Intro note: If you are new to my terminology please see the FAQ page and especially the video posted there.
There were quite a lot of long term levels that tagged last week, and I think the stage is set for some stock bounce. But what will it be? Decent rally back to SPY 193-94? Or lower high then breakdown? No idea, but here are some things to watch going forward. For USA main index charts see the last blog post here.
1. The yearly levels that just held - so primarily thinking INDU / DIA / YM YS1s, RTY / IWM / TF YS2s, NDX YS1, need to continue to hold for stock bounce; then the SPX needs to get in gear and recover its YS1 / 1HS1 1895-96 as well, along with NYA / VTI also recovering yearly levels. And of course, oil as discussed here.
2. The safe havens had a huge week with TLT reaching YR1 / 1HR1 134+ target first mentioned in this 1/13 video, but everyone knows that does look a bit toppy. GLD, recommended several times, also jumped over its YP the first week of February and tagged its YR1 / 1HR1 combo 117-118. Lastly VIX and VXD both poked above YPs but closed below, a possible bullish setup. Basically if stocks are going to put in decent rally, we will continue to see a fade in the safe haven trades that have exploded the last couple weeks. If safe havens stay firm, for example, staying above the next weekly pivots, and USA stock indexes cannot clear those, or reach a measly weekly R1 and then sharply drop, then the market could roll over.
3. Interesting vehicles to watch are anything that is poking above a monthly pivot. This is far from the case in any USA main or supplemental index, although if oil continues XLE will have the first shot. In world indexes, RSX will also pop on the oil trade and is just barely below its FebP as of 2/13 close, and selling in EWZ seems to have dried up with a much higher low forming and EWZ above its FebP on 2/13 close. That is probably more currency effect and DXY weakness, but could be squeezy.
4. Big picture point is stage set for some stock bounce, probably hinging on oil. But the vast majority of stock indexes / ETFs / futures are still below all pivots, and most save havens are above. So let's not get too cute with the counter-trend idea. The market is trying to fight off the lows - referring to SPX Oct 2014 low at 1821, Aug 2015 low 1867, Sept 2015 low 1871, Jan 2016 low 1812, Feb 2016 low 1810. But "there is no such thing as a quadruple bottom" and if this idea is correct indexes will put in a relatively weak bounce in the scheme of things then roll over.
5. If you've been following a Pivotal Strategy from the start of this blog, you would have been:
Buying USA indexes QQQ & SPY etc early October
Short oil and some global indexes like FXI and EEM at various points in November, possibly covering some of those shorts already
Short IWM if at screens 12/31 (but who was?)
Reducing USA significantly 1/4-6, possibly shorting there with YP pivot breaks; any tech long final out 1/7 with NDX below its YP and "bear for real" declared on the blog
Buying TLT 1/6, adding 1/22-28, possibly reducing the adds last week
Buying GLD 1/25+, possibly adding 2/4-5, now watching for profit taking signal on the add
Possible speculative buy on INDU / DIA as posted last week, but let's keep a tight reign on this
Now what? My bias is the final low is not in, because this year just not acting like 2014 or 2015 where we saw early weakness in January and early February then done and off to races. Also, as outlined here, I don't think a year long topping process means selling is over in a few months. This would mean playing a bounce lightly, look to add back safe havens on a pullback to monthly or even weekly pivot support. Probably a lot hinges on oil; if that continues, then stocks will put in a decent bounce, bonds will drop further, and oil related vehicles will obviously participate in a quick squeeze. I'll also keep an eye on VIX, because I think that has been subdued given market action. If VIX again lifts above its YP/ 1HP combo at 27.46 - which has poked above, but not yet closed above on a weekly basis - then we'll probably also see a major breakdown of all the YS1 levels that have just held along with SPX low areas listed above. A breakdown will be very messy and could happen quickly, so this is a good time to watch the short term levels like weekly pivots on an hourly chart.