Well the broad markets pulled back in a big way today. Among the casualties were four PMO BUY signals on the DecisionPoint Scoreboard indexes. Below the Scoreboards are each of those index charts. There are a few interesting differences.
The Dow had attempted to break out of a bearish rising wedge, but it couldn't hold and instead we ended up with two large declines. This one takes price out of the rising trend that began last autumn.
The NDX had created yet another steep rising trend that was broken today. Instead price is back within the rising trend channel. Price closing below the 20-EMA is bearish, but the OBV hasn't completely fallen apart yet.
OBV is still good but today's price drop executed the bearish rising wedge.
I'll look more closely at the SPY, but here is $SPX. Price dropped below the 20-EMA and closed below the rising bottoms trendline which executes a bearish rising wedge. Note the gap from mid-December. This is going to be the first line of support hit next.
TODAY'S Broad Market Action:
The DecisionPoint Alert Weekly Wrap presents an end-of-week assessment of the trend and condition of the stock market (S&P 500), the U.S. Dollar, Gold, Crude Oil, and Bonds. Monday through Thursday the DecisionPoint Alert daily report is abbreviated and covers changes for the day.
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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.
IT Trend Model: BUY as of 9/6/2019
LT Trend Model: BUY as of 2/26/2019
SPY Daily Chart: The rising trend has been broken today. The SPY triggered a PMO SELL signal. Total volume was above the one-year average so this could be a selling initiation or exhaustion. The OBV bottoms are still in a rising trend, but I suspect that will be breached as it was on the Dow.
Climactic Market Indicators: No denying the climactic readings on all but New Highs. The squeeze finally resolved downward. This is a drop well-below the lower Bollinger Band. This is accompanied by climactic negative readings on the Net A-D indicators. The question is whether this is an exhaustion or initiation. I am expecting this to be a selling exhaustion. We will likely see a rebound, but it will likely be short-lived. This looks very much like the late July breakdown. I don't see a resumption of the rally overall, I suspect we will get choppy trading like we saw in August of last year.
Short-Term Market Indicators: All have reached near-term oversold territory. Notice that end of July - early August deep drop on these indicators. As noted above, this looks a lot like that period as far as the indicators are concerned.
Intermediate-Term Market Indicators: Here are my comments from last Thursday: "The continued divergence between the ITBM and ITVM is very unusual. I've been trying to look back and see when they completely traveled for any length of time in opposite directions. The closest I came was in the divergence before the 2018 correction. I'm not saying we will see a drop of that proportion, but it certainly puts a negative spin on this chart." These indicators are not oversold which tells me they need to unwind. If we get price action like last August, that will work them lower.
The Golden Cross and Silver Cross Indexes are declining and we have a negative crossover on the Silver Cross Index. The readings are still bullish, but I don't like the direction they are headed.
CONCLUSION: The rising trend of the market is breaking down and the condition is still overbought. My sense after looking at the indicator charts is that we are experiencing an exhaustion climax on the climactic indicators which is good for the next day or two. I really am feeling dejavu from last August. I think we will be working out these overbought conditions with the same type of volatile choppy sideways trading.
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IT Trend Model: BUY as of 1/22/2020
LT Trend Model: BUY as of 5/25/2018
UUP Daily Chart: The wedge is executing as expected but now UUP has come up against overhead resistance. Overall the PMO looks good and we did just get an IT Trend Model BUY signal last week.
IT Trend Model: BUY as of 12/26/2019
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: We are now seeing a cup forming. I like the reaction of the PMO moving from flat to rising. Most times knowing that I'm bullish on the Dollar, I would look for Gold to decline. However, notice that the correlation between the Dollar and Gold is positive. That means for now they are mostly traveling together.
GOLD MINERS Golden and Silver Cross Indexes: We saw a pullback after the incredible run Gold Miners we're having. The cup and handle formation still looks great and today's intraday high broke the declining trend.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/6/2019
LT Trend Model: BUY as of 12/16/2019
USO Daily Chart: Oil continues to slide and because of this we have a new IT Trend Model Neutral signal. This signal was generated when the 20-EMA crossed below the 50-EMA while the 50-EMA was above the 200-EMA. Had the crossover occurred below, it would be a SELL signal. Neutral means in cash or fully-hedged. I don't this turning around, but it could at least catch its breath at support at $10.50. Look for Oil to continue lower.
IT Trend Model: BUY as of 1/22/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: No stopping TLT as it continues to push higher. I had thought that TLT might need a pullback given the big gains on the original gap up, but apparently not. I don't see any reason why we won't see last year's high tested.
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Technical Analysis is a windsock, not a crystal ball.
Happy Charting! - Erin
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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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