Weekly strategy update

Some charts on vehicles that I mentioned in the last weekly strategy report. Conclusions are obvious - USA reclaiming FebPs on SPY & DIA which is a mild positive. So my view of a Pivotal Portfolio is shifting a bit more bullish here. But a reclaim of a monthly pivot while being below the others is not the same as position long on an asset above all pivots (the only examples that I track this year have been TLT, GLD, GDX and BTCUSD). 

If you have been following along, there is  a speculative INDU / DIA position from 2/12 that is an easy hold and/or possible add (or SPY), and some smaller combo of the suggested emerging market vehicles RSX, EWZ, and EEM from 2/16 or what is left if you took some quick gains last week.

TLT is not getting hit too hard, but right now GLD looks more like rejection from YR1 area which, if appears this way into the close, I think is a profit taking signal on any add from 2/4-5. In addition, DXY has just held its YP and even reclaiming its 1HP which further pressures GLD.

SPY jumping above the FebP.

GC continuous contract making the rejection look clear (based on first hour, real judgment at the close), and this is really the 2nd time we are seeing selling from this YR1 area. 

Sure enough vehicles that led on the recovery of the FebPs are getting more pop on the bounce. RSX, EWZ and EEM here. Watch FebR1 on EWZ approaching soon.

Lastly BTCUSD had nice pop and already at the FebR1. Let's give this some time. So far pause no rejection despite DXY strength. If people want to get money out of China, a stable BTCUSD is definitely a way. So maybe there is another massive move on this. 

Hold gold?

The Pivotal Perspective was all over the rally in gold. From my view you didn't have to think about it too much - an asset class that was below all pivots especially long term levels for much of the last few years was suddenly above 3/4 levels and bells were ringing. Here is a summary review post with links to the originals.

Also on 2/1: "If it rallies above the YP with a look of support, then add." Even if you bought the close of a massive rally bar, you were in at 112.32, although if buying that day above the YP then could have been as low as 109.75. 

So like TLT, the question here is one of management. The original buys 1/25-29 are very easy to hold, but what about the add? As of last week GLD was above its YR1 - OK very overbought RSI, but not rejected from the pivot level. Now there is a gap down that could be rejection. Exits are trickier than entries but I think there are a couple reasons to hold it. 

This move has been the best jump above long term levels since July 2012 and that was a high test attempt after a multi-year tremendous run. There was one attempt in 2014 that barely cleared the level and immediately faded; then another early rally in 2015 that lasted 3 weeks above the YP after tagging the 1HR1 for the high of the year. So this time *is different* compared to the last 2 years. 

Long term moving averages like the monthly 20MA and daily 400MA point to a similar conclusion (charts not shown).

Granted, it would be easier if the $US fell back under its YP at 96.48. That said, faith in central banks is not the same as last year. Their maneuvers, instead of looking like backstopping the market, are growing more suspect. This could increase the support for gold. Last, Goldman Sachs has been 5 for 6 on its top trades of 2016 and they are calling for a short today. So maybe that is a hold :)

On the daily view, you can see the drop under YR1 thick red crosses 118.98, but let's look at levels that could act as support. FebR3 is at 114.53 which would also be a possible gap support. Even though FebR3 is a resistance level, it has convincingly cleared and the nearest medium term level that might be support. 

Zooming into short term levels, GLD has been entirely above its weekly pivot since 1/20  to today - quite a run. One week holding the weekly S1 at 114 area would not be too bad. Let's see what happens. 

Gold update

Prior gold posts: 
"With 3 trading days left in the week, it is possible that gold is giving the best looking long term buy bar in about a year. Very simple: if the move is for real then gold stays above the 1HP and will then clear the YP." "Above that [1HP/Q1P combo] is bullish because now a market that was very beat up is suddenly above 3 pivots. Then the all important YP is not far and may test."

"Last week I noted on the blog that GLD might be putting one of the best weekly bars in quite some time." "Still, the [2/1] open at 107.54 is just a little over 2% above the 1HP which is not bad risk/reward for a long term position. If breaks on a weekly close then the position is closed. If it rallies above the YP with a look of support, then add."

"So the big question here is whether this is normal pullback to support on DXY and another failed breakout attempt in gold, or whether we are seeing a real long term trend change. I don't know, but I do know where to watch to answer this question. DXY YP 96.48 and GC G6 YP 1137 (just continue to update on rollovers)."

Now let's look and see what happened. GLD W below with long term pivots only. Clear lift above the 1HP the 1/25 week was the first tell. Active traders were buying there, long term investors looking at charts over the weekend could have been taking partial positions on the 2/1 open. 

Here's the daily chart. Volume was picking up on the advance to the YP, a good sign. No rejection at all, next day above, then launch. Per notes above, full position. I think let this one run for a while :)

Dollar and gold

I've written about gold here on 1/27 and followed up here on 2/1. I haven't talked about the currencies, but pivots work on these too. First, something very interesting has happened with the dollar just in the last few days. Here are the charts: first weekly with long term pivots (yearly & half-year) only, then the daily with the usual view of long term and medium term (quarterly & monthly) as well. 

DXY the dollar index has been entirely above its yearly pivot from mid August 2014, and in fact is the first touch of the level since then. During this time it has been mostly above its half year pivots as well, with a few breaks in 2015 2H that did recover and rally to 2HR1 exact on the highs. So from The Pivotal Perspective, this test of the YP is really important. Above the YP and we can think YR1 at 102.72; below and start thinking YS1 at 92.45.

Here's the daily view. The selling started with a rejection of the FebP. A break of the monthly pivot has happened several times last year, but the difference here is the very next day it broke through Q1P without any attempt to hold, and the 1HP didn't bounce either. Now the YP as I type is caving without any try. Next support is a long way down. 

Meanwhile, gold is following through on recent advances and doing the opposite, clearing its yearly pivot. Using the continuous contract below, you can see GC mostly below both the YP and HP since early 2013. There were a few breakout attempts that quickly failed. I'll address these soon in another post. 

Here's the daily view of the current G6 contract. Unlike the end of 2015, it has been above its monthly pivot in both January and February. Then it cleared the 1HP / Q1P combo. That looked like a failure but came back enthusiastically and cleared again. After a brief pause it has been off to the races. In pivots a lot of the time a second move is definitive, and in this case at the end of a long downtrend it took three tries to really clear and get moving up. 

So the big question here is whether this is normal pullback to support on DXY and another failed breakout attempt in gold, or whether we are seeing a real long term trend change. I don't know, but I do know where to watch to answer this question. DXY YP 96.48 and GC G6 YP 1137 (just continue to update on rollovers).