12/3 Total market view: "Bottom line - 4 of 5 USA main indexes are above all pivots, VIX is below all pivots; safe havens TLT and GLD are below most pivots (GLD still above YP). It is right to be mostly long USA indexes while stepping out of the way on leverage for the pullback. Next move to ramp back up longs or protect more recent gains will depend on Tech set Q4P, and what happens with currencies and rates with any political news out over the weekend."
Tech held Q4P and rallied back above all pivots. USA indexes continued higher. SPY daily comments recommended reducing then eliminating hedges 12/5-7, and going back up to some leverage 12/7.
This is really an amazing move and everyone knows it. So, sentiment has gotten to the point where it often does near market highs or places where upside is more of a struggle. Despite showing several signs of longer term strength, at some point the rocket runs out of fuel and I think we are probably at that time.
Heading into options expiration and put-call is quite low. This means option writers would benefit from engineering a selloff, or at least keeping things sideways to drain premium. Keep that in mind.
Bottom line - Just like last week all we needed to do was watch Tech set Q4P (which clearly held and rallied), this week I'd suggest watching reaction from RUT YR2 1387 which is an amazing accomplishment with lows of year on YS2. The market has surprised me with strength and I suppose that could continue, but I 'think' the next move is sideways or some drop.
More detail on moves I have recommended in a dedicated post here. The decisions will be whether to 1) reduce leverage and 2) hedge which will take market exposure less than market weight. In general I was too quick to reduce leverage and hedge after 11/28 after saying buy 11/7-15, but that doesn't mean the next reduction will be a mistake. A partial hedge against RUT YR2 is a possibility with a tight stop above; this effectively locks in gains from any buys while holding longs. Your perspective may differ, but it easier for me to do this then take gains and position back in on the long side. Also, there is no reason to lose any money on the most recent leverage longs on QQQ from 12/7.
USA mains - For the coming week RUT YR2 level to watch and a few Q4Rs on SPY (Q4R2), DIA (Q4R3), and VTI (Q4R2).
Safe havens - Continue meltdown. TLT and other bond variations not really on any levels which suggests lower. GLD nearly testing YP. VIX below all pivots from 11/9 on daily close fantastic job confirming stock longs, again.
Global - Several weaker indexes had pivot improvements last week. EFA rallied above Q4P and DecP, EEM back above YP, INDA recovered 2HP and rallied above DecP. FXI weekly chart still looks like it could easily drop.
Currency and commodity - USD healthy hold of DecP and back up to highs. The real question is whether EURUSD breaks down out of 18 month range to correlate to USD break out up.
Multiple signs of strength abound across time-frames and USA main indexes. Also, 2017 Yearly Pivot Promise suggests significantly higher levels will reach on USA main indexes, and lower levels for safe havens. More on that in weeks to come.
Valuation and fundamentals
Citigroup Economic Surprise Index confirming stock launch and bond drop. Where is valuation a real concern? At 18x forward earnings. We're not there yet.
Getting up there, and option writers would benefit from a drop here.
December dates (published 11/26)
12/1-2 strong - turned out key pullback low as suggested last week: "If Tech holds Q4P a lot would line up quite bullish"
12/7-8 maybe - trading high?
12/19 - ?
12/28 - TBD