2/5 Total market view: "Bottom line - Range bound or start of melt up, not sure here. There is no reason why VIX can't sink down into the 9s and indexes go for major resistance (and by this I mean Q1, 1HP levels, not just monthly). If market fades then IWM will likely be the first below a monthly pivot."
Result - IWM did drop below its FebP for two days but larger move was SPY and VTI up to 1HR1 / Q1R1 resistance areas.
Trump honeymoon now about 3 months has been an incredible move. But the rumor, sell the news as they say, and the tax plan and further deregulation still in rumor stages with news yet to come. So there is a case to go yet higher. But SPY and VTI are running into long term resistance at 1HR1s, and QQQ is not far from YR1 These are key levels to watch. In addition RSI approaching overbought or fully overbought on several charts across timeframes increase the chances of a pause or a drop.
Any sign of weakness on Monday means possible to reduce long exposure via a hedge on SPY. Run through the top checklist (current answer: maybe) and the more items tick off the more likely the market is at a decent trading top.
Reductions in Q4 2016 made money (IWM hedge was a gain as was FXI short). But 2017 reductions have cost a bit. That said, 2 indexes on long term resistance means ready to hedge to lower exposure from current 100% long.
USA main indexes - SPY on 1HR1 Q1R1 combo and VTI on same. IWM on FebR1.
Sectors of note - XLF on FebR1. XLE below 1HP for several days but bounced back from FebS1.
Safe havens - GLD above all pivots showing some caution, but TLT weaker and just barely above its monthly (below the others). VIX and XIV continue to be correct on markets as they held levels (pivot resistance for VIX and support for XIV) when some USA main indexes were weaker on 2/1-2.
Global indexes - EEM, FXI, INDA and EWZ all at highs despite USD bounce. Impressive!
Currency and commodity - DXY held its YP exact on the low on 2.2 and since then has also recovered 1HP and Q1P. Near testing FebP.
RSIs approaching overbought on several indexes across timeframes - this tends to increase the chance of a top. But as we saw last December if market ignores overbought readings then it is very strong, so the important thing is to watch the reaction.
Valuation and fundamentals
While watching 17.5 forward earnings at 2318, I am still pulling for 18x-19x as a better bull market euphoria high. These levels are currently 2384-2517 or 3.0% - 8.7% higher than now. Fundamentals continue to support risk assets.
Extremes reached in December 2016, but not yet in 2017.
Timing (Proprietary experimental work in progress model)
Feb dates published 1/28
2/6 - Non event?
2/10 - Stock index high?