Erin and I have a 30-minute show on StockCharts TV every Monday at 5:00 PM ET. On Monday of this week the market had taken a large gap downward, and a viewer asked how far down I thought the decline would go. At the time I said I had no idea because it has been hard to think of downside targets with the market so heaven-bent on moving higher. Now, having given it some thought, I am still not in love with any particular downside target, but we can see some obvious levels of support should price drop that low. The closest is the line drawn though the top of the December up gap, which is -4% from the January top. A full -10% decline would take the market down to the line drawn across the double tops in July and September of last year (not visible on this chart). In my mind, that is important support, albeit not necessarily a target. Let's reserve our conclusion until after further analysis below.
The DecisionPoint Alert Weekly Wrap presents an end-of-week assessment of the trend and condition of the Stock Market, the U.S. Dollar, Gold, Crude Oil, and Bonds. The DecisionPoint Alert daily report (Monday through Thursday) is abbreviated and gives updates on the Weekly Wrap assessments.
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BROAD MARKET INDEXES
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.
ETF TRACKER: This is a list of about 100 ETFs intended to track a wide range of U.S. market indexes, sectors, global indexes, interest rates, currencies, and commodities. StockCharts.com subscribers can acquire it in the DecisionPoint Trend and Condition ChartPack.
Top 10 . . .
. . . and bottom 10:
This chart is included so we can monitor rate inversions. In normal circumstances the longer money is borrowed the higher the interest rate that must be paid. When rates are inverted, the reverse is true. Note that the previous double bottom support has failed.
IT Trend Model: BUY as of 9/6/2019
LT Trend Model: BUY as of 2/26/2019
SPY Daily Chart: The rising trend line drawn from the October low was violated on Friday, and we should be looking for horizontal support. A retreat to 300 would be respectable and wouldn't blow up the bull market. This chart looks bearish with the daily PMO falling below the signal line and the trend breakdown.
SPY Weekly Chart: The parabolic arc was violated this week, and the weekly PMO turned down at a very overbought level. We should interpret this to mean that a respectable pullback has begun.
SPY Monthly Chart: This time frame still looks bullish with the rising PMO and the intact trend line.
Climactic Market Indicators: There was climactic action last Friday and three times this week. Directionality was a bit confusing, but all told it netted out negatively. Price almost reached the first horizontal support line at 300, so Friday's climax could be an exhaustion climax, meaning that there could be a bounce next week.
Short-Term Market Indicators: We got a little warning from the negative divergences that appeared about a week before the last top. These indicators can go lower before they are oversold.
Intermediate-Term Market Indicators: The Golden Cross (% stocks w/ 50EMA > 200EMA) and Silver Cross (% stocks w/20EMA > 50EMA) Indexes have topped in overbought territory and have crossed down through their signal lines. This chart is bearish.
It appears that the ITBM and ITVM negative divergences have finally delivered on their promises of lower prices. The daily PMO is overbought and falling, and the indicators allow for a lot more downside.
CONCLUSION: The trend is UP, the market condition is OVERBOUGHT, and it appears that the market has topped. There are certainly plenty of underlying problems including extreme overvaluation, but the coronavirus seems to be the primary fundamental issue for the market at this time. With the timing of a perfect storm, coronavirus entered the picture at just about the time that the technicals were seting up for an intermediate-term price top. I've been looking for an important top for some time, and I think it has finally arrived. We shall see.
IT Trend Model: BUY as of 1/22/2020
LT Trend Model: BUY as of 5/25/2018
UUP Daily Chart: Last week UUP escaped the falling wedge formation, and this week there was snapback to the point of breakout. The daily PMO has topped, so we should expect more downside.
UUP Weekly Chart: The weekly PMO is falling, so long-term support line will probably be tested again soon.
UUP Monthly Chart: Because the monthly PMO is rising again, this chart looks slightly less negative than weekly chart.
IT Trend Model: BUY as of 12/26/2019
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Gold has managed to get back above the horizontal resistance line drawn through the September high.
GOLD Weekly Chart: Gold is up over +50% from its bear market low, and it continues to make progress.
GOLD Monthly Chart: The saucer with handle formation is almost in the rear view mirror.
GOLD MINERS Golden and Silver Cross Indexes: These indexes are near the top of their ranges, and the Golden Cross Index has persisted at this level for six months.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 1/27/20
LT Trend Model: BUY as of 12/16/2019
USO Daily Chart: The 50EMA should cross down through the 200EMA next week, which will generate an LT Trend Model SELL signal.
USO Weekly Chart: USO and WTIC are about to test the bottom of the narrowest trading range shown, which is WTIC 50. My guess is that we're soon to see WTIC 42 tested.
USO Monthly Chart: I believe the basing pattern that started in 2015 (range of 7.80 to 16.00) will hold for some time.
IT Trend Model: BUY as of 1/22/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: TLT has broken out of a falling wedge, and that steady up move may not be ready to quit.
TLT Weekly Chart: Bonds are rallying and yields are dropping. The weekly PMO has turned up, implying that there is more rally to come.
TLT Monthly Chart: The monthly PMO is rising, and the top of the rising trend channel will be challenged soon.
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Technical Analysis is a windsock, not a crystal ball.
Happy Charting! - Carl
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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