Last week: "Bottom line - I want to be bullish stocks with tech and global stocks doing fine above all pivots, oil rallying, safe havens crumbling, and VIX giving the all clear without being too low. At the same time I don't like this combination: YR1s acting as resistance on 4 of 5 USA main indexes, monthly pivots acting as resistance on 3 of those, and the same 3 daily 50MAs rolling over with downward slope. Sentiment is a bit too bullish on ISEE as well. You don't have to be max long here and in fact shouldn't be with only 1 of 5 USA mains above all pivots. Maintain longs on the leaders but lighten up if Q4Ps break on SPY, DIA and VTI, or use those levels as hedge areas if they turn into resistance. Basically I am expecting range bound action but don't know whether stocks have energy to move back up to high areas or SPY DIA VTI Q4Ps break and we see a test of QQQ OctP or lower as the next move."
Result was first move bounce for 10/10 high, with ISEE 3rd highest reading of the year warning on the long side, then immediately back down with Q4Ps breaking on SPY, DIA and VTI along with test of QQQ OctP. On Friday 10/14, the SPY, DIA and VTI all Q4Ps "looked like" resistance. Here's a detailed post on what that means.
Pivot action on all 5 USA mains and VIX is forcing me to be bearish here, so I maintain that stance until we draw bullish conclusions or we see lower levels that might mean taking off hedges (thus being more long) is the better risk-reward play. Also keep in mind that although I take the QP rejections and other technicals seriously, USA mains are still in long term uptrends (ie above 2HP and YPs; and above most rising moving averages on weekly, monthly and quarterly charts) so I tend to view this as some kind of correction to be avoided, and which will wind up being some kind of buying opportunity.
Bottom line - bearish for now with SPY, DIA and VTI Q4P rejections, IWM Q4P break and QQQ OctP break. A bearish scenario would be lower to see SPY, DIA and VTI Q4S1s, a nice pullback, making the trapped bulls squirm, but still with the possibility of comeback. A more bullish scenario would be QQQ back above OctP and IWM back above Q4P as VIX drops back under its Q4P as well. Due to the long term charts and trapped bulls, recent sentiment extreme and timing I'm thinking the more bearish version.
Either way usually best to buy what holds up best on a drop and right now that is financials, tech, maybe India, then we'll see what happens with the EEM / FXI story if $USD strength continues.
Only a few things left that I track still above all pivots. XIV, XLF, NQ futures, PIN (India ETF, but not INDA), and 2016 market leader EWZ Brazil.
USA mains - Q4Ps looking like resistance on SPY, DIA and VTI, as Tech set didn't hold OctP, and RUT set broke Q4Ps as well. Bearish until we see something different. This could be Tech set recovery of OctPs as RUT recovers Q4P, especially with VIX confirmation, OR it could be lower until we see Q4S1s and Tech set Q4P. I'm thinking the latter.
Safe havens - Not so safe anymore so any stock drop is pure pain for investors without TLT uptrend to cushion the blow. TLT below 2HP means long term weakness for the first time sine 2015 on a weekly chart. For now VIX sounding trouble above Q4P and OctP so stock index bounces remain suspect.
Global & other - $USD the story now, one of the best trending moves of Q4 along with TLT and GLD down, and oddly, oil up. But The Pivotal Perspective has been on top of all of these moves. $USD strength will will likely keep lid on USA stocks and puts a kink in EEM story so I'll do a special $USD post soon.
I factor in moving averages, Bollinger bands on a variety of timeframes but sometimes you have big levels that make things simple and right now these are 4816 the NDX 2000 top, 2134 SPX 2015 high, and 18351 the INDU 2015 high. INDU is leading down and so the first choice for any portfolio hedge.
Here are monthly, weekly and daily Dow charts to show what I am talking about. The charts include the 2015 monthly close high level as well, and this may still act as support.
Valuation & fundamentals
More headwind than tailwind.
Recent ISEE extreme on 10/10, otherwise no extremes since too much bullish sentiment across the board in mid August.
For October, 2 dates/windows published since end of September:
10/9 - that's Sunday so let's say 10/7-10
So far 10/10 key lower high. Heading to 10/19 low?