10/15/2017 Total market view: "Similar conditions as last week - strong uptrends for USA indexes, but major pivot resistance in play across the board, RSIs overbought, weekly chart Bollinger band overthrows - and now with slowing momentum and some safe haven strength. The most likely move is some top and drop this week."
While this was somewhat true for IWM and QQQ, it was off for SPY and especially DIA which continued to power up.
Over the last two weeks I have expected limited upside due to: all 5 USA main indexes heading into major resistance levels (means Q 2H or Y levels), including two yearly resistance levels, most especially INDU YR2; valuation reaching above 18x SPX forward earnings by moving average and latest Thomson data for the first time this year; RSIs overbought to historical extremes across timeframes (again, most especially on INDU), and Bollinger band overshoots on weekly chart which tend to peak after about 3 weeks.
So far this hasn't been the right take, but depending on how adjustments have been made and when it hasn't cost that much. Any safe haven longs on GLD for example (which worked spectacularly well in July and August) are out for small gain or scratch. In addition, 10/16/2017 Daily comment: "...fractional close above INDU YR2 on both cash index and ETF... So far it's still risk on. I'm a bit skeptical but will avoid any big counter-trend positions until i see things moving the other way."
This also demonstrates why it can be easier to add safe haven longs or hedge via shorts with tight stops, instead of cutting profitable longs and then trying to re-enter.
OK, now what? Most of the conditions are still in play, except that many indexes cleared pivot resistance levels that I have been pointing to over the past two weeks. SPX/SPY cleared Q4R1 and testing YR2 (cash testing level, SPY has bit more to go); INDU/DIA jumped above YR2 and even cleared Q4R2 without any pause; NDX/QQQ cleared 2HR1 but still under Q4R1; RUT/IWM highs still slightly under YR1; broader indexes NYA & VTI still point to strength in stocks.
If strength continues, then we will see SPX definitively above YR2 and then SPY follow through as well. If markets fade, then we could see SPX YR2 rejection along with weakness in current laggards IWM and QQQ.
Given such strong momentum, even if we see some pause and drop this week, it is likely that it will be a rather temporary trading top. This kind of RSI and Bollinger band strength usually means divergence highs - ie, higher highs in price with lower highs indicator. We are not even close to this on DIA and SPY yet.
VIX and XIV, while in areas of possible turns, are still saying risk on; and other safe havens (TLT AGG GLD GDX SLV) look weak. To my eyes, some sort of safe haven breakdown looks to be the more likely move as indexes push higher. But I'll still be watching reaction from SPX/SPY YR2, IWM YR1, and QQQ levels.
Bottom line - INDU powering up above YR2 and then above Q4R2 was very bullish. Safe havens are weak. Bulls get benefit of doubt; but still watching SPX/SPY YR2, RUT/IWM YR1, and QQQ Q4R1.
USA main indexes - IWM and QQQ still under key levels; they could join others in rallying above this week, or may lead down if SPY and DIA slow down.
Safe havens - Watching XIV 2HR2. GLD still above Q4P, and TLT back to crucial area of 2HP and D200MA which has already bounced once. TNX on the move; to my eyes, looks like TLT breakdown / TNX TYX breakout up is next move. If correct, GLD and other metals likely down as well.
Sectors of note - XLE near YP; if oil weakens, practically only thing I know of below a YP to have a trend trade short.
Global indexes - With $DXY stabilizing, global indexes are off the highs despite maintaining status of above all pivots.
Currency and commodity - $DXY 2nd try above Q4P, but so far only fractionally above.
Cryptos - BTCUSD 2HR3 5667, so far above. ETHUSD rather glaring lower high on recent move and slightly below OctP; Q4P at 276 significant support, then 2HP & D200MA combo both near 230-36. I think that area will test.
New highs faded a bit last week, along with MCO into red. Not too concerning yet but still watching.
VALUATION & FUNDAMENTALS
If institutions paying more than 18X forward earnings then they are starting to think corporate tax cut is for real. At least this is how i view it.
Not screaming, with put-call measures a bit higher.
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 - non event
October dates (listed from 10/1)
10/6-9 - 10/9 mild pullback low
10/19 - pullback low
10/23-26 - trading top? stronger timing window than many
November dates next week