9/23/2017 Total market view: "Some key indexes are testing resistance - SPY and VTI are both testing 2HR1s. With sudden strength of IWM, XLF, and oil, as global indexes excepting INDA maintaining strength, I just cannot be that bearish. That said, given pivots, other technicals and valuation I expect to see some selling attempts on SPY in the coming week."
Indexes fell mildly on Monday and Tuesday with a selling attempt from SPX 2500 area, then came roaring back to finish higher on the week.
Often definitive moves begin around the end of quarters or beginning of the next. This happens as major institutions are adjusting allocations, and of these can set the tone for a considerable period ahead. A few examples this year: 1) all USA main stock indexes jumped above all pivots on 1/3/2017, despite some fade into year end 2016, then went on to strong performance for two months; 2) TLT held its Q2P on 4/3/2017, and then was stable or up making its high for the quarter late in June; 3) EEM held its Q3P (near test) 7/6-7, and went on to substantially more gains. This list goes on.
While these three examples happened to be days early in the new quarters, these moves can also happen in the 1-3 days of the prior quarter. A notable case was the last two days of 2015 that set the stage for an ugly January 2016 for stocks, and as it happens, the last real correction.
With this in mind, we just saw most USA stock indexes breaking out higher, safe havens fading, and many emerging market indexes bouncing after holding support. As sentiment gets more toppy, more timeframes reach RSI overbought, and more charts experience resistance at upper Bollinger bands, we may see some fade - but for now stage is set for more stock gains in the coming week.
Bottom line - SPY and VTI just broke out above long term resistance as TLT fell back under its YP and GLD continued to fail from its breakout attempt. In addition, weekly charts on many global indexes look similar to USA indexes in August - in other words, a normal pullback in an uptrend. Stock bulls have the ball. New Q4 and Oct levels in play Monday.
USA main indexes - SPX/SPY above 2HR1 2503 opens door to YR2 2576 by year end. RUT/IWM 2HR2 level to watch.
Safe havens - XIV testing 2HR1, level to watch. Last week TLT broke under its YP with a monster gap, and AGG is also now testing its YP. GLD will likely be near its Q4P. SLV was below all pivots the last 4 trading days in Sept. Point here is that continued weakness in safe havens will help confirm strength in stocks.
Sectors of note - No stopping semiconductors. 9/20 looked like YR2 rejection, and after brief dip back to higher highs.
Global indexes - Many of these dropped last week as $DXY tried to rally, and a lot look similar technically to USA index weekly charts in August. Meaning - EEM, FXI, KWEB and EWZ all pulled backed to weekly 10MAs, and I think bounce is the more likely next move. INDA went lower and broke 20MA. Of those I track, only SHComp and RSX not really making the same move.
Currency and commodity - USO tagged its YP and rejected. I have been emphasizing oil in the last few weeks seeing signs of strength but move from here is a toss up (and recommended at least partial exit last week). DXY has lifted for a few weeks and even traded above a monthly pivot for 4 days but hasn't gotten very far.
New highs & new lows very bullish condition for stocks.
Also, a study of Dow quarterly chart RSI peaks leads me to conclude that stocks probably have more room to run until we see more excess (quarterly chart RSI 85+) or quarterly chart RSI divergence. Neither is happening right now.
VALUATION and FUNDAMENTALS
SPX first close above the 10 week average of 18X forward earnings, currently 2505. Wall Street likely expecting positive earnings season, but this is still a level to watch. Citigroup Economic Surprise Index staying in negative territory; a move to positive will help bond yields rally.
CNN FearGreed is up there, but other sentiment meters I track are not that toppy. Also, though widely quoted, FearGreed is not just sentiment but actual positives and negatives in the market such as stock/bond differential and new highs & new lows. So just because it is high doesn't mean sentiment is frothy.
As it turned out, 7 dates provided for August. 2 were the high and low of the month. 2 were the second high and second low of the month. 2 were milder turns. 1 was non event.
9/4-5 - 9/4 mild pullback low
9/13 - QQQ high and TLT low
9/22 (+/-1) - stock index high 9/20 (miss)
9/26 - stock pullback low 9/25 (-1)
9/29 - stock high?