The market continued higher but price action the last two days could best be described as a "trickle up". For three days the SPY has tapped on the top of the bearish rising wedge. The indicators remain positive with the OBV rising and RSI in positive territory. The PMO is very close to a crossover BUY signal. Total Volume was still rather paltry, but I do notice that Total SPY Volume broke its declining trend.
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MAJOR MARKET INDEXES
SECTORS
Each S&P 500 Index component stock is assigned to one, and only one, of 11 major sectors. This is a snapshot of the Intermediate-Term (Silver Cross) and Long-Term (Golden Cross) Trend Model signal status for those sectors.
RRG® Chart: XLK has entered the "Leading" quadrant. XLV continues to move strongly in the bullish northeast heading within "Leading". XLB, XLF, XLE and XLU are traveling quickly in the bearish southwest direction.
CLICK HERE for an animated version of the RRG chart.
CLICK HERE for Carl's annotated Sector charts.
THE MARKET (S&P 500)
IT Trend Model: BUY as of 5/8/2020
LT Trend Model: BUY as of 6/8/2020
SPY Daily Chart: It might be time to revisit the intermediate-term rising trend channel. We've not talked about it because price has been unable to reach it for months. The "trickle up" has not improved the situation, but if we see another decline, it will be just one more time that price failed to challenge the top of the rising trend channel. Each failure makes it more likely we will see a breakdown of the rising trend.
Participation: The following chart uses different methodologies for objectively showing the depth and trend of participation for intermediate- and long-term time frames.
- The Silver Cross Index (SCI) shows the percentage of SPX stocks on IT Trend Model BUY signals (20-EMA > 50-EMA).
- The Golden Cross Index (GCI) shows the percentage of SPX stocks on LT Trend Model BUY signals (50-EMA > 200-EMA).
- The Bullish Percent Index (BPI) shows the percentage of SPX stocks on Point & Figure BUY signals.
On Monday (8/9) Carl discussed the concept of a "stealth correction" during the DecisionPoint show. You can watch it HERE.
I opted to include the BPI and the thumbnail on our SCI/GCI chart. The SCI has now turned up mostly above the signal line. The BPI had a positive crossover. The GCI is holding steady, but hasn't broken its declining trend.
Participation continues to improve, but negative divergences are still visible as we make new all-time highs. Readings are getting close to near-term overbought territory on Stocks > 20/50-EMAs
Climax Analysis: No climax today although we saw a rather large expansion in New Highs. The VIX is above its EMA on the inverted scale which is positive.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
The STOs spiked today which is positive except that they are now in overbought territory. Momentum is building among the members of the SPX. The %Stocks with PMOs Rising is expanding as it should in a rally.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
IT indicators continued to rise quelling some of my concerns of the intermediate-term rising trend not holding up. We really should have more PMO BUY signals within the SPX, but %PMO BUY signals is improving and nearing a positive crossover its signal line.
Bias Assessment: We've added this new section called "bias assessment". It occurred to us that one of the ways we can measure market bias is to compare the SCI to the percent of stocks above their 20/50-EMAs. When the percentages are lower than the SCI, the market bias is bearish and if they are higher, it is bullish. Any "mechanical" signal requires additional analysis to confirm the numbers.
I like seeing 70% of stocks having price above their 50-EMAs. That could definitely improve the SCI reading. The SCI is currently lower than participation numbers and that gives us a slight bullish bias.
CONCLUSION: Climactic indicators have not confirmed what appeared to be a possible buying exhaustion on yesterday's NYSE Volume Ratio. The market keeps trickling up. I am bullish moving forward given the strongly rising STOs, but cautious given they are now overbought. IT indicators are improving again suggesting the intermediate-term rising trend will stay intact for a little while longer. I currently have 50% exposure to the market.
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BITCOIN
There is a rising trend channel visible on Bitcoin. However, in the shorter term we have a rising wedge. If Bitcoin continues to hold support at the April low, there is a high likelihood we will see it move out of the wedge and begin to rise in earnest to hit the top of the channel. The only problem I see is a lack of positive upside momentum. The PMO is looking bearish.
INTEREST RATES
Yields have begun to rebound.
10-YEAR T-BOND YIELD
$TNX nearly broke the declining trend drawn from the May top. We did see a close above the 50-EMA which is positive. The RSI and PMO look particularly positive as they rise from oversold territory. Higher yields are likely to continue.
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: I see a bearish engulfing candle on UUP today. The body of the candle is 'engulfing' the body of yesterday's candlestick. A new PMO crossover SELL signal was generated suggesting price will be testing the short-term rising trend.
There is a short-term bearish rising wedge, but the chart patterns of a double-bottom and possible cup with handle are still visible. If we see a break below the 200-EMA that would break the rising bottoms trendline and at the point I will disregard these patterns. Short term, I don't like the Dollar but longer term there are bullish characteristics.
GOLD
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GLD Daily Chart: GLD dropped below support at the bottom of the July trading range. However, it did close above the 20-EMA and we have a hammer-like candlestick which is bullish. The RSI is barely positive. The PMO has flattened out again.
(Full disclosure: I own GLD)
GOLD Daily Chart: All is not lost, but the RSI on $GOLD is now in negative territory. $GOLD did manage to close above the bottom of the July trading channel, but both GLD and $GOLD failed to hold above their 200-EMAs. We still have a short-term rising trend, but it seems tenuous at best.
GOLD MINERS Golden and Silver Cross Indexes: The Gold Miners continue to tease. It seemed they might be recovering and we have a bullish falling wedge. Given price can't even make it above the 20-EMA, it seems very optimistic to think it will now move up to test the top of the wedge. Participation has gotten worse. The SCI which had been holding at 3.33% is now at zero.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 8/18/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO closed above the 50-EMA and traded above the 20-EMA. It has recaptured its prior rising trend after a constructive bounce off the 200-EMA. The PMO is now rising in earnest and the RSI is in positive territory.
BONDS (TLT)
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: BUY as of 8/10/2021
TLT Daily Chart: As the 20-year yield begins to turn back up, TLT is pulling back. We now have a PMO top below the signal line and a negative RSI. Look for a test of the 200-EMA.
Technical Analysis is a windsock, not a crystal ball.
--Erin Swenlin
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NOTE: The signal status reported herein is based upon mechanical trading model signals, specifically, the DecisionPoint Trend Model. They define the implied bias of the price index based upon moving average relationships, but they do not necessarily call for a specific action. They are information flags that should prompt chart review. Further, they do not call for continuous buying or selling during the life of the signal. For example, a BUY signal will probably (but not necessarily) return the best results if action is taken soon after the signal is generated. Additional opportunities for buying may be found as price zigzags higher, but the trader must look for optimum entry points. Conversely, exit points to preserve gains (or minimize losses) may be evident before the model mechanically closes the signal.
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