Last week: "USA mains are acting in a very healthy fashion at the highs and we should see major pivot resistance for a top of any significance. Most sentiment extremes reached in mid July have backed off. Safe havens TLT and GLD are a bit weaker, and we aren't seeing any concern from VIX/XIV. Simply stated stocks should rally further and I'd especially like to see INDU YR1 area (also check other index targets below) for a key high."
Close but not quite; the high on 8/15 was 59 Dow points from the YR1. Hope is not a strategy, but I am hoping that wasn't IT as target failures are very pesky phenomenons since I don't trade them and they are only clear in hindsight. Safe havens are still a bit weaker, VIX and all variants are all clear, and we really "should" see several USA mains on major pivot resistance for a top of significance. This hasn't happened yet.
I don't have a bias on the coming week. Given sentiment extremes recently reached, I would not be surprised at a another small drop and comeback. Yet for now I keep to this view: ideal high area INDU YR1 18727 with other levels (Q3R2, 1HR1) a bit above that; SPX Q3R2 to 2HR1 2198-2209; NDX achieved 1 day above 4816 so if above that next pivot resistance level is AugR1 at 4857, and RUT Q3R2 to YR1 combo at 1246-1261.
Let's put that in perspective. INDU has rallied from lows bang on YS1 to YP which held on 6/27, and now all the way to near YR1; SPX slightly below YS1 through YP to above YR1; NDX below YS1 to above 2HR1; and RUT from YS2 and now approaching YR1! These are all fantastic moves; not completely unusual historically speaking, but pretty good. Perhaps we will see higher than these levels by the end of the year, but SPX is up 10% off the 6/27 low and I am doubting that the market simply blasts through these resistance levels. In other words, they might be good areas to take some profits, hedge, or possibly short some of the weaker indexes depending on what unfolds. Of course, given the moves in TLT and GLD this year they could again be considered on the long side if back above all pivots.
Friday 8/19 reminded us that at stocks, bonds and gold can all drop together on the fear of rising interest rates; but safe havens TLT and GLD below monthly pivots leave stock indexes in the relatively stronger position above all pivots.
However, sentiment extremes have been recently reached; valuation already on the high side; Citigroup Economic Surprise index fading. The main point here is we have reached a point where upside is likely limited, though markets can easily go essentially sideways for several weeks before a drop that matters. Oil which is acting very well will help stocks maintain gains.
USA mains - see above
Safe havens - TLT and GLD below AugPs but both haven't dropped much either. TLT reached AugS1, GLD not even that. VIX and variants all clear.
Global & other - China (both Hong Kong and Shanghai), India, EEM, and others have all participated in the rally. NKY and DAX remain the weak links, and I even recommended a DAX short here on 8/15. NKY can be considered with a move under its 2HP. These are harder for USA individuals to trade, but can be accessed through futures and perhaps EWG & EWJ, though currency moves will impact the latter. Oil is looking good, back above all pivots on the definitive CL1 contract as of 8/15. This is of course supporting the stars of 2016, EWZ and RSX (though the latter might be done on its YR1).
Daily 20 MAs have flattened as they do with sideways action on SPY, DIA, TLT, GLD. But not on QQQ, IWM, SOXX, EEM, FXI, and others.
Now a concern for the market. Risk of shakeout drops has increased, sideways, and upside limited until fear is refreshed.
Valuation and fundamentals
Citigroup Economic Surprise Index dropping rather fast after what looked to a great move.
I probably should not have tried to separate out stocks from safe havens as it just made a mess. 7/29-8/6 strong period was a relatively minor pullback low in stocks, yet a key higher low in oil for the year, and a double top in GLD.
But August has been a bit too sloppy to be helpful thus far:
8/9-10 stocks - minor pullback low
8/12-13 bonds & gold - TLT high of month, GLD near lower high
8/21-22 stocks - we'll see
8/23-24 bonds & gold
8/29-9/2 all mkts