Total market view

6/3/2018 Total market view: "Bottom line - Easier money usually made by long strength and avoid/short weakness. After small caps (IWM and KRE) led in May, in the last few days all tech indexes - QQQ, SOX, XBI and KWEB - have been on fire. If market plays out bullish, tech likely to make new highs. If bearish, the international names likely to drop. At some point we may see an institutional rebalancing move, but these typically take place in the latter 2 weeks of June and not in the beginning of the month."

Result - IWM and the tech names higher in June; several international names lower that 6/1 (SHComp, EEM, FXI, INDA, EWZ and RSX). 

All 5 USA main indexes are above long and medium term pivots, but there is notable difference between leaders IWM and QQQ (both well above YR1); SPX in middle zone doing fine but not yet back to YR1; and then the more international influenced DIA and NYA which remain relatively weak. 

Sectors are similarly mixed, with SMH and XBI just off recent highs at YR1 and HR1 respectively, yet XLF unable to clear QP. 

EFA, EWG and EWJ all below QPs as well. And then in the emerging indexes that I track, only only China tech KWEB has joined the party in June. 

As mentioned above, it has been a great strategy to focus on the technical leaders and avoid the laggards. But heading into the last 2 weeks of Q2 there is more chance of an institutional rebalancing move which would pressure the leaders and could help a bounce on the losers (which could mean bonds as well as international stocks).

Momentum on IWM using RSI and BB across timeframes is at a fever pitch, so all the more reason to be locking in gains near the HR2 / YR2 combo (one more push up would do it). This could potentially be a speculative short as well. I have already mentioned SMH in this regard, and so far YR1 remains the top.

Yet the reason to still be decently long here is VIX, closing below its YP and thus below all pivots for 5 of the last 8 of the last trading days. If there is any bear scenario for USA main indexes we should see VIX back above its YP. 

TLT reclaimed its MP last week after holding its YS1 for 5 consecutive trading days. That said, weekly chart seems to limit upside.

Metals perked up then got totally hammered the next day with DXY strength seeming to have a delayed reaction. GLD nearing its YP support (with GDX already below all pivots) could be level to watch for further breakdown.

Bottom line - If markets go higher it is likely the leaders will have another push up to reach IWM HR2 / YR2 area and QQQ JunR2. If lower then likely international names leading down, and one could have already have a partial short position on anything below Q2Ps. Until VIX & VXX confirm trouble the bull trend of risk on gets benefit of the doubt. At the same time the combination of crazy momentum on IWM, quarter end r-ebalancing soon in play, frothy sentiment and the HR2 / YR2 combo make this an ideal area for a decent reversal. 

USA main indexes - For this week SPX / SPY HR1 to watch. Bullish above, weaker below. 

Sectors - I mentioned SMH as long early May, then said hold above Q2P; so far YR1 is the top. XBI has been a bit stronger, currently above YR1 but slightly under HR1.

Developed - DAX well above all pivots, EWG not; N225 the same with EWJ. Issue is DXY strength.

Emerging - RSX joined EWZ below all pivots last week. Several of these names at areas of weekly Bollinger bands / 50MA that would bounce if typipcal correction territory. As EWZ showed this is not guaranteed to happen. 

Volatility - VIX below all pivots; no problems for market until that perks up.

Bonds - TLT strength and XLF weakness both point to upside limited for leaders as players more inclined to take gains off the table if the next move is risk off. 

Metals - Any lower and all three metals ETFs will be below all pivots.

Currency - DXY massive move from HP low last week; seems like it should test YP.

Crypto - BTCUSD near major low area for the year and no real bounce. Testing JunS1 here, but first major support is 3000-3700.

Currently on RUT
Quarterly RSI at 79 higher than all bars than 3 in the late 90s. 
Monthly RSI at 75 higher than all bars except 10 bars since 1988. 
Weekly RSI not extreme but 2 bar close outside BB fairly rare, with RSI at 68.
Daily RSI has stayed overbought in June, a sign of strength, but making slightly lower highs.

This is what I mean by "crazy" momentum - this is a stretched move, speculators are record long the Russell. There is a lot setting up for a reversal here. Have I been clear enough on this point?

SPX forward P/E under 17. Implied valuations rising nicely due to increased earnings. SPX could reach 3000 area and be less expensive than the January top.

Equity only pull call near lows of the year. Those calls likely on popular tech stocks and small cap names.  

17 1 PCE.png

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 of year

June dates
6/2 mild - non event
6/5 esp for currency - 6/6 EEM high otherwise not much)
6/13-14 strong - tough to read with a few stock tops but not much bearish on 6/15 and could have been pullback low on 6/15 (+1)
6/20-21 strong