Total market view

Abbreviated post today, just the summary and no supporting charts. 

1/14/2018 Total market view: "Markets are in a euphoric blow-off phase and we are likely to see higher highs in Q1 and 1H; in this kind of environment we 'should' see at least some main indexes reach YR1s before a major top. Assuming one is decently long with some GLD/GDX the thing to do now is monitor to make sure the portfolio remains long leaders and decides when to take hedging positions to lock in some gains. As noted from the first week, bonds are weak across the board while metals were clearly the place to be. Interestingly, VIX and XIV have not shared index enthusiasm so i think the next place for a trade is UVXY. See safe havens for details on this setup."

Result - setup triggered early 1/17 and if exit near close one day gain of about 9%.

Most equity indexes pushed higher last week, and though advances were generally smaller than the week prior it still looks like continuation of an amazing run. Meanwhile, bond breakdown continues. I find it striking how clear the market is being in terms of the asset class that is not in favor - bonds. I can only hope that when it is the turn for stocks, there is similar indications and time to make adjustments. 

As noted in the daily comment, VIX seems to suggest market expectations of a deal or limited consequences of a shutdown by closing back under all pivots on Friday after being above Q1P and JanP 1/16-1/18. Perhaps like Brexit, the market may be genuinely surprised on Monday. That said, also like Brexit, perhaps whatever lows form will be temporary. 

Global indexes are also ripping higher with both developed and emerging indexes powering up. It is likely that any gov't and perhaps DXY troubles will be even more reasons to allocate abroad.

USA main indexes - Things may change on Monday but as of Friday's close indexes were above resistance levels that had pressured stocks lower on 1/16. YR1s are getting within reach. 

Sectors - SOX index (influencing SOXX ETF and to some extent SMH) breaking out up above its 2000 top. XBI still testing 2015 high. Financials depend on the index; XLF not yet above 2007 high (seems like going for it) but IYF above. 

Global - China still ripping with FXI, KWEB, SHComp, EEM all decently higher; all others higher as well. ACWI global index weekly RSI at 91; NYA index quite strong but still under that level at 87.

Safe havens - Under all pivots: TLT, AGG, TIP; Under 3/4: LQD, MUB. Only HYG holding above pivots and this is because it tends to trade more like a stock. A few more comments. FOMC raising rates, unwinding balance sheet, global QE taper, global growth, corporate earnings, stock strength, potential inflation pressures and perhaps DJT budget blowup are all contributing to the bond breakdown. Long term investors should include the yield in technicals especially for these fixed income vehicles as I described last week in this column and tweets. Using this system, TLT and AGG are approaching critical levels. This will impact anyone 40+ who has some bond allocation. Financial advisors, robo and otherwise, that are following typical textbook of increasing bond allocation with age without considering the current context have people 40+, especially those about to retire or already retired, in an asset class that is already showing pricing stress and on the verge of a long term exit according to my system. 

Currency - DXY under all pivots from 12/20, reached long term support of 1HS1 but weak bounce so far and likely lower on Monday.

Weekly RSI on NYA Composite Index and many others highest in history. NYA from 1993, SPX from 1980, Dow Ind from 1970. I am not saying these are the proper beginnings of these indexes only what I can see on TradingView. Only NDX had higher weely RSIs than now in 1995. So we are in monitoring phase - watching for at likely several higher highs in price with lower highs in RSI and inside Bollinger bands, then ultimately forming with RSI near 70 or lower. This could take years to play out. Or perhaps this time around, we will see a flash crash for a more swift resolution of the overbought condition. 

New highs and new lows - new lows increasing somewhat but new highs so strong that a significant top will likely occur with a lower peak.

SPX has pushed above the 10 week average of 19X forward earnings for the 2nd week in a row. Yardeni's SPX and Blue Angels (google it) are literally going off the chart. 

Daily and weekly put-call at multi year lows. This indicator also requires context. For example, the absolute low was 5/2009 and puts were at a very low level from December 2008 on. Investors had already sold stocks with less to protect or knew the the worst had likely past. But considering 2010 on, daily put-call at current levels end of 2010 (followed by 6 months of choppy range followed by -20% drop), end of 2013 / beginning of 2014 (-10% drop in next weeks), and June 2014 (followed by another extended range period and correction). 

While I think we will see the YR1s, perhaps after shutdown related drop and recovery, this implies one should start thinking about taking profits on the next high.

1/4 - middle of up, non event
1/10 - mild pullback low
1/15 - i thought high 1/16 at the time, also looking like mild pullback low (+1 on 1/16)