I was joking with Carl today about a title for today's article... "catching a falling hatchet" instead of a "falling knife" as the saying usually goes. Carl told me, "It's more like a falling chainsaw"! I have to agree, price is cutting through price levels just like a chainsaw right now. Today the 200-EMA was broken by the SPY, something I wasn't expecting to see yet and something that troubles me greatly. The drop has been swift and painful. I know many people are pointing to the very oversold indicators out there and are hoping to catch that chainsaw by the handle. Look at the indicator chart below. We have seen much more oversold conditions before a turnaround. Later in the article, you'll see that intermediate-term indicators really aren't oversold yet.
TODAY'S Broad Market Action:
One WEEK Results:
Top 10 from ETF Tracker:
Bottom 10 from ETF Tracker:
On Friday, the DecisionPoint Alert Weekly Wrap presents an 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.
One WEEK Results:
IT Trend Model: BUY as of 9/6/2019
LT Trend Model: BUY as of 2/26/2019
SPY Daily Chart: Not only did price break below 200-EMA support, it cut right through support at the July and September 2019 tops. Where to next? If we are lucky, 290 at the April 2019 top. However, I would strap in for a drop to 270 or 280. Volume has only been increasing as the fear spreads across all sectors. Until we see volume lessen, I believe there is more selling to come.
Climactic Market Indicators: Climactic spikes continue on breadth. The VIX continues to fly lower closing near a high of 40! That seems high, but my opening chart shows you that the oversold indicators on this short-term chart, are that oversold in a bearish environment. While I'd like to say we will see a short-term bounce from these conditions, I know they can get lower. This still looks like an initiation to lower prices.
Short-Term Market Indicators: The ST trend is DOWN and the market condition is OVERSOLD based upon the Swenlin Trading Oscillator (STO) readings. We now have deeply oversold readings on the STOs. I did a look back from the past 10 years and these are at the lowest we've seen in 10 years. We need understand something very important here. These are "oscillators" which mean they HAVE to oscillate. There is a good chance we will see these start to improve before the coast is clear.
Intermediate-Term Market Indicators: The Silver Cross Index (% of SPX stocks 20EMA > 50EMA) and the Golden Cross Index (percent of SPX stocks 50EMA > 200EMA) continue to dive with price. The SCI is only in neutral territory and the GCI is still overbought! Believe it or not, I don't think there has been enough damage. There is a reason the GCI isn't moving lower that quickly. Due to this very long-term rally, most stocks have seen increasing margin between their 50/200-EMAs. Price must fall below the 200-EMA and stay there in order for the 50-EMA to drop for a 'death cross'.
The IT trend is still DOWN when measured by the green rising trendline and the market condition is MODERATELY OVERSOLD based upon the ITBM and ITVM readings, NEUTRAL based on the PMO, and SOMEWHAT OVERBOUGHT based upon the Silver Cross/Golden Cross Index readings. Combine that all together and we the IT condition is NEUTRAL not oversold.
CONCLUSION: The ST and IT trends are DOWN. Market condition based on ST and IT indicators is OVERSOLD to NEUTRAL. The picture is not pretty and I don't see it improving until we see more oversold indicator readings, especially from the Golden Cross and Silver Cross Indexes.
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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: Well the flag may not be applicable anymore given price dropped and closed below support at the October top. Price also stayed below the 20-EMA most of the day. The PMO is triggering a SELL signal.
IT Trend Model: BUY as of 12/26/2019
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: I would've expected to see Gold perform far better today. The Dollar lost a lot of ground and that generally helps Gold. Of course we see that the correlation between Gold and the Dollar is positive right now so it isn't totally unusual to see them travel in concert. If I were to hide out anywhere, Gold would be my choice. I already own Silver and plan to expand my position in Gold soon.
GOLD MINERS Golden and Silver Cross Indexes: With Gold not rallying and the market tanking, Gold Miners took it on the chin hard today. Interestingly the SCI held steady. Support might be found at the 2020 low. A boost in Gold prices would certainly help against being sucked into the whirlpool that is the market right now.
CRUDE OIL (USO)
IT Trend Model: Neutral as of 1/27/2020
LT Trend Model: BUY as of 12/16/2019
USO Daily Chart: Down we go with the market in general. Support is at the 2018 low, but we have a new PMO SELL signal below the zero line. We may need to pull up a longer-term chart next time to find the next level of support. Oil very likely isn't done falling.
IT Trend Model: BUY as of 1/22/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: Today I annotated the parabolic move in TLT. Parabolics usually breakdown swiftly and unexpectedly. I am not looking for a big breakdown in Bonds. It's a relative safe haven and one of the few areas that I am finding in the results of my scans as of late. I am looking for higher prices given the major positive volume that came in today and the very positive (and not overbought) rising PMO.
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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.
Helpful DecisionPoint Links (Can Be Found on DecisionPoint.com Links Page):
DecisionPoint Shared ChartList and DecisionPoint Chart Gallery
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)