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As with yesterday, selling could have looked worse today but really wasn't. For several reasons I view this as more a pause than a turn. Let's keep it simple and use the NYA; holding above the YR2 is bullish. If that breaks, then it will look more like a possible turn. And of course VIX and XIV would have to also confirm trouble, which they haven't. Despite XIV mild drop from 2HR3 today, still holding Q4R3 is part of my logic around the pause idea.
SPY, NYA and XIV below.
Today saw selling from highs but not as much pivot damage as one might think.
SPY DecR1 high, but still above Q4R3
QQQ 2HR2 rejection, but held DecR1 as support
DIA no change
IWM no change, and held Q4R1 as support
NYA 2HR2 & DecR1 rejections, but above YR2; VTI DecR1 high, still above Q4R3
VIX no change
XIV 2HR3 resistance, but Q4R3 support
TLT weakened below the YP, all the way down to Q4P.
I think any further losses will be in global names - EEM sharply lower, below DecP and moving averages; FXI already below DecP, RSX joining EWZ below Q4Ps.
SPY and XIV below.
Per the weekend Total market view on the blog, "Heading into holiday week giving stock bulls the benefit of the doubt especially after the strong rebound last week."
USA indexes up across the board, with NYA first close above YR2 and TLT notably weaker.
XIV 2HR3 near exact on the high; some of these XIV triggers on UVXY have worked out quiet well. Just watch to see if above at least a daily pivot as a trigger on Tuesday.
SPY, NYA, XIV and TLT below.
VIX and XIV had it right again. Well, i lost some on SPY, IWM and EWZ short hedges, but gained on FXI short and biggest hedge position TLT still gained on the day (though reduced on close). Cut SMH short hedge for a still very successful trade, and cut FXI short (originally a hedge from November) as well, also a decent gain. These were due to market environment and look of weekly charts.
By the way, if i call something a short hedge that means it is offsetting a correlated long. If it is just a short then it is a position without a long against.
Not sure what is happening from here - despite the bull party there are a few indexes bang on key resistance so i opted to close out a lot of positions and as usual sort out things over the weekend.
SPX and TLT below.
The move I have been pointing to the last two days happened today.
12/12: "SPX/SPY, RUT/IWM, NYA and VTI look pretty toppy today. Add in TLT hold of Q4P, VIX reversal bar, and first timing date since 12/1 (which was a key low) and there is a good shot at decent trading turn here. Portfolio has already reduced exposure with hedges on SMH and FXI on 11/27 that i have made no mention of covering. I also recently recommended TLT as an option above the YP. Yesterday was too close to call and today held a Q4P and key MA (moving average) so I'm going to give it one more day. In addition, adding to hedges on SPY based on SPX and both ESZ17 and ESH18 contracts." (bold added)
12/13: "Toppy looking bars on SPX, NYA and VTI, and somewhat on DIA. ... In addition to safe haven buys and possible short hedges against the SPX Q4R3 level, we could also look for glaring weakness. EWZ is trading below its Q4P, but there has been some chop around this level without a definitive move."
Also confirmed via recent Tweets on both SPY / SPX / ES and TLT, this one from 12/12: "Pivot resistance across USA main indexes; $SPY divergence high on Bollinger bands; put-call near multi-year lows; ISEE spike high today; timing date (first since 12/1) - all set up for trading top. Great r/r short hedge here below $ES_F H8 2670." (ps - levels based on daily close as always, so not stopped out.)
Moving on to today.
SPX Q4R3 rejection
DIA Dec R1 rejection
IWM YR1 and DecP break
NYA YR2 rejection, VTI Q4R3 rejection
TLT lifting above YP, strength in metals
However - VIX, while on the move, is still below all pivots; no notable move in XIV at all!
Given the yearly levels involved on IWM, NYA, VTI and TLT, this could be an important turn. But I'd feel a lot more confident in further downside with a real VIX/XIV move.
Portfolio is already nicely positioned from this week, already hedged on FXI and SMH from late November, recently long TLT (and adding), then added short hedges on SPY on Tuesday and EWZ short from yesterday. Today added a GDX partial long based on YP, IWM short and sold the FXI to have the units short instead of just hedge.
In sum i am making a gamble on further downside without VIX/XIV confirm which is a bit tough to do. That said, NYA signals rarely disappoint. And with put-call just off 3.5 year lows, compared to mid November when it was at relative high, means better to go a little bigger on the bear side.
SPX, IWM, NYA, FXI, TLT below.
Toppy looking bars on SPX, NYA and VTI, and somewhat on DIA. But IWM recovered its YR1 which is a positive, and QQQ holding above its YR3.
TLT also making a move above its YP, and metals caught a bounce. GDX recovered its YP so I'm watching this for partial position. GLD didn't quite reach a level but GCZ contract held 2HP exact; SLV held 2HS1 near exact.
Often safe havens will strengthen before a stock drop so given TLT and metals today, along with VIX over the last 2 days, point to more risk for stocks. But as long as all USA mains remain above all pivots, and VIX and XIV remain below / above all pivots respectively, bull trends firmly in place.
In addition to safe haven buys and possible short hedges against the SPX Q4R3 level, we could also look for glaring weakness. EWZ is trading below its Q4P, but there has been some chop around this level without a definitive move.
SPX, NYA, VTI, EWZ, TLT and GDX below.
SPX/SPY, RUT/IWM, NYA and VTI look pretty toppy today. Add in TLT hold of Q4P, VIX reversal bar, and first timing date since 12/1 (which was a key low) and there is a good shot at decent trading turn here.
Portfolio has already reduced exposure with hedges on SMH and FXI on 11/27 that i have made no mention of covering. I also recently recommended TLT as an option above the YP. Yesterday was too close to call and today held a Q4P and key MA (moving average) so I'm going to give it one more day.
In addition, adding to hedges on SPY based on SPX and both ESZ17 and ESH18 contracts.
SPY, SPX, ESZ18, IWM, NYA, VTI, VIX and TLT below.
Markets continuing in bullish fashion - SPY above Q4R3 (though SPX still under same level); NDX/QQQ above YR3; and RUT/IWM holding above YR1. Also, XIV soared above DecR1, TLT fell below YP slightly and metals continue to crumble.
SPY, SPX, XIV and TLT sbelow.
Earlier this week on 12/5 Daily comment said: "If USA mains hold DecPs again I'll cover some shorts. But if more join QQQ below DecPs as VIX climbs, I'll hold."
And the next day SPY formed low above DecP - ES bang on it - and VIX fell back under DecP in a convincing manner.
Cutting back some hedges was the way to go, but still, SMH and FXI hedges from the week prior worked out quite well. :)
As usual more on the blog over the weekend.
Victory for stock bulls as 4 of 5 USA mains above all pivots (only QQQ below DecP, as IWM recovered slightly today). Safe havens hit hard, with TLT and metals down significantly, and VIX giving crystal clear rejection of DecP and D200MA.
SPY, VIX and TLT below.
More bullish than bearish action today as ES held its DecP and QQQ came back even before reaching pivot support. VIX also looked more like a continuation buy signal.
On the bear side, IWM also moved below its DecP and TLT gained.
So glad about the SMH and FXI hedges with FXI down another -2% today!
SPY, ES, VIX and FXI below.
Today the bearish developments of Monday continued, with one small change. Somehow, VIX closed under its DecP. I'd have more confidence in a significant down move ahead if VIX were moving higher - like above its Q4P again. Not yet. So it's possible that this is just a few day 'sell the news' move and USA main indexes again hold their monthly pivots and zoom back to higher. Possible.
One argument against the shallow dip is that TLT moved clearly above its YP today. How is TLT just a few points off its high of the year after a relentless 1 year stock rally? Typically, strength in safe havens means more volatility in risk assets.
Over the past several weeks, some of the hedging suggestions have been a bit frustrating. As i have mentioned several times, there were a few gains and a few small losses. But i did not relent on risk control and the next batch of short hedges has been a fantastic alpha move: short SMH and FXI near highs to lock in gains from 8/21 area buys; then short QQQ, and adding to QQQ. Potentially short others like SPY or IWM yesterday or adding on TLT long today. As I mentioned in yesterday's daily comment, it was time for action and now I am quite comfortable on this market drop.
If USA mains hold DecPs again I'll cover some shorts. But if more join QQQ below DecPs as VIX climbs, I'll hold.
SPY, QQQ, VIX and TLT below.
Today is one of those days with coordinated action among all USA main indexes plus VIX and other safe havens. That means action.
Thankfully, the hedges recently suggested are working fabulously - SMH & FXI shorts both 11/27, then QQQ recommended as short hedge on 11/29-30 on any bounce back towards YR3.
From 11/30 Daily comment on the QQQ YR3 short idea: "...I don't know the reward, but the trade has very tight risk against the YR3 level on NDX/QQQ combined. Still holding SMH and FXI hedges. This reduces overall exposure - all trends are up, but the cost of this position is minimal if wrong, and potentially significant rewards if right."
Today one would be very warranted to add to that position with QQQ the only USA main index below its DecP.
From here also watching TLT to see if YP can have "look of support" - it cleared YP fractionally today - because this could be a very non-consensus long into year end. The unclear signals occasionally work, but I think better to wait for clear signals and then take meaningful action.
So, the damage:
SPY Q4R2 rejection
QQQ YR3 rejection and DecP break
IWM 2HR2 rejection and Q4R1 break
NYA YR2 rejection; VTI Q4R2 rejection
VIX above DecP
All charts plus TLT below.
Outrageous day! SPY dropped from Q4R2 high yesterday to trade all the way to DecP (even below) and somehow rallied all the way back to close outside the daily Bollinger band for the 4th day in a row!
Similarly, VIX moved up all the way to DecR1 and near Q4R1 tag, only to finish below all pivots by 02. Amazing.
As usual more on the blog this weekend.
Odd day. DIA continuing to soar above levels and if we keep that as main reference - which would have been correct as strategy in Q4 - there is really no problem. However, SPY tagged Q4R2 along with NovR3 and looks somewhat toppy, and more important, NDX/QQQ testing YR3.
From 11/29 Daily comment: "Interestingly, QQQ fell back under YR3. Given the current look of most indexes and safe havens I think some bounce is likely into the end of the week, but I also think YR3 will remain as resistance for a bit further. A bounce towards that level could set up a great r/r short hedge."
And that is how it has played out. I don't know the reward, but the trade has very tight risk agains the YR3 level on NDX/QQQ combined. Still holding SMH and FXI hedges. This reduces overall exposure - all trends are up, but the cost of this position is minimal if wrong, and potentially significant rewards if right.
Hard to read too much into VIX - above its NovP which vanishes tomorrow, and clear resistance at Q4P.
SPY, NDX, QQQ and VIX below.
Interesting day with a few high flyers getting knocked and other indexes continuing higher.
VIX remains under all pivots and XIV held above NovR1, so giving benefit of doubt to bulls. Other safe havens collapsed - recent TLT position cut. Some of my hedging this year may have looked silly and over the months there were a handful of small dings - as well as some very proftiable trades and a huge score on short XIV. Today was one of the big scores, with SMH and FXI hedged out two days ago. Oh yeah, FXI -2% and SMH -4% today.
Interestingly, QQQ fell back under YR3. Given the current look of most indexes and safe havens I think some bounce is likely into the end of the week, but I also think YR3 will remain as resistance for a bit further. A bounce towards that level could set up a great r/r short hedge.
SPY, QQQ, FXI and SMH below.
Wow - I expected IWM and VTI to join other indexes above resistance this week, but these kind of fireworks are pretty amazing.
SPY definitively above YR2 cluster on 11/21 with XIV confirming above Q4R2 have been on the right side of the market.
Next levels in play are DIA 2HR2 and IWM already at Q4R1.
SPY, DIA, IWM, VTI and XIV below.
No change of pivot status to the main indexes, though notably RUT/IWM looks more like rejection at YR1 and VTI looks like some rejection of near YR2 tag.
VIX and XIV are still supportive of risk, though TLT held its YP again and GLD continues above all pivots. HYG also broke down below its 2HP, so below 3 of 4 pivots (only above YP). This has been fairly good leading indicator.
There was also some bearish action on various emerging markets and sectors: FXI NovR2 area top and today 2HR2 rejection so that looks like time for a hedge, and EEM NovR2 top. In sectors, XBI YR2 rejection; SMH fell back under NovR1 so taking a chance on another hedge as well; XLE YP rejection too.
Still, main indexes are fine as long as QQQ is holding above YR3, no rejection on DIA and SPY is trading above YR2, and VIX and XIV remain calm.
SPY, FXI, SMH and TLT below.
SPY continues above resistance; jumped above the significant cluster on 11/21 and from there maintained above NovR1.
As usual more coming up on the blog over the weekend.
Holiday action in indexes, but TLT held its YP and GLD jumped back above all pivots.
NDX/QQQ remains key level to watch. Safe haven strength often anticipates stock market weakness.
SPY, QQQ, TLT and GLD below.
