Last week from 10/22 Total market view: "Bottom line - Though the leader has held and VIX/XIV, which tend to be on the right side of the market, say buy stocks, I am still in upside limited camp due to: strengthening $USD, fundamentals per Citigroup Economic Surprise index, daily 50 moving average with falling slope on SPY, DIA, IWM and VTI. Stock trading range likely to continue, even if stocks bounce. If Q4Ps fail to recover then that is more bearish and we can still watch for Q4S1s. But shifting my bias to some limited bounce; let's say guess at this point is buy the rumor sell the news into the election."
And: "Even if SPY, DIA and VTI can clear Q4Ps - which would be a bullish development, basically taking away the Q4S1 targets for now - I still expect upside limited to OctPs."
Result was one day bounce on 10/24 that stopped at ES (SPX) and YM (INDU) futures OctPs, then lower with another rejection of Q4Ps on SPY, DIA, IWM and VTI.
SPY Q4P rejection move 10/27 was accompanied by VIX moving above its Q4P. Hence, "official trouble alert" on 10/27 Daily SPY comment. Perhaps we will see another bounce, but technically a move like 10/27 with clear rejection of quarterly pivots, resistance from falling MAs (moving averages) and VIX confirming is fairly rare and ought to be respected with reduction of longs and/or putting on hedges. Sometimes you may have frustration of seeing market come right back, but just as often you have the relief of avoiding a significant drop like last summer in oil and global stocks, 1/6/2016+ in USA stocks, and most recently 10/3+ in TLT and GLD, etc. More important it completely avoids the "hope it bounces so I can sell" mindset that takes over when one should have sold already.
Last week: "So this means long tech, financials, XIV maybe, global stocks, oil, $USD or short GLD/GDX, and hedged with DIA shorts. If USA mains recapture Q4Ps then hedges based on those levels come off, but at the same time think better to be soon taking some profits on global indexes and/or oil due to $USD strength."
It was the right move to take some off on global stocks (EEM, FXI, RSX, PIN) because now there is the chance to buy back at lower prices. But long QQQ & XLF, maybe XIV, some portions long global stocks as above, yet hedged with DIA shorts did not work because the longs lost gains and shorts did not drop. Grr.
As long as VIX is signaling trouble I believe it is right to raise cash / hedges until we reach lower levels on stock indexes and/or VIX trouble ends. After watching QQQ drop for days and DIA not budging, a partial reduction warranted but will be first to buy back on any move back above OctP. DIA shorts are still a hold below its Q4P/OctP combo. IWM shorts would have worked better but I didn't specifically recommend it. See Pivot status post for buy ideas and a recent post on Global indexes - EEM, FXI and PIN nice holds of Q4Ps as most USA mains are below.
Bottom line - SPY & VIX "trouble alert" issued 10/27 via SPY clear rejection of Q4P and VIX move above its Q4P. Consider previous incidences this year: 1/4-6, 1/29-2/2, 6/24, 10/11. 10/11 not much damage before the next alert issued, and 6/24 turned out quick buy 6/27+, but that was not the case on the first two. Until we see lower levels on stock indexes (ie SPY Q4S1) or recovery and end of alarm I think cautious positioning warranted. This means reduction of longs, more cash, perhaps short hedges though as mentioned DIA shorts have been frustrating.
USA main indexes - 4 of 5 USA mains below Q4Ps, and Tech cracking. Bullish scenario would be QQQ recovery of OctP, DIA & SPY back above Q4Ps and perhaps opening above NovPs. Bearish is anything lower.
Safe havens - Not so safe in 2H. TLT no bounce from 2HP at all is weak. GLD managed to hold, but bounce weak so far. VIX above 2 pivots is a key component in my "trouble alert."
Global & other - $USD nearly reached first target area (99.18 target, 99.12 high) and so far pause. I think higher long term but if $USD slows this will allow the global indexes EEM FXI and PIN, also likely EWZ & RSX, to bounce.
Lastly keep in mind new November pivots as of 11/1.
Monthly bars about to close. Not as important as the September bar close that also means the close of Q3, but still worth a look. Despite moves below 2015 highs on SPX and INDU, and below the 2000 NDX top, factoring in the monthly close high levels make this move less threatening. More on this soon on a post this week.
Valuation and fundamentals
More a headwind than tailwind.
No recent extremes in put-call, NAAIM managers or AAII individuals. Recent daily spikes on ISEE 10/3 & 10/10 near stock trading highs.
For October, 2 dates/windows published since end of September:
10/9 - that's Sunday so let's say 10/7-10
10/27 was added last week as a minor turn.
Result was 10/10 high, 10/19 minor high/non event, 10/27 too soon to tell.
12/1-2 (there will be other dates later in Dec)