I have been going on about yearly levels since mid October - INDU YR2, SPX YR2, RUT YR1. First this seemed like a needless worry - though INDU has had major turns on yearly levels every year since 2005, the index powered through YR2 without even a day of pause. But SPX did have some selling from YR2 area, and an equally fast comeback. Now again there has been some selling from this SPX YR2 / 2HR2 cluster, and today the emphasis was on the RUT YR1 rejection.
A few Pivotal Perspective basics:
- indexes on long term levels increase the chance for an important turn or definitive move
- the more main indexes the give the same message, the more reliable the signal
- key turns are often confirmed via other technicals, safe havens, sentiment, valuation, timing
- for a complete top assessment, please go to the FAQ page and search on 'top checklist' and then look for more recent posts
Regarding first point, it sounds simple but cannot be understated - consider high of year on EURUSD YR2 exact this year, or the low in TNX on YS2 in 2016, the low in stocks across the board on several YS1s & S2s .... the list goes on.
And over the last few weeks the market has been near INDU YR2, SPX YR2 and RUT YR1.
As mentioned in other posts, several other indexes have cleared YR2s so given seasonality it is certainly possible that SPX will join INDU and NDX in that status. But it is also possible that a key turn is in the works, and it is our job to assess that likelihood and then determine correct positioning given that probability.
Today SPX closed slightly above YR2 - a definite positive - but still fell back from 2HR2 level just above. The resistance on SPY is slightly different and there was clear selling from the YR2 level. RUT/IWM got whacked, and even closed below its NovP. In addition, XIV looks like rejection after high test of 2HR2 and this could lead to another drop. There is enough here for more near term weakness.
SPX, SPY, ES1, IWM and XIV below.
