Last week I was expecting a bounce and that delivered. Per my view of the market and timing model, my bias is for breakdown in March but I have to respect the bullish action on long term levels last week. It is easily possible that indexes go higher and the simplest strategy is to watch the FebPs that are nearest in play on SPX / SPY / ES, INDU / DIA / YM, and NYA / VTI as posted here. I really don't have an opinion on direction for the coming week and will let the FebPs decide.
If the market shows strength then I might say reduce safe haven trades and add more longs (but only what is above a FebP); but if it shows weakness be ready to pounce by adding shorts or safe haven positions. A breakdown from here could be very fast and messy.
Based on oil, a breakdown looks more likely. But various VIX indexes are appearing more positive, and it is my experience that VIX if often correct. We'll see what happens. More specifically:
1. In 2016, following The Pivotal Perspective would have reduced then cut (or at least fully hedged) USA stock longs, possibly reversing short, early January 1/4-7, while buying TLT. TLT then added after clearing the YP, and probably took gains on a portion of that at the YR1 / 1HR1 rejection. Basically we are monitoring the TLT position and deciding whether to go back to full strength or continue to hold the portion. If you took USA index shorts, then the YS1 holds, turn alerts 1/20-22 and 2/12 along with the INDU buy were good cover areas.
2. Likewise, GLD was mentioned several times before the big jump, with an add 2/4-5. I think the first buy is definite hold but watch the YR1 area this week on the ETF and futures to decide on taking some profits or not. This move likely corresponds with main stock index decision at the FebPs. Also might be worth keeping DXY in mind here, as DXY is again testing its YP. A second break should help support the GLD idea.
3. If in the INDU / DIA speculative buy, then obviously we are watching the reaction from the FebPs. If that clears across the board we could add, but if rejection then cut and take the small gain. I don't want to get cute with the counter-trend. Best gains are made long above pivots and short below. If still in the emerging market longs from last week - RSX, EWZ, and EEM all mentioned as possible buys above FebPs - and of course they have to stay above FebPs to remain valid. Again let's not get too cute with counter-trend, as these have poked above a FebP and still below all the others, but I'd give them a bit more time to play out if the DXY breaks its YP again which was testing on Friday.
4. If in BTCUSD from 2/16 near 407, that is moving well. "Above all pivots" scores again.
5. If market is strong, then really INDU / DIA / YM appeared to be the leader for a couple days last week, but as of Friday came back to be about even with SPX / SPY / ES so either of those could be adds. Basically I would only buy what is above a FebP. If weak then there are plenty of choices for shorts - anything that hasn't tagged its FebP yet. So NDX / QQQ / NQ, RTY / IWM / TF, IBB, XLF.
6. Oil. On the CL1 contract, oil has been below all pivots since 11/4/2015. The recent lows were bang on 1HS1 on 1/20 and YS1 2/11-12. Something that has been down 75% in the last 2 years is going to be quite squeezy. So, if already in this position from last year then your judgment call. Major support levels were the perfect places to cover. You could also hold a portion until oil recovers a quarterly pivot.
7. If in emerging market shorts as suggested as portfolio hedges from last year - FXI EEM PIN RSX EWZ were all mentioned in November - probably you would be out at least some of these positions, most of which had huge gains. First, all except EWZ reached an 1HS1 or YS1 or both. Second, EEM, RSX and EWZ have been above their FebPs 3 times as DXY softens. FXI has been the weakest, remaining below all pivots since 11/25/2015 and so the best to hold at this point. PIN recovered its DecP towards the end of the year but again below all pivots from 1/6/16, at which point there were plenty of USA short choices as well, but also could be held as a short compared to the now relatively stronger EEM, RSX and EWZ.