Total market view

5/27/2018 Total market view "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."

In the last 2 weeks, it was correct to lock in gains on USO/XLE, but not so much for IWM, QQQ, SOX or XBI.

In May I have been stressing the yearly levels in play - IWM YR1, QQQ YR1 and VIX YP. First IWM cleared its YR1 and then it held on a test. Last last week QQQ finally blasted through its YR1 after sitting under it since 5/10. But VIX is still above its YP, and really tech is the outlier in terms of strength as most other indexes, especially international, haven't had the same move.   

Either tech strength will lead to a bullish resolution with DIA recovering its QP, or DIA and other international indexes will drag others lower. 

Let's just point out the Pivotal Momentum basics - stock indexes to stay above QP or recover above it first:

USO 2nd time above QP 4/9 from there huge out-performance until 5/22 continuous contract YR2 top
IWM 2nd time above QP 4/10 and above from there; led USA mains through 5/30
XLE recovered above all pivots including QP 4/11
KRE 2nd time above QP 4/23, from there up to 5/22
QQQ 3rd time above QP 5/4

Others that cleared QP later, although I did go out of the way to recommend SOX as it recovered above its MP on 5/4 (mentioned in 5/5) Total market view.

These have been the best longs. 

And what had bearish action from QPs?
EWZ, EEM, INDA, SHComp below QP entire Q2
FXI below QP except 1 trading day
RSX below QP except 2 trading days
KWEB below QP except 3 trading days
XLF below QP except 5 trading days
NYA below QP except 10 trading days
DIA below QP except 14 trading days

These have been avoid or short. 

I don't know the way the market will go, but we aren't seeing the coordinated strong trend of 2017. Therefore long/short strategy doing well, if you get on the right side of the trade.

In general DIA pivots do seem to be especially important for the larger market, so until DIA joins IWM, QQQ and SPY above all pivots I have to allow for the possibility of a bearish scenario. It just wouldn't take much more for DIA to clear its Q2P.

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.

USA main indexes - QQQ blasted through YR1 resistance but DIA unable to reclaim QP.

Sectors - SOX and XBI powering up. XLF not so much.

Developed - Some trouble in Germany.

Emerging - Most names weak for much of Q2.

Safe havens - TLT hanging on by a thread. 

Commodity - USO topped as CL continuous contract ran into its YR2.

Currency - DXY above JunP; still gets benefit of doubt on long side which pressures DIA and other international names.

Crypto - ETHUSD 1 day break and then recovery of YP; but still under MP and QP. Reclaiming JunP would really help the rally case. BTCUSD also below JuneP. Personally I think these are going lower.

There are only 10 times when the 10 period average of weekly new highs resumed above the 10 avg of new lows. All these are shown in green arrows below. 4 of these 10 times had 2 in fairly quick succession. So far this decade these have haven't been bad times to fully recommit to the long side:


3 1 NHNL W.png

On another note - watching the Q Bollingers closely across the board.

Institutions were all over the drop in SPX valuations in March and April.

Put-call far from the lows of January. The only crowded long per COT is the Russell, which further suggests tech taking over leadership for June.

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
6/5 esp for currency
6/13-14 strong
6/20-21 strong