EEM long 8/3

Using pivots and moving averages, I thought EEM looked like a great way to add long exposure later in the rally. To be clear, I have been bullish on stocks from 6/28 on and especially after 7/6. See previous posts for all this. 

But from 8/3 on, EEM (and FXI which I didn't mention) has been one of the best things to own. 

8/3 SPY Daily: "SPX set below, along with an EEM chart with a several moving averages for your consideration - the ones in play are a rising 20MA in orange, and a flattening 400MA in thick brown (400 daily = 20 monthly, approximately). Hint: EEM chart looks like great risk-reward buy here with clear lift from YP, lifting from nicely rising daily 20MA, clearing daily 400MA slightly. My idea is to hold larger position above the D400, and decent position above the YP."

Truth be told I trimmed a bit early at the triple resistance cluster of the AugR1, 2HR1 and Q3R2, and may have missed the high. I'll hold the rest above the 2HR1 and may hedge under that. 

Bond short at the high!

Yes it is true. Regular readers know my basic take is "buy what is going up" ie above pivots. Once in a while, a combination of pivots and other factors lead to good "speculative" ie counter-trend buy setups. To me this means buying support levels (green lines on charts) which by definition are below pivots (orange). I issued these for INDU and oil on 2/12 and have documented these calls elsewhere. And even rarer than that, a short setup at resistance levels will attract my attention. 

Shorting the market is very enticing because then things drop they go down fast but in practice it is often difficult. Money around the world is looking for a place to go, and this makes most asset classes move up over time. When you are long you may have people taking profits and a few pro short sellers against you, but if you are short then you have the trillions of $ out there looking to buy something. 

Anyway, I digress. RSI's on bonds across the board were getting historically stretched and I wrote up two special posts on this here and here. 

On 7/6 I wrote this: "Interestingly, as "analysts" are starting to sound calls for TNX 1.0 (the % not a computer program version), I am increasingly wondering about a major turn in bonds based on major levels and RSI. TNX came very close to reaching YS2 today and remember the big turns that seem impossible happen on the big levels, just like the USA stock low of the year on RUT YS2 exact. Remember, resistance levels are better used as profit areas on longs instead of shorts - but if you want to take stabs at speculative trades (ie short above all pivots), then multiple RSI extremes and levels are the place to try. Watch reactions on these levels: JulR1 reached today, then Q3R1 just slightly higher 143.64 which would be a good tag area for a setup. If above that then I'll start thinking 2HR1 / YR2 combo 145-148."

The TLT high according to my data feed was 143.62 on 7/8. 

Thus far this has been the only bond short I have even mentioned all year, and in fact the only counter-trend short (ie short at resistance, usual focus is short what is below pivots only) I have recommended on this site ever.  

That was a pretty hot day too because I also pointed out a biotech long idea. See previous featured posts! 

"Long and strong" in August so far...

This was despite some very prominent top calls made by 3 of Wall Street's biggest and most respected names that I wrote up here. 

The smartest guy in the room Gundlach, Wall Street's biggest perma-bull Tom Lee and Goldman ALL said sell, but my take was:

"Long and strong with VIX below all pivots and XIV above its YP I say." That was written early 8/2 before most of the drop that day (see link above).

"with Tech looking about to blast off and bonds finally a bit weaker, maybe the market will leave everyone waiting to buy a dip in the dust."

"...c'mon, SPX finally clears 2134 and NDX going for new all time highs and you are going to sell out already? Please."

On 8/2 after close in the daily SPY section, I re-iterated all the support that was under the market: "My take from here: Watch VIX / XIV monthly pivots, then SPY Q3R1 / AugP support, QQQ 2HR1 support, DIA AugP, and NYA AugP. As you can see, plenty of monthly pivot support very nearby. Much better for the bulls if those hold."

The only problem with this comment was XIV should have said yearly, not monthly. Anyway, result was:

VIX dropped under its AugP for most of the day on 8/3
XIV held YP exact near the low of the day on 8/3 and lifted from there
SPY held Q3S1 and near tag of AugP, although that must be bad tick on data as SPX and both ES futures held higher lows 8/3 compared to 8/2. 
QQQ held 2HR1 near exact
DIA held AugP near exact
NYA held AugP near exact

All charts exact below, except replacing SPY with SPX since SPY bad data tick.

On 8/3 bullish again in the SPY section (with just a sentiment concern): "So, the case could be made for an ideal pullback low here on multiple pivot support that has held. The crowd was a bit too bullish today so we'll see how far tomorrow gets. Big level to watch from here is SPX YR1 2163 which closed bang on the level."

IBB / Biotechs leading 7/6

On 7/6 I pointed out how it had been almost a year since we have seen IBB leading on a daily rally. It was also the 3rd or 4th time this year (depending on how you count) IBB has lifted above a quarterly pivot. This move had both a monthly and quarterly on its side, but still below the 2HP and well under the YP. Still, I thought significant to call attention. 

Result 10+% rally from there in 18 trading days. 

Original here:

"Lastly, the other interesting thing we saw today was biotechs leading. It has been almost a year since that has happened! IBB tried to clear its Q2P 3x in Q2 only to go back down to test the low. Today is another try above a QP - is this the charm?"

Bullish comments since 6/27

Most market participants are rather surprised at the market strength since the Brexit drop - but not here! 

6/25 Total market view: "To translate, market in serious trouble if VIX moves and closes above its YP." That did not happen! VIX stayed totally below its YP on 6/27 when stock indexes were going lower and INDU held its YP. 

6/27 SPY Daily: "The market has reached crucial areas. I know you may read this kind of thing often in other technical analysis but with pivots when I say this I mean it. Big levels in play from here all within 1% give or take: SPX, SPY, ES YPs, INDU & COMP, DIA, YM YPs, VIX YP. ... I have said from March... bull more likely than bear with INDU above its YP at 17048. So this level really must hold for a hope of a bullish resolution here."

6/28 SPY Daily: "And that was a major league hold! Yesterday I pointed out the big levels - SPX and INDU set YPs along with VIX YP. Monday's low was 15 INDU points above its YP level, a near perfect hold. And this time VIX got it right, closing below the YP yesterday despite stocks dropping much more. When factoring in VIX, the last time we had a day like this was 2/12..."

6/28-29 SPY Daily: "When factoring in VIX, the last time we had a day like this was 2/12: a big drop down from the YP (or near enough) in combination with holds & recoveries on several major indexes. Now this time could be the key buy for the rest of the year, or it just be a bounce before a failure. But near the big levels when VIX confirms is usually the place to take a stab. ... Stab long that is. Most aggressive buy on 6/27 based on VIX and focusing on any index that was holding pivots relatively better would have gotten you long on: INDU on USA mains, MDY midcaps on other USA, then SOXX and SPY; also oil based on CL1 continuous contract perfect hold of YP, and EWZ, then maybe some RSX. A fund could have made the quarter on aggressive trades off these levels the past 3 days with DIA +3.7%, MDY +4.4%, SOXX +5.4%, SPY 4.0%, CL +8.8%, RSX +6.5% and EWZ topping them all with +9.6% in 3 days!"

6/30 SPY Daily: "You know you have a method that works when a statement made mid-March applies almost perfectly more than 3 months later. From 3/12/2016: "Bull alive and kicking above 17138 (the highest of the INDU pivots, the Q1P) and still more likely than bear with INDU above its YP at 17048." Monday 6/27 low was INDU 17063, just 15 Dow points from the YP. I have seen this before - whether it is end of QE, Ebola, or Brexit - if the leading index holds a long term pivot, the trend is alive."

6/30 E-wave: "If all this is correct then we are about to get the last best move of the bull market over the next year or two. This will mean a new 5 wave up pattern on the daily, that will comprise W3 up on the weekly, that is part of W5 on the monthly. Got all that? If not keep it simple from my view back in March to stay on the bull side of stocks with INDU above 17048."

7/2: "SPY above all pivots. Totally appropriate to hold recent longs above the Q3P of 206.88, and a target zone of about 215 to 217.65 includes the Q3P and YR1."

7/5 SPY Daily: "Most USA mains don't look too bad here, dropping on to Q3P / JulPs and so far holding as support. After hours, ES is even closer to testing the level."

7/6 SPY Daily: "Well you didn't have to worry because SPY ES SPX all held their Q2P / JulP combos near exact for a decent rally off the lows. Yet I'd feel better about the rally with IWM and XIV above their Q3Ps"

7/7 SPY Daily: "Waiting game for the jobs number but if IWM and XIV are correct then stocks will be higher on Friday. We'll see!"

Catching key turns

Just after the 6/8 high...

6/9 Daily SPY: "The market has certainly been strong since the February lows and admit it acts like it wants to test the 2015 highs. But with strength of safe havens and other factors listed above, perhaps we are due for a shakeout of the weak hands."

6/10 Daily SPY: "But with the combination of valuation and sentiment factors, along with the incredible safe havens, perhaps we just saw a more important top on monthly R1s."

6/11 Safe havens: "In other words, all 4 of these safe havens sending warnings about risk."

6/12 Total market view: "But a few other components of my Total market view are considering if we just saw a turn of more significance."

* * *

And the 6/27 low...

6/27 Daily SPY: "The market has reached crucial areas. I know you may read this kind of thing often in other technical analysis but with pivots when I say this I mean it. Big levels in play from here all within 1% give or take: SPX, SPY, ES YPs, INDU & COMP, DIA, YM YPs, VIX YP. ... I have said from March... bull more likely than bear with INDU above its YP at 17048. So this level really must hold for a hope of a bullish resolution here."

6/28 Daily SPY: "And that was a major league hold! Yesterday I pointed out the big levels - SPX and INDU set YPs along with VIX YP. Monday's low was 15 INDU points above its YP level, a near perfect hold. And this time VIX got it right, closing below the YP yesterday despite stocks dropping much more. When factoring in VIX, the last time we had a day like this was 2/12..."

Regular readers know that I don't blab about key tops and bottoms constantly... only when multiple indexes are reacting against pivots. 

Top calls 4/19-20 and 5/1

4/19 SPY daily: "Might this be a trading high? Now the chances have increased, especially with the near tag of DIA on AprR1, and IWM on AprR1 too." And a specific hedge recommendation: "A general hedge here using your vehicle of choice (vehicle weaker under pivots for short, VI futs, XIV / UVXY, index puts, inverse ETFs to hedge out longs based on the AprR1) is very decent risk-reward idea."

4/20 blog on Elliott wave doodles: "If this idea is correct, w5 of W3 will ideally have relationship with w1 of W3, and it so happens we are bang on 100% here at 210.50. SPX AprR1 and ES AprR1 are very close. This would imply we are in ending stages of W3 here, followed by a larger drop, and then a W5 move for a more significant top."

5/1 blog post rather directly entitled Did we just see a major high in the market?: "It is possible that we just saw a major top." Note: SPY, DIA and QQQ highs 4/19-20, but IWM and NYA highs 4/27. 

Bullish throughout April...

This is more a collection of a few calls I have made several times pointing to higher targets - the first of which arrived today on SPY with a tag of the AprR1 at 210.10.

Did I have concerns with RSI overbought readings and NYA long term level rejection earlier this month? Sure. But the main point I made on 4/7 (which as it turned out was a key pullback low) was that it would be quite rare to have only 1 index on pivot resistance at a high - therefore, 4/1 probably not a big top. The condition to turn bearish was main USA index breaks of AprPs which did not happen on any of them.

From 4/7 post Was 4/1 a big top for the market? answer being, No. "Usually we will see multiple indexes on resistance levels for significant turns in the market. The larger the timeframe the more important so a big top "should" have several yearly, half-year or quarterly resistance levels involved, or a combination. That wasn't really the case here." And, "Only NYA tagging current pivots and showing rejection. This would be quite rare to a big top like this. But I will have to shift more bearish the more stock indexes break the AprPs, and the more we see the safe haven trade back on."

SPY, QQQ and DIA did not even test the AprPs, remaining all above throughout; IWM and NYA tested and held AprPs for the key low of April so far 4/7 with IWM also tagging the level on 4/12. 

4/12 SPY daily: "SPY continues to hold above all pivots and positive for the year. I don't know if we'll see major resistance in April (up near 210) but oil rallying and NYA looking strong definitely gives this a chance."

4/13 SPY daily: "SPY continues to power up, holding positive for the year and now a move to AprR1 looks quite doable."

4/15 SPY daily: "Despite valuation (see this post) and seasonal ("sell in May") concerns, it is my contention that markets will see pivot resistance - which means at least monthly resistance, and much more typically quarterly, half-year, or yearly resistance - before we see a major top."

4/16 USA main indexes: "April completely above its pivot so far, and we should see pivot resistance for any significant top."

XLE trade idea from 4/6

On 4/5-6 we saw oil hold its Q2P on the CL1 contract, and break and recover its Q2P. I thought if oil held, XLE might get a decent pop as it was also about to positive on the year. Here's the exact quote from 4/6 written with XLE at 60.44: 

"Today I am also watching XLE which will move with oil. RSX and EWZ already had huge moves and will be subject to more profit taking. XLE is holding positive on the year and may clear its AprP. If this happens on daily close good r/r buy setup."

I didn't quite nail the strategy on oil, as the original plan was to hold runner units on oil, EWZ, RSX first recommended 2/12-16 as long as oil was above its Q2P. Right idea, but I was looking at CL K instead of CL 1 on decision to cut those 4/4 and enter small short. As explained in the XLE post, bias this year is to the long side so easy decision back in oil long 4/6 and step on the gas with XLE. Only thing that I might have considered is back in EWZ and RSX too, although tougher setup both holding some support levels but moving into resistance as well. 

Anyway, I won't be doing these real time trade ideas anymore but the specific ideas I have posted separately on the blog have done extremely well this year. 

NKY short setup mentioned throughout March

I have been doing a post on NKY and DAX each Monday for several weeks.

3/7: "The bottom line here is 2016 so far is weaker for NKY and DAX compared to USA indexes, which is a change from 2015. While USA has rallied to major long term levels, DAX and NKY are not even close. If the market turns lower, these two will be back under all pivots well before most USA indexes and thus can be placed on short watch list."

3/14: "The Pivotal Perspective is that both of these are much weaker than USA indexes, especially the current leaders INDU, SPX and NDX. While these three have recovered or in the case of NDX nearly recovered long term pivot levels, both NKY and DAX remain far below. While both have traded above the MarP this month, neither has exceeded its MarR1 level, again in contrast to many many USA and other global indexes. Relative weakness puts both on the short watch list going forward."

3/21: "Both relatively weak compared to USA leaders. NKY could be short if below YS1 level 16766. DAX probably second choice compared to NKY but can use MarR1 9981 as short level."

3/28: "While both indexes participated in the global risk rebound from 2/11-12 lows, both have exhibited relative weakness compared to USA and other oil related emerging market ETFs. Both remain far under long term pivots; NKY did not even reach MarR1, and DAX traded slightly above MarR1 for 2 days and today has rejected that level. Relative weakness make these attractive short candidates, or from institutional or investing perspective current under-weights. As a short, though, NKY is sitting just above YS1 so that is a much better setup on a break. We can also watch to see where price is in relation to new Q2 pivots." 

DXY weak from 3/16

From 3/16 currency post: Did not pound table here due to currency market chop, but still: "Is this finally the move for real? This will be the 3rd time below all pivots. After the second time, the recovery was very weak. Maybe so."

Of course that was aided by Yellen in the last few days, but even before the speech the bounce stopped clearly below the YP level. 

XLF short from 3/19, 3/22 & 3/23

Part of defensive ideas in the last weekly strategy sum: "XLF is a candidate if drops back under YP 1HP combo both at 22.65 (barely cleared on Friday)."

3/22 SPY daily: "XLF looks like a maybe short, small position only if taking since there isn't any rejection yet."

By 3/23 it was obvious though, clear rejection from level! "Short NDX? No, better was adding shorts via IWM below 3 of 4 pivots and first to drop under its WP from near the open today. Or add to XLF short from yesterday."

VIJ6 buy 16.85 from 3/19 & 3/22

From 3/19 weekly strategy sum: "4. If stocks consolidate... looking to buy VIX futs J6 either with a move from Q1S1 17.72 as support or if one more plunge then down to YS1 (!) 16.85 would be a good stab at speculative long."

And repeated in 3/22 SPY daily section: "Still, the VIJ6 idea could work as long as it lifts up from 16.85. This is a situation similar to the ES short idea at 1988, although this situation officially "speculative" as we are buying support (ie, speculative buy = something below all pivots). Depending on your agility you can simply wait for a clear reversal and enter there, or watch the hourly chart and buy with any lift from the same level, or could have entered speculatively at the close today in smaller size with trade valid above 16.85 from here."

Note: this was intended to be a very short term hedge and exit was recommended the next day.

Is all this too good to be true?

Just in 2016, one person working very part time, has recommended:

1/4-7 scram, hedge or short USA stocks
1/6 buy bonds via TLT, then add later in january
1/6 SPY to see 186, written with SPY above 198
1/7 "bear for real with NDX below 4373"
1/22 "turn but not a big buy"
1/27+ buy gold in later january, then add early february, also mentioned GDX for kick
2/11 said partial take on TLT gain (date of high!) 
2/12 buy DIA and oil (first stock buy rec of year)
2/13-16 buy RSX, EWZ, EEM
2/24-25 area add to DIA longs
3/1 SOXX long
3/1 pointed out IBB weakness among USA ETFs, among short ideas 3/12
3/9-10 bullish daily commentary, especially DIA
3/12 "bull alive and kicking INDU above 17138"

OK, with a few misses:
went more bullish 2/22, then back to bear playbook 2/23 with FXI shorts and safe havens, then back to bounce plan 2/24-25
SPY short idea 3/8 quick cut
rare currency ideas have chopped a bit, until the most recent ones
bitcoin soared then fell back
to be completely fair, i did say cut emerging markets idea when back to bear playbook and then when back to bounce scenario didn't mention them again; although idea was valid above FebP and they opened above MarP so just matter of time devoted to this site that i did not specify back in. even if you don't want to go with me on this point, i did not say cut oil and that had 29% up from 2/12 close to the recent highs. 

But still, these strategies have caught all the big moves of the year in nearly every asset class! (I am not really watching soft commodities however.)

If you doubt any of this, most of these ideas have been documented in the rest of the featured posts section. If you read the featured post, there will be links to the original idea. It is one thing to say oh we were expecting gold up this year but is another to prove it with posts on 1/27, 2/1 and 2/4. Etc.

No rewind on chart data feed on tradingview.com so you check when I was writing about these ideas you will see everything in the great call list is all completely true! We've got your alpha here! 

I've been working on this market strategy project for a long time. I started a newsletter in 2007 and ran that for several years, then joined a hedge fund full time at the end of 2012. In 2013 that fund was one of the top in the world in percentage return. Alas the head trader of the fund retired at the end of last year and I am starting fresh. But as you can see from the recs, these methods are the real deal.

Please do not assume this project will continue indefinitely; if you are interested in this kind of strategy and opportunities, please send a message through the contact page. Thank you. 

ps: With more time and a Bloomberg, even more would be possible, especially in the realm of individual stocks. 

DIA and SOXX longs on the way up

From the start of the rally on 2/12 I have been recommending DIA (or INDU or YM take your pick).

And on 2/24 on playing the bounce scenario: "If so then way to do it is reduce on full safe haven positions if they show rejections from major resistance and put into the USA leaders DIA and SPY that are above the FebPs (obviously, only if that is the case)."

3/8, 3/9, 3/10 pointing out how DIA / YM holding YP already, the most bullish of the USA main indexes. 

Along with every weekly USA main index post after from 2/13 (just go to FAQ, put in USA main index and then use the tag feature to view them all) - I pointed out that INDU had held its YS1 (where others broke and recovered).

OK, DIA is not that big a deal compared to SPY as percents up from lows approximately the same. Actually by percentage gain IWM is up the most from the 2/12 low; but also most at risk to stall. If it is percentage up from lows you are after, then you had chances on oil, EWZ, RSX and EEM too!

But I would say DIA being the pivot leader has been much easier to hold the way up, and this counts as a psychological advantage. After clearing the FebP on 2/17, there was not 1 daily close below a monthly pivot! And despite the red bars 3/8-10, DIA was clearly holding its yearly pivot! Now today as I type it is soaring above its MarR2 as well! Just no reason to be reducing at any point yet on the rally. 

And here is SOXX idea from 3/1 as a way to shift portfolio more long even though already quite a bit up from lows: "Then easiest way to shift more bullish was to cut FXI shorts, add on SOXX above its 1HP and possibly QQQ above its YP, although that level is a bit suspect."

Now this has mattered quite a bit. QQQ from 3/1 close to today as I type it is only up 1.5%. SOXX up nearly 5.5%! If you wanted in on the rally and get back into tech, then QQQ is middling, IBB is a disaster, and SOXX is leaving them in the dust. 

 

 

"Bull alive and kicking" with INDU above 17138 from 3/12

Some good old fashioned human judgment and pivot analysis here. On 2/11-12, I noticed that of the 5 main USA indexes, SPX, NDX, INDU, RTY and NYA, INDU held up the best. So that in addition to a VIX and VXD reversal signal from major pivots, timing window 2/11-15, bearish some bearish sentiment extremes, and most especially the amount of indexes all holding yearly levels, led to the speculative buy call 2/12 on both DIA and oil. 

I called it "speculative" for the simple reason that nothing was above any pivots yet, and my preferred method is to long above pivots and avoid, hedged or short below. Later after the shuffle at the end of February, INDU / DIA / YM was still the leader and so first choice. Last week still the leader, with DIA & YM clearly holding their YP level for 5 days *before* the big jump on 3/11. 

This wasn't the case last year or even 2014; NDX was usually the leader (of these 5 majors; IBB even better). But this year IBB is getting crushed and dragging down NDX. So that is why I shifted with the post on 3/12 - if the leader INDU is strong and holds levels, bull is alive. Other analysts are chiming in now after the jump above the D200 MA and breadth etc, but really DIA has been nothing but incredible from 2/24 and then especially from 3/1. 

From 3/12 Bull vs Bear post:

"But now it may be time to shift tune. INDU / DIA / YM has been the pivot leader on the rally. [...] INDU was the first cash index to close above its FebP (fractionally on 2/17) with others still below, and likewise the first to close above a long term pivot on 3/4 above its 1HP, where the others hadn't done that yet. And really YM and DIA were the best tells last week, clearly holding major support before the big jump at the end of the week. On Friday both SPX and INDU leaped above all pivots on Friday, but with INDU the current leader the market call here is:

Bull alive and kicking above 17138 (the highest of the INDU pivots, the Q1P) and still more likely than bear with INDU above its YP at 17048."