From last week: "I would prefer a deeper drop for risk assets, at least down to MayS1s, but at this point it looks like the market is more likely settling into a range instead of making a sharp decline."
Total market view from here
Pivots showing near term weakness in stocks likely, although severity will be something to monitor. Further declines on both NYA and ACWI, as well as the tech set under all pivots, would point to a bigger drop. Other technicals, valuation, fundamentals and timing are all strengthening the bear case. Yet sentiment has turned quite quickly bearish as well on a relatively mild drop so far. It is very likely that USA indexes will test MayS1s, and then we'll see what happens from there per the Pivots section below.
Given Friday's clear rejection of MayPs on all 5 main USA indexes (see that post for details), a move to MayS1s is extremely likely. But what happens after that will be something to watch. If VIX remains tame and TLT stalls at its MayR1, then maybe it is just going to be a choppy sideways period. But if VIX gets in gear and TLT moves above its MayR1, then stocks are in larger trouble.
The other important development last week was the break of NYA YP, which coincided with selling from the ACWI (global index ETF) YP as well. Institutions not defending key support is usually bearish for the market, but both of these are still near enough to 1HPs for a save. These are important levels to watch from here.
Also, NQ is barely holding on to its Q2P, and cash indexes NDX and COMPQ are a bit above Q2Ps as well. For now they are holding on, but if these break then tech indexes will be below all pivots!
Several USA and global stock indexes failed at falling weekly 50MAs recently. I think this is a big deal, especially combined with the slope issue. Breaks of rising MAs can come back, but rejections from falling MAs show a real trend. Also, in bull markets pullbacks to rising weekly 50MAs are fairly rare. For example on SPX, after tagging a flat W50MA in late May and June 2014, there was only a few tags for the next 3 years: 11/12 and 11/19 weeks of 2012, 10/13 and 10/20 weeks of 2014, and then two tags in mid 2015 before the breakdown. So really there is potential for the start of a much larger move here.
List of indexes I track that are dropping from falling weekly 50MAs (most in last 3 weekly bars)
USA mains: NDX, COMPQ, RTY, NYA
USA other: SOXX, XLF, HYG
Global: ACWI, EEM, PIN, EWJ, EWG
If time permits I may do another separate post on the global indexes like I do for USA mains and safe havens.
Meanwhile TLT looks fantastic lifting from a nicely rising weekly 20MA, and for that matter both 20 and 50MAs on quarterly, monthly, weekly are all nicely sloping up, and daily MAs starting to turn up again too.
Valuation and fundamentals
See today's specific post. These are not helping stock indexes right now, with valuation higher after the drop.
I was quite right to point out sentiment extremes 4/7 and 4/21, summarized per this 4/30 Total market view post. But sentiment has been quick to turn the other way with daily put-call sharply rising back to relative highs, ISEE very low on Friday, AAII manager exposure dropping fast, and AAII individuals nearly as bearish now as they were in January. It would take more time to do the detailed analysis to say when these are really extreme but if you want examples of a method please check prior sentiment tags.
April timing was confusing, even for me, just because there were more dates than usual (about one a week). But May is easier with just a few dates and really two windows to watch. As listed on 4/30:
5/9 Model A & B
5/26-27 Model A
5/31 Model B
So it looks like 5/10 was the turn (+1 trading day) and this could be an important lower high. I would prefer for 5/26-31 dates to be lows, although that doesn't necessarily mean going straight down from here.