The short-term rising wedge has finally become "official". We had been waiting on a near-term lower high so that we could legitimately draw the top of the wedge. The expectation of the rising wedge is a breakdown. The minimum downside target of the pattern should it execute is a move about the size of the back of the pattern. That would mean a decline back to the bear market low. During today's DecisionPoint show, Carl and I discussed what we think is the likely outcome... a pullback. While it could pull all the way back to the bear market low, indicators just aren't supporting a decline that deep. Notice that total volume contracted on the decline--that's good news for the short term.
TODAY'S Broad Market Action:
Past 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: NEUTRAL as of 2/28/2020
LT Trend Model: SELL as of 3/19/2020
SPY Daily Chart: We saw a retracement of about 29.5% off the bear market low. The prevailing rule of thumb is that a move of 20%+ marks a new bull market. I don't see it. Maybe under 'normal' circumstances that would make sense, but the unknown impact of the virus on the economy and earnings tell me this isn't a 'normal' market environment.
Carl discussed the chart below that outlines how a new "bull market" based on the 20% rule did not pan out...at all.
Climactic Market Indicators: Breadth readings were somewhat climactic to the downside today. This supports the idea of a short-term pullback.
Short-Term Market Indicators: The ST trend is UP and the market condition is OVERBOUGHT based upon the Swenlin Trading Oscillator (STO) readings. The 'normal' range for the STOs is between -400 and +400. STO readings are overbought. Note also the %of stocks above their 20-EMA and %PMOs rising are very overbought.
Intermediate-Term Market Indicators: The Silver Cross Index (% of SPX stocks 20EMA > 50EMA) and the Golden Cross Index (percent of SPX stocks 50EMA > 200EMA) are both rising. I've begun to pay more attention to the Bullish Percent Index (BPI). I've added this ChartSchool link to the list at the bottom of every article for those who wish to read more about this indicator. The BPI is very overbought and supports the idea of a pullback.
The IT trend is UP and the market condition is NEUTRAL based upon all of the readings on the indicators below. IT indicators are rising and have now reached neutral territory. They aren't decelerating, so the intermediate term is still bullish.
CONCLUSION: The ST is UP and IT trend is also UP. Market condition based on ST indicators is OVERBOUGHT and based on IT indicators is NEUTRAL. With the bearish rising wedge fully developed, short-term indicators being overbought and breadth moving negative, we should see a pullback. Until we see deterioration of the IT indicators, I doubt we will see a test of the bear market low on this pullback.
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IT Trend Model: BUY as of 3/12/2020
LT Trend Model: BUY as of 5/25/2018
UUP Daily Chart: The Dollar is pulling back. The PMO suggests we will see a test of support along the October top.
IT Trend Model: BUY as of 12/26/2019
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Gold was in the ETF Tracker top 10 today on a breakout move. The PMO is beginning to look overbought, but with a pullback in the market likely ahead, I would expect Gold to continue higher.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners hit the number one position on the ETF Tracker with an over 6% upside move. We saw a breakout above the 2019 top. The Silver Cross Index is improving quickly. The Golden Cross Index is turning up, but still needs a positive crossover. I am expecting Gold Miners to continue to outperform.
CRUDE OIL (USO)
IT Trend Model: Neutral as of 1/27/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: I am unhappy with USO. Even with news of tightening supply, it fell 1%. The PMO still looks positive, but I'm likely going to be stopped out of USO at $4.70. There is a possible bullish reverse head and shoulders or triple bottom.
IT Trend Model: BUY as of 1/22/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: The PMO triggered a SELL signal last week. So far price is holding at the 20-EMA, but that negative PMO configuration bothers me. I'm short-term bearish on Bonds.
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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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