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Below is the 4-month candlestick chart of the SPY, which gives us excellent insight into what is happening in the very short term. Today, the market finished higher following a brief pullback on Friday. Looking in the thumbnail, we can see we do technically have a bearish island formation. The PMO topped last week and has been moving mostly sideways. My main concern for the very short-term is that island.
The DecisionPoint Alert presents a mid-week assessment of the trend and condition of the stock market (S&P 500), the U.S. Dollar, Gold, Crude Oil and Bonds.
China has finally begun to move out of their bear market, something that US managed with a new all-time high presented at the beginning of May.
BROAD MARKET INDEXES
Mid-caps finally broke above the 2018 high last month, but small-caps continue to underperform and have yet to even challenge the 2018 highs.
BROAD MARKET SILVER CROSS INDEXES (SCIs)
The health of the broad markets is still bullish and the SCIs all broke declining trends. Although they are topping, they remain strong overall.
At the end of December, a new Long-Term Price Momentum Oscillator (PMO) BUY signal appeared on the NDX. We haven't seen a monthly PMO upside crossover on the Dow Industrials yet. Below the Scoreboard, I have put in the monthly charts for both the NDX and INDU.
Each S&P 500 Index component stock is assigned to one, and only one, of eleven major sectors. This is a snapshot of the Intermediate-Term and Long-Term Trend Model signal status for those sectors.
IT Trend Model: BUY as of 9/4/2019
LT Trend Model: BUY (SPY) as of 2/26/2019
SPX Daily Chart: Technically, price is in a bearish rising wedge, but I believe you could interpret it as a rising trend channel as well. What Carl and I discussed as being most important on this chart is that, despite choppy trading during the last part of December, the rising trend has not been challenged. If the market was interested in a big decline, global unrest could certainly have been an accelerant. Instead, we see a positive close and an intact rising trend. The PMO is moderately overbought, as the top of the range for the PMO is typically +2. Remember, overbought conditions can persist in a bull market.
Climactic Market Indicators: This is the second day the bottom Bollinger Band was punctured. Typically, these penetrations of the bottom Band lead to a rally pop in the next day or two. Other than that, breadth and volume readings aren't climactic.
Short-Term Market Indicators: The negative divergence between declining tops on the Swenlin Trading Oscillators (STOs) remains in effect. We will know more if they can turn up before moving too far into negative readings and bounce off that zero line; that would tell me there is internal strength still. The negative divergence could be resolving as we have a backed off of all-time highs. I am not quite as concerned about the divergences between %SPX Stocks > 20/50-EMAs and price, given the choppy trading during the holidays that is likely causing the divergence. Note that %Stocks > 20-EMAs sat around the 70 - 75% line during the bull market move in October and November. So, although we've lost ground on that indicator, it could be much worse.
Intermediate-Term Market Indicators: Negative divergences remain on intermediate-term indicators and we now have negative crossovers on both the ITBM and ITVM. This tells me to remain cautious in the intermediate term. However, note that the SCI is still very healthy. Yes, it topped, but seeing 80% of the components on IT Trend Model BUY signals is still just fine.
Conclusion: Charts are suggesting some upside in the coming week. I'm watching the possible island formation. Support is holding and, given readings on the VIX, I am not expecting a breakdown as I write this afternoon. IT indicators like the ITBM/ITVM are a bit more concerning. I would like to see the %stocks above their 50-EMA begin to turn back up, but, for now, I would probably move mental stops to hard stops, not necessarily tighten them up.
IT Trend Model: BUY as of 11/7/2019
LT Trend Model: BUY as of 5/25/2018
UUP Daily Chart: The Dollar is oversold. Price did manage to stay above the 200-EMA and has now moved back into the trading zone. The PMO has not turned up and price is far from crossing above its 20-EMA. If the Dollar is going to rally, this is the time. For now, it is still weak.
IT Trend Model: Neutral as of 11/8/2019
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Gold took off at the end of the 2019 and is currently in a parabolic rally. Carl and I noted in today's DecisionPoint show that, although it broke out above the September top, it did come back down to close right on that new support line. I'm expecting this parabolic to break down or for the angle of ascent to weaken, as this near-vertical rising trend simply can't be sustained. Given the strong PMO configuration, I believe support will be found at the current closing price, around 1568.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/5/2019
LT Trend Model: SELL as of 6/4/2019
USO Daily Chart: Oil dropped today despite the concerns in the Middle East. Carl suggested we could see Oil move higher if the global supply is compromised. Like Gold, price broke out, but today it closed right on support at the September high. The PMO bottomed above its signal line, which I find to be particularly bullish. I would look for a move to challenge the April highs.
IT Trend Model: Neutral as of 10/28/2019
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: Bonds have not broken out from the bullish falling wedge. We have a new PMO BUY signal and price didn't have to test the bottom of the pattern in December before rallying again. All of this points to an upside breakout for TLT.
Thank you again for subscribing! Keep an eye out tomorrow for the next addition of the DecisionPoint Alert.
Technical Analysis is a windsock, not a crystal ball.
Happy Charting! - Erin
Erin Swenlin will be presenting at the The MoneyShow Las Vegas May 11-13, 2020! You'll have an opportunity to meet Erin and discuss the latest DecisionPoint news and Diamond Scans. The conference is free to attend or view online!
NOTE: The signal status reported herein is based upon mechanical trading model signals, specifically the DecisionPoint Trend Model. These 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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