7/22/2018 Total market view: "Bottom line - There have been moderate gains since longs of early July. If RUT cleared YR2 and VIX was below YP then I'd probably err on the side of holding longs. But with the three mains just shy of targets and VIX above YP, with DJI and NYA starting to move negatively from JulR1s, it is time to be watching for a defensive adjustment."
Results - NDX and RUT topped in resistance areas, while SPX exceeded for two days and then dropped. VIX closed one day fractionally below its YP then bounced. It paid to be defensive especially on IWM, XBI and QQQ.
Abbreviated version due to travel. Regular schedule resumes soon.
Last week was more rotation than pure risk off. The laggards of many months, DIA and NYA, continued up for most of the week with a mild drop on Friday. The two indexes that were first to reclaim above all pivots in Q3, IWM and XBI, had the biggest declines.
That said the door is open for more selling for the coming week. SPX tried and failed at its YR1; NDX HR1 / QR1 rejection; and RUT continuing to drop from its YR2. Of course FAANG widely owned and the -20% drop sure to have shaken some people up.
We'll also have new August pivots in a few days.
Bottom line - Buying into the rally from early Q3 has done moderately well. It turned out the better gains came on the setups after the first IWM & XBI longs - SPY, QQQ, then XLF and INDA. With former leaders now leading down, and former laggards turning into leaders, there is no simple index hedge (though you can always hedge a QQQ long with the same short). That means taking profits, or at least not letting gains turn into losses, was the right move.
If DIA and NYA were leading down and VIX moved more to upside last week, I'd be thinking about a major turn. But with markets making more of a rotation move, I will think at some point soon there will be another attempt to move broadly higher.