Although 4 of 5 USA main indexes remain above all pivots, and VIX below all pivots with XIV above all pivots (ie larger uptrends very intact), there were several serious negatives that increase risk to downside:
- SPY broke Q3R1 slightly. This is the 3rd time below the level; none look like rejection yet, but inability to hold is more bearish.
- INDU higher, but 2 weaker up bars under major resistance at 2HR1 invites selling.
- QQQ drifting lower from Q3R1.
- VTI also driftin glower under Q3R1.
- IWM leading down (as called btw), below AugP and testing major support area (another day down of similar magnitude would be the first long term weakness in months).
- TLT huge jump with very significant buying the last few days as the major indexes are going sideways. This is not what typically happens when stocks are about to break out up.
- XIV YR3 rejection, potentially the start of a big deal!
So about this last point - I wrote a special mid-week post on the blog on VIX and XIV on 7/25. That turned out to be the day before the price lows in VIX and highs in XIV, both on 7/26 thus far. You have to read all the way to the end to get the real point - that several seemingly unstoppable market trends have indeed ended on yearly levels, like QQQ in 2000, SPY in 2007, GLD in 2011, SHComp in 2015. And now - potentially - XIV on YR3 in 2017. However, there are many incidences of seemingly stretched trends testing yearly levels and having no adverse reaction, or a minor reaction that quickly recovers and the trend continues on its merry way. That could also happen here. But a XIV rejection from YR3 may indeed be the start of something big.
And that is what happened today.
Look - until more USA main indexes are below quarterly pivots and VIX above, I am not going to get too excited about the bear side. As if the TLT move was not clear already, it is simply a time for caution and risk management on the long side. That is all.
SPY, INDU, IWM, TLT, XIV below (purposely showing INDU cash index tonight over DIA).
