7/5/2017

A lot more +s than -s today:

QQQ recaptured Q3P
SPY held JulP - could have broken, but didn't
VTI held JulP - could have broken, but didn't
XIV held JulP - you get the idea
VIX JulP rejection - could have cleared, but didn't

TLT stayed under Q3P - could have cleared, but didn't
GLD stayed under 2HP - etc

Last daily comment said holding USO above the JulP so that was taken out. Also ready to cut SMH short. Both great mean reversion trades for the end of 2H and quick counter-trend moves that were among the biggest moves in markets since 6/26. FXI was holding based on YR1, and that cleared somewhat in addition to closing slightly above its JulP. Portfolio 100%. INDA looking great and adding 2 on that per recent Total market view. 

So now the question, 100% (which would mean trimming 2 SPY) or leverage? I am option for leverage with all safe havens saying green light for risk. This could change tomorrow but for now +2 INDA for 120% net.

If QQQ looks more convincing above Q3P could further add on that or rotate out of some of the SPY. That said the pure technical leaders on USA mains are now DIA and IWM, above all pivots and above all MAs, then XLF and XBI for the sector leaders. 

Bullish from here is the safe havens staying below their respective pivots (and XIV above), with QQQ lifting off above the Q3P and SMH recapturing Q3P as well. Bearish would be TLT and GLD above Q3P and 2HP respectively, and XIV below JulP with QQQ fading and others that held today breaking down. We'll see what happens but cost will be low even if bearish version plays out, so comfortable taking more risk. 

ps - if GLD rallies above its 2HP, GDX could be interesting play off its YP.

SPY, QQQ, INDA, VIX, XIV, TLT, GLD and GDX below.

7/3/2017

Interesting action today - very mixed bag. A lot of positives, but two yearly level rejections is just not bullish. 

+s
DIA jumped above YR1, above all pivots
IWM above all pivots
XLF strong - nice to catch that from longs last week!
VIX below all pivots, XIV above all pivots
TLT and GLD weak - TLT below YP, JulP and testing Q3P; GLD all of a sudden below 2HP, Q3P and JulP.

-s
QQQ 2017 USA main index leader below Q2P and YR2 fail!
VTI YR1 fail
SPY JulP rejection
SMH below Q2P and already testing 2HP

Themes of the last 1-2 weeks continued today, with momentum trades QQQ and SMH getting hit while 2017 laggards USO, XLE, IWM and especially XLF all popping.

The only pain to portfolio today was the FXI hedges on EEM longs. Didn't see that coming. Holding these one more day due to DXY strength. 

I saw potential weakness in GLD last week, but pro selling today in the pre-market and didn't chase the gap. This time would have paid to manually calculate the other pivots; as of Friday, only below monthly. Today, opened below Q3P and 2HP. At Friday's close, would have been below Q3P enough to trigger a short position. 

Portfolio is 80% net long due to SMH short and 2 FXI short hedges. Ready to cut the SMH short which has been fantastic move for 1 week trade; we'll see if 2HP holds on Wednesday. USO will hold above the JulP and then see what happens at Q3P and 2HP above. SPY for the rest is OK but don't like the JulP rejection. There is a case to reduce 1 or 2 of these, but so far in 2017 any reduction without VIX & XIV confirmation has cost the next day. So, will skeptically hold. Also, I could swap out some of these for IWM longs, since SPY below JulP and IWM above. Don't quite like the setup with IWM pushing the daily BB but will keep this in mind. 

My tune will change if VIX jumps above Q3P and DIA rejections YR1 again, but until that happens, staying mostly long. 

SPY, DIA, QQQ, VTI, XLF, SMH, TLT, GLD below.

6/30/2017

Bearish action today, and DIA in particular looks like about to get slammed from the YR1. As usual, a lot more coming up on the blog over the weekend. 

Monday will be the biggest change in pivots other than the first trading day of the year - we'll have new second half (2H), third quarter (Q3) and of course July pivots in play. 

SPY and DIA below. 

6/29/2017

Market threw quite the curve ball today. To some people's perspective, these days are what gives technical analysis a bad name. Wait - you were wary but long and expecting down, then bullish, now bearish but holding most positions?

Yes that is about right! If you are very large institution then I agree this might seem like flip-flopping, if it takes weeks to build a position. But I am not an institution and go from leveraged long to flat to short all very easily. Flexibility is a feature, not a bug!

Aside: if some company reported earnings that were under expectations, would fundamental analysts revise forecasts? Probably! Same with technical analysis. Sometimes there is whipsaw; sometimes there are trends. Our job is to catch the best trends and try not to get whipsawed too much. But trying to avoid whipsaw entirely is not going to happen. 

In the last several weeks, I have gone on and on about the importance of Dow YR1. This is because many key turns over the past 10+ years have happened on these levels. In fact the history goes back much further than this, but if you aren't convinced by these examples then there is not really any point in going further. 

So, as DIA / INDU approached YR1 levels I expected a sell-off but it didn't happen. Then the level cleared. I put bearishness on hold and purposely held SPY longs instead of QQQ, thinking mean reversion & re-balancing more likely especially into the end of this month. Yesterday the Dow YR1 in addition to 3 other yearly levels on USA main indexes all looked like support and I made a bullish conclusion. Today that was all undone. Should I stick to bullish guns? No way! Again - a feature, not a bug. 

Of course it is a big frustrating to go leveraged long only to see market tank the next day, but consider: I'm out of tech positions from 6/20. 2 longs were XLF which were still up on the day handsomely. I nailed two counter-trend mean reversion moves this week with SMH short (-2.25% today btw) and USO long from 6/26 which are both delivering. So where was the pain today in the portfolio? 2 units IWM, but I specified a tight stop so that was cut early for minimum of damage; and EEM, which had been hedged via FXI shorts from lats week, so not too big a deal, slap them on again based on the FXI YR1 so that was also triggered early. Actually, I was rather comfortable today!

Out of IWM early and EEM hedged meant back to 80% net long. Then what? As usual let's try to assess with a method and not emotion:

-s
DIA back under YR1! Key top scenario back in play just based on this.
QQQ back under YR2!
VTI back under YR1!

3 yearly levels looking bearish. There are other major level rejections as well on other indexes: EFA, FXI, and others. 

+s
4 / 5 USA mains above all pivots
VIX below all pivots, XIV above all pivots
TLT YP rejection

But I'll be honest and say there is a lot of TBD:
VIX stayed under all pivots, but 2nd big lift rom Q2S1 and massive engulfing bar
XIV went as low as YR2 but made a massive rebound
SPY big drop, but above all pivots and rising D50
the list goes on

Going out on a limb here, but I think best idea is to do nothing. If VIX had stayed above its Q2P, I would be thinking much differently.

Portfolio is 6 SPY, will hold above the YR1 / JunP combo; 2 XLF, doing fine; 2 EEM, hedged via FXI shorts; 1 USO long, 1 SMH short both up nicely. I may cut the counter-trend moves tomorrow. 

For now, and thanks for reading this longer post, I'll repeat from 6/27: "Here is the key point: While Wall St is going gaga over bullish second half forecasts, we are on the verge of a real deal Dow YR1 rejection. If that happens, top for many weeks, months or even the year could be in. Watch."

SPY, DIA, QQQ, VTI, XLF, FXI, USO, SMH, VIX and XIV below.

6/28/2017

For several reasons, I have been skeptical of the market from late May. Without elaborating, I thought that Dow YR1 would stop the rally enough for a decent pullback (meaning 4-5% on SPX). Even yesterday this appeared to be the higher probability outcome, but without VIX & XIV confirmation elected to hedge a bit and not cut too much. 

Today DowYR1 held as support, with VTI also back above YR1 despite the rejection of yesterday. In addition, SPY had huge lift of near test of YR1, and QQQ has held YR2 - again - as support. All this is very bullish. Think about it - Dow above YR1 significantly reduces the chances of a major turn here, and opens the door to Q3R1 or Q4R1, 2HR1, or YR2 for a top. This means substantially higher than now. Similar logic on other indexes like VTI and SPY. I have to grit my teeth to say it, but given the year so far maybe YR3 is in the cards for QQQ. We can only think that way when QQQ is above YR2, which it is. 

So we can chalk the 6/27 move as yet another false break - and there have been several this year!

In addition, TLT sold off and closed a bit under its YP. This is not enough to be rejection but XLF took the move in stride for a very healthy advance. Even before the bank news after hours, it was clear that IWM and XLF were holding up better than other indexes per pivots and moving averages. 

Anyway, bulls in charge. I'm going with it. FXI hedges out, bringing portfolio to 80% net. Buying 2 XLF and 2 more IWM valid above the Q2R1 for now. IWM has had tendency to get smashed near highs so tight stop on that. Still in the smaller counter-trend plays from Monday, long 1 USO and short 1 SMH. 120% net long. This is underweight tech which I think it is right, but may shift some of the SPYs into QQQs or SMHs in near future. 

And yes, of course I wonder about a fake-out, but when 4 different yearly levels turn into support for USA mains, there really is no choice but to follow along for the ride. 

SPY, DIA, VTI, QQQ, IWM, XLF below. 

6/27/2017

T-t-talking about some alpha generation! Out of QQQ & KWEB last week, yesterday long USO and short SMH! 

From 6/26 post: "In addition, special 1 day timing cycle indicates higher than usual odds of a market smash on Tuesday. What qualifies as smash? Let's say QQQ -1%." Quant that folks!

"Stock bulls have won but jeez I would like to see that timing cycle play out tomorrow as indicated. For this reason I will go out on a limb and issue speculative short on SMH based on rejections of 1HR3, Q2R2, and D20MA failure."

So there you have it. It is calls like this that sent me into a small hedge fund that was literally top of the charts in 2013 with one of two funds under management in top 5 in the world with a 110% gain. Alas, fund closed near the end of 2015 and I am not checking people's boxes enough to fit in their box like thinking that generates sub-par returns. I have more to say about the current quant fixation - that seems to still be severely lagging SPX btw - but let's look at markets. How important was today?

-s
SPY Q2R1 break, back to YR1 test
QQQ Q2R2 rejection, back to YR2 test
DIA 1HR2 rejection, Q2R1 slight break, YR1 break!
IWM Q2R1 rejection
VTI YR1 rejection!
VIX liftoff from Q2S1

So that is serious - bearish action on all 5 USA mains including the very important Dow YR1 and VTI also rejecting YR1 level.

+s
VIX still below all pivots
XIV still above all pivots (although down from JunR1 today)
GLD still not above all pivots

According to the media this move was 1) Google fine and 2) Trump-care rejection. Oh yeah? Why was INDA -1.7% and USO +1.9%? This is called profit taking, re-balancing and mean-reversion. That's all. The news provided the spark. But as to what that timing cycle was that called this in advance... my lips are sealed.

If VIX or XIV was confirming trouble I would have no hesitations about cutting more positions, but they didn't. Still I think 80% net is too long even if one of those positions is oil which was up today. I think the smartest thing is to hedge out 2 EEM longs with 2 FXI shorts, valid below the FXI YR1. This brings portfolio to 60% net, all SPY. 

Even though yesterday said timing cycle due for smash especially on QQQ today 6/27, I am going to hold the SMH short one more day (playing for an abc ie zigzag down). Holding oil long too. 

Here is the key point: While Wall St is going gaga over bullish second half forecasts, we are on the verge of a real deal Dow YR1 rejection. If that happens, top for many weeks, months or even the year could be in. Watch.

SPY, DIA, QQQ, SMH, USO, VIX below.

6/26/2017

Not much change to pivot status on the USA main indexes and safe havens other than GLD, which broke its JunP after reclaiming status of above all pivots for 1 day. That said, lower high in place on the momentum QQQ and SMH invites more selling.

In addition, special 1 day timing cycle indicates higher than usual odds of a market smash on Tuesday. What qualifies as smash? Let's say QQQ -1%.

On the bullish side, DIA still holding YR1 as support for the 4th consecutive test, and VTI back above YR1 for the 2nd consecutive day as well. Also, XIV showing absolutely no signs of trouble. VIX is back to Q2S1 which is an interesting level to watch for Tuesday. 

Portfolio is up to 90% long with a speculative buy on USO near the YS1. This is totally counter-trend move - ie below all pivots - but in certain very rare circumstances these setups offer good risk-reward. I haven't done too many of these but mentioned in an oil post on the blog over the weekend. Risk is limited to daily close below the YS1. 

To me the bond market is screaming, and the last few weeks I am in disbelief that stock charts are holding up so well with TLT at multi-month highs (ie TYX & TNX at multi-month lows). Stock bulls have won but jeez I would like to see that timing cycle play out tomorrow as indicated. For this reason I will go out on a limb and issue speculative short on SMH based on rejections of 1HR3, Q2R2, and D20MA failure. This keeps portfolio at 80% net long. Keep in mind, though, that the far easier money was made buying QQQ, KWEB and SMH (instead of IWM and SPY) on the 4/20+ low areas. 

SPY, QQQ, SMH, USO, TLT and VIX below. 

6/23/2017

Once again the market could have dropped but didn't. DIA held onto its YR1, and VTI recovered its level slightly. But sometimes weak up bars invite selling as the next move. As usual a lot more coming up on the blog. 

6/22/2017

Not much change from yesterday. TLT still strong above YP / 1HP combo; Dow still testing YR1 and remaining slightly above; VTI testing YR1 area and slightly below.

SPY and weekly charts of TLT, DIA and VTI below. 

6/21/2017

Markets continue to toy with a couple long term key levels without giving a definitive sell signal on USA indexes, despite strength in TLT moving above its YP / 1HP. DIA YR1 and VTI YR1 are testing and back in play.

But QQQ continuing to lead and despite breaking JunP for the 3rd time this month came right back again. 

From a positioning standpoint, today was very frustrating to see QQQ and KWEB race back up, but if QQQ JunP was decision to exit there was chance to get back in earlier today. But since I mostly keep to signals on close unless specifying in advance, I won't count this and keep the current positioning for now.

SPY daily, and weekly charts for DIA, VTI and TLT. My bias has been skeptical since May, and even more so since TLT has cleared its YP. I think markets are about to get whacked - but exit on winners so far wrong. 

6/20/2017

Hmm. Several bullish developments of yesterday were undone today. The last few weeks I've been saying watch carefully - especially the Dow YR1 - without making any adjustments to portfolio. I've held QQQ throughout one drop and recovery, despite thinking we might see a re-balancing move out of tech into energy (tech down, energy still lower thus far). But today, given TLT move above its YP and QQQ third break of JunP, think better to exit out of that (a great 7+ month hold btw, just should have added). Tightening stops under EEM longs below the JunP, so any lower will cut those units too. 

If there weren't already warnings from Gundach and JPM's head quant, and especially the very low ISEE today, I would think the markets are about to break down. They still might, but given the widespread expectations of summer correction I think perhaps frustration is the more likely move instead of a bear trend. Still, there is just no arguing with TLT clear of YP. I said in the Total market view that a clear of this level would increase the chance of a stock drop and I keep to this view.

Let's try to assess correct positioning:

+s
4 of 5 USA mains above all pivots
VIX below all pivots
XIV above all pivots
So let's not get carried away with bear ideas just yet

But the -s:
QQQ main leader under JunP for the 3rd time this month
IWM Q2R1 rejection
NYA 1HR1 rejection and Q2R1 break
VIX reversal bar after Q2S1 near tag and recent test
TLT YP & 1HP clear!

To watch!
SPY Q2R1 - yesterday cleared, nearly testing today
DIA 1HR1 - yesterday cleared, today testing
VTI YR1 - above since 6/1, another day like today will mean break
XIV 1HR3 / Q2R1 - slight break after clear yesterday, basically testing

KWEB was a later long from 4/20, and was actually one of the best moves in the market from that buy date. A savvy trader would have had a better exit the day BABA gapped up 15% on KWEB's 1HR3, but I didn't say that. Still above all pivots but basically taking gains on the 2nd drop from YR2 area for KWEB.

I'm comfortable with 80% long and will be lower tomorrow if EEM stops out. If markets bounce then I'll be forced to buy back in, but c'mon, TLT would NOT be jumping above its YP and VIX reversing from quarterly levels if some trouble was not brewing here. 

An agile hedge fund could be shorting NQ below the JunP, or shorting some IWM based on the crystal clear Q2R1 rejection. The trending short would have been oil based on pivot & MA breaks on CL1 contract and USO both 6/1, but I didn't specify that at the time so not counting in hindsight. 

SPY, QQQ, IWM, EEM, VIX, XIV and TLT below. 

6/19/2017

Wow - bulls winning. 

DIA launch above YR1 without even 1 day of real selling
VTI launch above YR1
QQQ back above YR2

SPY also up, and IWM back to Q2R1.

TLT mildly lower, but safe haven GLD gave up status of above all pivots.

SPY, DIA, QQQ and VTI below. 

6/16/2017

A mixed day with QQQ breaking JunP again for the second time this month, but DIA refusing to drop. As usual a lot more coming up on the blog. 

6/15/2017

The market could have dropped more today but didn't. Dow traded above YR1 for the second day. VTI also held its YR1 as support. VIX stopped cold on a test of JunP and fell from there. All in all, bears could have turned the tables on the trend with a clear rejection of Dow YR1 with tech leading lower and VIX jumping above pivots, but that didn't happen. If a bearish event could have happened but didn't, that's bullish. 

QQQ is below its JunP at the lower daily BB. This is only the 2nd touch of the band since the election. Previously I have cut on weakness too soon, so will hold this another day. Same for KWEB.

But the weekly charts to me look like setting up for stock tops.

Keep an eye on bonds: TLT, TNX and TYX all at YP / 1HP combos. D200MAs have cleared for TLT and broken for the yield charts. If the YPs go in direction of bonds (ie TLT above YP, TNX and TYX below YPs) then I think stocks will be much more at risk.

In addition, DXY low on 1HS1 exact pressures global indexes. Portfolio is fully long but still has 1 QQQ, 1 KWEB and 2 EEM. Dollar strength along with momentum re-balancing puts all the non SPY positions at risk for further declines. 

I may shift gears soon. Despite today's bullish action, I'm still skeptical. Two of the smartest people in the room, Jeffrey Gundach and JPM's head quant Marko Kolanovic, have both sounded the alarm for risk this week. I tend to agree. But until I see pivot level rejections and VIX / XIV confirming, better to hold. 

SPY, DIA, TLT and VIX below. 

6/14/2017

Dow cleared its YR1 today. This level, which I have been pointing to the last few weeks, is a big deal. Many historical turns have happened on the Dow yearly levels. Given the action in safe haven TLT today, this was a surprise. That said, the way stock index futures are moving after hours this Dow YR1 clear might be reversed tomorrow. 

The last Total market view said it is a week to pay attention. A rejection of Dow YR1 is still a rejection, even if it happens after a fractional clear by 1 day. But holding is bullish. Let's see what happens. 

SPY, DIA and TLT below. 

6/13/2017

The premise of The Pivotal Perspective is that important market turns have historically - and thus far continue - to be made on pivots. Someday this may not work, but for the last many years (and decades) it has done very well. If you are a new reader and question this, please read this post of the key turns since 2005 on Dow yearly levels. 

And so here we are - market testing Dow YR1. There isn't really any sign of a turn. The level is being approached confidently, not tepidly. Other indexes have already cleared levels, so this is more the case of last one to join the party instead of multiple indexes all being rejected. There isn't much sentiment euphoria. Safe havens via TLT and GLD are doing OK, but no sign of divergence in VIX and XIV. All this points to the greater chance of Dow clearing its YR1 as the next move.

But still, given the key turns of many years on Dow yearly levels, I'm still watching for a turn. 

SPY, DIA, XIV below. 

6/12/2017

Hmm. I do think there is a chance of a very key top here on INDU YR1, but so far I think decent chances for a bounce on Tuesday based on VIX and XIV. 

The -s
QQQ below JunP, first trading day below a pivot since 4/19
DIA under YR1

The +s
QQQ still holding above YR2 as support
DIA pause not rejection of YR1 so far
VIX under all pivots
XIV above all pivots
No other change of pivot status to other indexes
Safe havens TLT & GLD look weak

Thus far it doesn't seem to be a day for defensive adjustments. If VIX were higher I'd be singing a much different tune, but it isn't. DIA down from YR1 1 day but the damage was only .13%. That is not really a reversal. Stay tuned.

SPY, DIA and VIX below. 

6/9/2017

Not a routine day. As usual a lot more coming up on the blog!

6/8/2017

Trouble posting last night.

Another sideways day for most indexes, though 2017 laggards IWM and XLF jumped.

Interesting action on the near test of INDY YR1 / 1HR2 / Q2R1 cluster. 

Had to scream from IWM shorts at a small loss. 

SPY and DIA below - when I can upload images. 3rd day in a row with clear resistance on the JunR1 for SPY. 

6/7/2017

Market trends resumed today - Tech via QQQ up, Semiconductors up, oil and energy down. Long strength and short weakness doing well, although if playing I'd be on guard especially towards the latter half of the month and early July for re-balancing moves.

JunR1s in play across the board on SPY, DIA, QQQ, IWM and VTI all - yes all - testing today. So the question is whether we see another rejection or these levels clear. 

I give edge to stock bulls based on VTI YR1 hold and XIV near test of JunP and hold. Apparently oil -5% (again) not having any contagion effect. In fact, perhaps this is reason to just buy more tech stocks :) But I'm not changing positioning quite yet. 

Also, so far YP / 1HP combo on TYX & TNX both holding. This is also bullish for stocks. 

SPY, USO, XIV and TNX below.