Per the recent Total market view, stage was set for a bounce and markets delivered. "VIX closing just under its 1HP of 15.99, and some SPX and INDU variations within striking distance of recovering Q2Ps, make a bounce a possibility. Should this happen with VIX reversing lower from 1HP, the portfolio will return more long..."
Let's count bullish developments:
SPY recovered Q2P with decent lift-off (in other words, no weak buying)
DIA & VTI same
IWM back to positive for the year (not pivotal but still)
QQQ rallied back to AprP, now key tell for follow through
Safe havens all confirming:
VIX massive rejection from 1HP - you will see that these days of VIX collapsing from levels are the days to put money to work (see arrows on VIX chart below)
XIV above Q2P fractionally, also key tell for follow through
GLD & TLT mild rejections from Q2R1s
AGG mild rejection of YP / 1HP area
Since our sentiment studies indicated enough bearish sentiment over the past 2 weeks, easy to jump back in here with all this pivot action happening simultaneously and VIX below 16 for session and dropping hard all day.
2 IWM short covers
+ 1 DIA just take it back to 2
+ 1 EWZ valid above Q2P + AprP only, ie if lower close tomorrow may cut.
+ 2 SPY
This takes portfolio to fast 100% long.
If SPY & DIA break Q2Ps again, I will reduce again. Based on the look of the VIX, there is no justification for not entering. It is judgment call here of 70-100% but I think the days that so many key indexes say the same thing are the days to take meaningful action. I'd rather go fully long here and then perhaps leverage if we get back into situation of more stock indexes above all pivots and safe havens weaker than currently.
SPY & VIX below. Portfolio is 50% global now, so DXY needs to stay weak. I'll confess major risk of France vote could be $DXY strength which would likely be good for IWM and maybe XLF, but bad for the global stocks. I'm willing to buy IWM and XLF above their Q2Ps. I'll have to think about portfolio hedge heading into next week.
PS - again from Total market view: "Though I have designed this site for the active ETF investor/trader, there is another way to use levels and that would be on high leverage under certain circumstances - meaning when several of these elements combine to produce a high likelihood of a turn. A fund with nimbleness and leverage could choose to "go big" during these times. A recent example would have been shorting the 3/1 highs with SPX YR1 and valuation levels reached, in addition to several RSI and BB extremes that were not likely to last. Another example could be long this week, if Q2Ps recover and VIX drops from 1HP."
That would have been buying size ES 2130+ with only 10 point stop. See ES 2 hour chart below. Not low tick but considering 3/1 sell and 4/17 buy, not bad. Now can rest easy with break-even stop and check for follow through items above on Tuesday to decide to take partial gains or let run.
