Total market view

5/20/2018 Total market view: "...if you have avoided bonds (per Pivotal Perspective clear repeated warning from the beginning of the year), were watching for commodity longs per many repeated comments of emphasis, played USA small caps and tech on the Q2 recent rally and out of the emerging markets, then you have done very well. Now as last week it is time to be watching to lock in gains. ... if my idea on pro selling in tech is correct, we are about to see further declines in QQQ and SOX/SMH, and possibly a TLT and bond bounce as oil pulls back from its high."

Result - Stocks were sideways but bond bounce and oil drop on track. Locking in gains from any USO or XLE longs, and/or playing TLT on the long side all worked. Stocks have yet to confirm the anticipated bearish scenario. 

USA main indexes have been mostly in a deadlock since 5/10. QQQ has yet to break out up above its YR1, with the level testing 8 of the last 12 bars; however, DIA has continued to hold its QP, with that level testing for 8 of the last 11 bars. VIX and VXX are not helping break the tie, as VXX plunged below all pivots on 5/10 and remained there since, yet VIX has continued to hold its YP.

Which way will this go? I still prefer a bearish scenario - this implies QQQ YR1 rejection, DIA QP break, SPY MR rejection, and likely IWM YR HR QR cluster break. This is mostly due to Bollinger band resistance on higher timeframe charts such as SPX Q Bollinger band at 2744 and the quarterly high at 2742, the RUT monthly Bollinger at 1646 and monthly high at 1639, and especially clear selling at the NYA Q BB of 12822 with quarterly high at 12853.

But I'm a bit less confident of this compared to last week. There was ample opportunity for this move to happen last week yet didn't. So at this point a bearish scenario for stocks remains a possibility and not an actuality, excepting NYA. In addition, SOX recovered above its 2000 top. If we were about to see QQQ YR1 rejection, it is more likely that this level would have held as resistance. 

Global developed trading vehicles EFA, EWG and EWJ fell under pivots last week, though this is mostly due to $USD strength as underlying DAX and N225 remain above all pivots despite having a pullback. 

Global emerging markets have been weaker throughout Q2. All recommended longs for this quarter have been USO then XLE, IWM, KRE, QQQ, SMH/SOX, and most recently TLT suggestion was really a speculative move with only a weekly pivot on the side of the trade.

I am paying keen attention to the QQQ YR1, IWM YR1 and VIX YP because this is where big moves happen, as evidenced by CL1 continuous contract YR2 high tick and smackdown, as well as ZB1 continuous contract YS2 near tag and bounce for the bond low of the year so far. 

Bottom line - I still think it is time to watch to lock in stock gains and will do so when the market tips its hand with a DIA QP break, QQQ YR1 rejection and VIX/VXX confirmation. Until then perhaps the bulls will surprise me with a push to higher levels.

USA main indexes - Several levels testing: IWM YR1 HR1 QR1 combo, QQQ YR1, SPY MR1 (MayR1), DIA QP. NYA already fell under its QP due to dollar strength and global weakness.

Sectors of note - XLE topped on YR1 as CL continuous contract topped on its YR2. XLF also not among the leaders in Q2, only moving above all pivots fractionally for 3 days of the quarter. SOX/SMH up 6% since mentioning this as trade on the long side in the 5/6 Total market view. 

Global developed - EFA, EWG and EWJ all fell back under QPs and MPs last week.

Global emerging - More damage here as well, with SComp giving back some recent gains, FXI QP rejection and EWZ YP 2nd break. Only INDA perking up on the long side back above YP with oil's drop but not recommending this as a long yet.

Safe havens - TLT bounce played out, now if in ideally stays above YS1 and even better to stay above its MP. Metals just cannot do much this year with a lot of sideways chop. GLD above long term levels put the question on any GDX & SLV shorts; at the same time, until these join GLD with technical strength think best to avoid.

Commodities - Sometimes homework pays and although a top on USO YR2 would have been easier I cannot complain too much when it is CL continuous contract YR2 and XLE YR1 for the definitive turn.

Currencies - $USD strength is hitting global markets. DXY had a break pullback from HP and then recovered above, meaning the first long term trend strength since May 2017 just happened in the past few weeks. Currency trends tend to go on so giving DXY the benefit of the doubt for higher prices with current levels to watch 94.67 and then YP 95.70.

Cryptos - BTCUSD under all pivots twice in May so far. Leader ETHUSD testing YP HP area so that needs to hold to prevent BTCUSD from going to 3-4K.

New high new low indicator has chopped a bit this year but gave green light for stock bulls the 4th time this year on 5/4. A weekly basis looks less impressive however. 

A lot of quarterly and monthly Bollinger band levels in play. People have gotten used to markets melting up through them without being any resistance, but here's the thing - the drop in last quarter or months put a lot of these back inside bands. It is less likely for indexes to have had this move to start zooming outside the bands again.

Helped keep a bid under markets as called, currently mid 16s on SPX forward P/E. 

Typically I use put-call for stocks most often, then occasionally glance at ISEE, AAII and NAAIM numbers. COT also worth watching as extreme positioning has turned fast this year, for example VIX earlier and last week both oil longs and bond shorts were crowded and had fast reversals from major YR2/YS2 areas.

April dates
4/2 - USA main index low, date listed per 3/18 Total market view
4/13 (mild)
4/18 - so far stock high
4/23 - 4/24 close low, 4/25 price low slight miss

Why do I quietly persist in this timing project? Because of 4 dates listed for April (from the end of March!) 

  • one was the low of the month across the board for USA stock indexes, and same date TLT high
  • the date listed as mild was mostly non event, perhaps a small pullback low on SPY and other stocks
  • 4/18 was the high of the month for stocks
  • 4/23 slight miss, 4/24 close low 2 weeks with 4/25 slightly lower lows

Not bad eh? 

May dates
5/6 (could be 5/4 session or 5/6 globex)
5/11 for currencies esp (DXY pullback low 5/10-11)
5/15-16 area looks important change of character (5/17 TLT low)

June dates
6/2 mild
6/13-14 strong
6/20-21 strong