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Mixed signals for Thursday. VIX closed above its MarP, only the second day to close above any pivot since 11/9/2016. But NYA held MarP and IWM had near test of MarS1, so we don't have a purely bullish or bearish scenario.
I respect VIX, so don't want to return to 100% long; however, IWM near MarS1 while other indexes is probably a quick take. Therefore, I think the best move is to take off one of those hedges for 10 longs, 2 hedges, 80% net long exposure.
SPY, IWM below.
Finally this year, a hedged position did some good. It bothers me that VIX and XIV are not showing trouble, but a bit higher on VIX will change that so willing to hold the hedges.
Also, monthly Bollinger band configurations on USA main indexes look negative.
I'll be watching NYA tomorrow, likely to test is MarP. This is an old school index but still giving fantastic signals on the pivots - check below.
Lastly, the days that stocks and bonds drop together are of particular interest. Even though still fairly long the market (no exposure to bonds though), I recognize that this represents pure pain to most passive investors. There may come a day where both stock indexes and bonds are below quarterly pivots. But that's not the case right now and though I remain in upside limited & somewhat bearish camp in short term, when 4 of 5 USA main indexes are above all pivots it means portfolio should still be mostly long.
Cutting INDA back under its MarP so that means 90% long with 3 hedges is only 60% long. Watching VIX and NYA MarPs tomorrow - if those look bearish for stocks, hold the hedges.
SPY, NYA and VIX below.
3/9 9:35 EST correction: INDA still above MarP. 100% long, 3 hedges (1 SPY, 2 IWM) = 70%.
So far, top calls near 3/1 & 3/2 are playing out, but decline has been a creeper move. On the daily charts it looks like we could easily see a high retest of sorts. Zooming out to weekly or monthly charts, however, the drop looks more threatening, or at very least suggests minimal upside from here.
+s
VIX still below all pivots, and XIV above 1HR2 today
QQQ still above 1HR2, slightly
Most USA main indexes have rising daily 20MAs to help act as support
TLT looks terrible, and GLD below 1HP today, first since 2/3 (working assumption as recently repeated: safe haven weakness usually a positive for stock indexes, and vice-versa)
-s
IWM clear rejection from MarP
Weekly & monthly charts on USA main indexes look like decent top is in
Choice is to maintain 90% long, take gains or hedge. IWM is leading lower and clearly below the MarP. IWM has stalled all year and is now back below 2016 highs. Although sitting on D50MA which could be support, this level has already broken 2-3x this year (1 of those was slight break). Therefore I think the best move is a short hedge, 2 units on IWM, valid below the MarP.
This means portfolio is 100% long with 3 short hedges, for 70% net long. One unit just off SPY 1HR2 level and 2 more today.
SPY and IWM below.
Decline from levels (so that's DIA, VTI and IWM MarR1s, and especially SPY YR1 1HR2 Q1R2 MarR1 cluster which was tagged for 3 of those 4) continued, but no actual change of pivot status. So far IWM remains above MarP, QQQ remains above 1HR2. Simiarly, VIX below all pivots and XIV higher. Point: Stock indexes could have been worse, but aren't, so that is bullish.
Safe havens are weaker and while we may see rates up and stocks dropping because of this - the opposite of what happened last summer, with rates going down and stocks rallying - in general I keep to the idea that growth of stocks compared to and safety and long term nature of bonds and inert gold are conflicting principles. Typically what is good for growth is bad for safe havens and vice-versa. For now, TLT below all pivots amd GLD weaker is more supportive of stocks than the opposite, TLT and GLD strong (like they were beginning of 2016).
Simply stated, no reason to change positioning yet. But after this mini pullback completes, stage is set for high retest of sorts with major divergence, and this has potential to be a very key top. If decline picks up speed, then IWM will break MarP and that can be a hedge, or we can consider taking gains on anything else that breaks its MarP too.
SPY and VIX below.
Despite my preference to see a top here, the fact is that there were some bullish signs on Friday according to The Pivotal Perspective:
2017 main index leader QQQ held support
IWM held its MarP
VIX collapsed back under all pivots, and XIV rallied back above its MarP
But weekly charts do look quite toppy. A lot more coming upon the blog.
I rarely make adjustments on Fridays, preferring to do comprehensive workup on the weekend and then be ready for confidence action, but USA mains above all pivots and VIX vehicles confirming risk on makes 70% seem too low. Positioning also depends on your point of entry - if you were ready to hedge a position near a level then an SPY short Thursday open can still hold, but towards the close has more risk of loss. Taking one hedge off brings back up to 80%, and INDA looking like best global option but let's say 1 unit for now and will consider adding more next week. This means back to 90% long with 1 hedge remaining on SPY.
SPY and VIX below.
When I talk of markets "ringing the bell", it is days like this. I started this site near such days with this first blog post on 9/30/2015, talking about a key low. And so it was.
Today:
SPY rejected its YR1, crystal clear.
QQQ back to testing 1HR2, still bullish.
DIA rejected MarR1, not a huge deal; but YR1 / 1HR2 / Q1R2 cluster just above.
IWM rejected MarR1 and will likely be first main index to break a monthly pivot if selling continues.
VTI also rejected from MarR1, with YR1 / 1HR2 / Q1R2 just above that level.
So maybe the market will make a fool out of the more cautious trader I have been since February - not adding leverage and maximum 100% long, along with a few reductions that cost a bit - but, this has many of the configurations of a classic top. What we don't really have yet is divergence on technicals, retests, and most importantly, more indexes on more than monthly levels, so this may yet still play out. An even better high would be some kind of pullback, then a rally so that more indexes would reach major levels (ie, quarterly, half-year and yearly). But sometimes market does not cooperate with the ideal.
Big turns can occur on the yearly pivots - just like August summer top on IWM YR1 (both times near exact), TNX *the low* on 7/8/2016 at YS2 exact, Brexit low on DIA YP near exact, and SPY YP nearby; I can go on and on and on.
In addition, there were a few indexes that have been strong this year that have finally traded below monthly pivots and with the look of rejection to boot: EEM, FXI and EWZ. I am tempted to short these, but will opt for hedge instead.
Positioning - well, if I said hedge on QQQ at 1HR2, and yesterday said "Based on VIX and other technicals, I think SPY YR1 or max DIA YR1 will be a decent top" there was a great low cost hedge opportunity on SPY today near the open. These hedges reduce portfolio to 70% long and are valid below the YP.
What the bears don't have here is VIX or XIV confirmation of the selloff. Oddly, VIX returned below all pivots today by a fraction. So I am resisting becoming even more bearish, since VIX is still OK with risk.
SPY below.
Wow! SPY nearly fulfills yearly pivotal promise in just over 2 months. Tag of Q1R2 today with YR1 just above.
QQQ powered above its 1HR2; DIA YR1 is a bit further away; IWM merely on MarR1; VTI looks like SPY. So, 2 of 5 USA mains very near YR1s and as I said near 2/10 it is just not every day that multiple USA main indexes are on long term levels.
VIX did not confirm the move, remaining above its MarP which held as support. TLT crumbled back under all pivots but GLD stayed firm.
Based on VIX and other technicals, I think SPY YR1 or max DIA YR1 will be a decent top. That doesn't mean the market goes straight down. Usually the first reaction off a high is not the big drop.
The QQQ hedge I mentioned yesterday was taken out with QQQ blasting above the level on open. Back to 90%, but cannot buy more with markets on major resistance and VIX above a monthly pivot for only the second day since 11/9. At least portfolio doing well on the XLF overweight.
SPY, DIA, QQQ and VIX below.
All USA main indexes close February with a great run above all pivots. But today was the most threatening bar for VIX since 10/27-28. That said, put things in perspective - it is just VIX above a monthly pivot and usually it takes a quarterly level to really change the trend.
There are three basic ways to outperform the market - and let's define that as SPY.
1. Be long indexes or sectors (or stocks, if time permitted) that are outperforming SPY
2. Be more long when SPY is going up; ie, leverage
3. Be less long when SPY is going down; ie, hedged
I have done well on #1 at times, especially 2016 Q4 after elections with immediate rotation into even more financials and then IWM; but a bit less so this year with the market outperforming in areas I have not been concentrated in meaning tech and global stocks. I was comfortable with maximum leverage (up to 150%) in Q4 but less so in Q1, and believe 120% was the highest exposure in 2017. But I have been very, very good throughout this site at #3.
Currently 90% given RSX entry which as a position was correct. Per the recent Total market view I mentioned possibilities of taking gains on SMH and yesterday the chance of hedging QQQ. The other choice would be to jump on IWM short if below MarP on Wednesday.
I don't want to be too bearish - the larger trends are still up for stocks. But with VIX above FebP and very likely to open above MarP, I think the correct position is to be less long so that means 70-80%. Hedge on QQQ. Jump on IWM short if below MarP. Wait and see on SMH.
SPY, QQQ and VIX below.
Bullish action for USA stocks with IWM jumping, VIX staying below all pivots when it could have rallied above the FebP, and both TLT and GLD weaker.
Should be more than 90% long here but think I will wait for new March pivots.
QQQ is a hedge candidate still bang on 1HR2.
SPY, QQQ and VIX below.
Gap down but bar finishing in fine fashion. A lot more coming up later this weekend on the blog.
Today's action gave a slight edge to the bears.
SPY held FebR3 as support which is bullish, and DIA higher. But QQQ was rejected from 1HR2, a significant long term resistance level, along with Q1R3; IWM was a bit weaker; and NYA/VTI saw selling from monthly resistance as well.
VIX stayed clearly under FebP which is bullish. But XIV was lower, TLT reclaimed its monthly pivot, and GLD jumped.
A stock shakeout in the near future would be the more typical move for stock indexes. That doesn't mean we have seen the major top yet.
I am reluctant to reduce longs as this has cost gains in 2017 thus far. With 3 of 4 safe havens showing some caution for stocks, this is a consideration. Though I have written of out-performance of semiconductors for nearly a year, SMH might be a candidate to take gains. I will wait another day before any adjustments.
SPY, QQQ and VIX below.
Several resistance levels in play for USA main indexes, but mostly monthlies and only one at more significant 1HR2.
If we look at VIX and TLT, I'd say stock bulls have the ball. But XIV suggests some risk. We'll see what happens.
SPY, QQQ, VIX and XIV below.
Still powering up. Only XIV giving some warning, yet this was countered by VIX FebP rejection to stay under all pivots.
This is not just a Trump rally. This is a stock market rally as money gets reallocated out of bonds. If you disagree, tell me how Trump tax cuts help Brazil (EWZ +2.1% today) India (INDA +1.6%), emerging markets (EEM +1.1%), or China (+.9%)?
QQQ reached 1HR2, which is just an incredible move after being about sideways from 8/2016 to 12/2016. Maybe this is the real issue - NDX and QQQ have blasted above 2000 highs.
SPY and QQQ below.
USA main indexes continue up. TLT and VIX could not rally above their FebPs, but could have. Stay bullish stocks.
RSX another story however; reduction there takes portfolio to 90%. Initiall promising with fast jump, but stalled and was portfolio drag. I'm not sure what to replace to make 100% long with RSIs so stretched.
More coming up on the blog this weekend.
SPY below.
Today was a very bullish day! Why? Because weak selling that holds support (most clearly on DIA) is very positive in the context of a market melt up! Also, VIX could have closed its monthly pivot, but didn't.
SPY YR1 looks quite doable considering only 6+ weeks into the year.
Leaving portfolio without adjustment (no change from 2/3), 100% long. RSX will likely be first reduction but for now it continues to hold above all pivots.
SPY, DIA and VIX below.
What an interesting day. Markets continued melt up, with DIA closing fractionally above 1HR1 and QQQ just soaring above its YR1 (!) with no pause at all. Thus far, the long term levels in play on 4 of 5 USA main indexes have resolved in the most bullish fashion - straight through without even a day of pause!
Yet VIX, XIV and GLD are saying something a bit different, especially VIX. While VIX still is below all pivots, this kind of move up as indexes were all higher is rare.
In addition, SPY (and other stock index) RSIs across timeframes are in quite stretched territory. I'll do more work on this idea over the weekend on the blog.
Yet despite my concerns, I'm leaving portfolio 100% long without adjustment (last adjustment 2/3, back to 100% long). If reduction then likely RSX first to go.
SPY, VIX, XIV and GLD below.
Melt up continues - so far USA main indexes showing no signs of trouble at long term resistance. SPY and VTI above their 1HR1s; DIA testing its 1HR1 / Q1R1 cluster and QQQ still on YR1.
Safe havens except GLD are crumbling with an absolute stunner of a move in XIV.
Since there isn't any pause at resistance best to hold. As I have said a few times, this quarter not my best compared to others but at least overweight on XLF is doing something positive to portfolio. Looking back, should have (in trading there is almost always a "should") kept some leverage on with only GLD showing caution, and not TLT, VIX or XIV.
SPY, DIA, QQQ and XIV below.
So far melt up continuing but there are still quite a few long term resistance levels to watch.
Markets can go weeks or months without running into long term levels, and then the days where multiple USA mains test multiple long term resistance are fairly rare. Actually, 2/10 and 2/13 are the first such days this year.
SPY jumped above 1HR1 / Q1R1 combo, bullish.
VTI on 1HR1 (just above Q1R1, also FebR2 exact)
QQQ on YR1 (!)
So that makes 3 of the 5 USA mains. DIA is approaching its 1HR1 / Q1R1 combo, and IWM being left out of any big move this year so far, and merely at FebR1.
Add to that XIV on 1HR2. So, quite a lot in play - with several daily, weekly, monthly and quarterly charts reaching RSI overbought or very near overbought.
That said so far it has been better to hold fully long and while we can consider reduction at long term levels so far there is no sign of any weakness. Keeping portfolio same.
The media is all over Trump tax cuts and de-regulation but tell me how does this help Brazil and emerging markets? They are ripping higher and IWM is stuck. This is just a pure risk on move and media is concocting a reason that doesn't hold up with 10 seconds of analysis.
SPY, VTI, QQQ and XIV below.
Although I have not played all the wiggles as well as other quarters, from the start of 2017 I have maintained a basic bullish perspective on USA indexes and have recommended being fully long for most of the year thus far.
The reason? All 5 USA main indexes have been above all pivots for the vast majority of the year. IWM slid below its monthly pivot a few times but has yet to see a monthly S1.
Today, SPX reached the first long term resistance level of the year. It will be interesting to see what happens here. I'll try to sort out the most likely scenarios this weekend on the blog.
Wow, a day after I thought the strength in TLT would surely lead to a drop in stocks, the market came roaring back. At least I kept to 100% long!
SPX came with 4 points of Q1R1 and 8 points of 1HR1. This area looks very doable.
SPY and SPX below.