The market and indicators were looking soft yesterday, so not a surprise to see a decline today. However, seeing the 1.5%+ deep dive in the last hour of trading was likely a signal that this short-term rally is going offline. Dow futures are down which could suggest this decline isn't yet over. The market has been rising with blinders on--focused on the high ground in the future, but ignoring the grand canyon valley that has to come first. My stops will likely begin triggering soon and that's okay. I'll be ready for the next rally. The best short-term hope is that support at 2850 will hold, but it will be hard to stop the downward momentum of today's one hour dive.
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: BUY as of 5/8/2020
LT Trend Model: SELL as of 3/19/2020
SPY Daily Chart: The PMO has now officially topped. As I noted in the opening, holding at 2850 support would keep price in a rising trend channel. Volume increased on this decline, but wasn't climactic. The VIX pierced the upper Bollinger Band on the inverted scale signaling an overbought condition that generally leads to lower prices in the very short term.
Climactic Market Indicators: Along with the VIX piercing the upper Band, we had climactic breadth readings on the Net A-Ds. Unlike the end of April, this has all the earmarks of a selling initiation. These climactic readings are arriving on the first down day at significant overhead resistance with the PMO topping. Not a bright picture.
Short-Term Market Indicators: The ST trend is UP and the market condition is NEUTRAL based upon the Swenlin Trading Oscillator (STO) readings. It appears that the Swenlin Trading Oscillators missed this top, but if you recall, %Stocks above 20-EMA and %Stocks with PMOs Rising both ticked lower yesterday. Now they are dropping quickly. Over 2/3 of stocks in the SP500 have negative momentum and less than half of the stocks are trading above their 20-EMAs. It will be very hard for these stocks to propel another rally. The breakdown of the rising trend channel looks ugly.
Intermediate-Term Market Indicators: The Silver Cross Index (% of SPX stocks 20EMA > 50EMA) turned down today and the Golden Cross Index (percent of SPX stocks 50EMA > 200EMA) continues to rise. The BPI has topped below its signal line and I find that especially bearish.
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The IT trend is UP and the market condition is NEUTRAL based upon the ITBM and ITVM. The IT indicators are all pointing lower and we had another negative crossover for the ITVM on this whipsaw. Declining tops on the ITBM and ITVM confirm those declining price tops that we now have.
CONCLUSION: The ST is UP and IT trend is also UP. Market condition based on ST indicators and IT indicators is NEUTRAL. The picture is bearish based on pretty much everything I have shown you today. I've tightened stops and they likely will trigger tomorrow (with everyone else's!!), so trade cautiously. For Diamonds subscribers, I will be posting a new report tomorrow rather than tonight. I'll be watching Beyond Meat (BYND) on the open, the chart is quite bullish. Do proceed with caution--a watch list and stops are a must.
IT Trend Model: BUY as of 3/12/2020
LT Trend Model: BUY as of 5/25/2018
UUP Daily Chart: Yesterday's comments still apply: "UUP is ready to mock me again with my chart pattern discernment, but currently, the bearish descending triangle makes the most sense. The PMO is now getting oversold and has turned up. I won't get completely bullish until we see not only a break from the declining tops trendline, but a breakout above the April top. For now, it seems happy to bounce around in this trading range."
IT Trend Model: BUY as of 12/26/2019
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Yesterday's Comments still apply (with addition): "The symmetrical triangle is still valid. The expectation of this continuation pattern is an upside breakout given the rising trend it was in before the formation of the pattern. The PMO doesn't support the thesis of an upside breakout, but I do find it bullish that it is decompressing and moving out of overbought territory without any major price deterioration (rising price lows)." I will add that if the market begins to decline, Gold may very well be a target for many investors.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's Comments Apply (with addition): "Miners were due for a pullback, but the rising trend hasn't been broken. I would consider pullbacks in the miners to be possible entries. The BPI is on the overbought side, but the SCI and GCI still look positive and have certainly seen higher readings." Like I mentioned above with Gold, I believe this will be an area that will hold up if the market declines.
CRUDE OIL ($WTIC)
The oil market is under severe pressure due to a lack of demand, and we do not believe that USO is an appropriate investment vehicle at this time. Until further notice we will use $WTIC to track the oil market. Since this is a continuous contract dataset, it doesn't "play well" with our Trend Models, and we will not report Trend Model signals for oil.
$WTIC Daily Chart: I've been considering a reverse island on Oil, but now it looks very much like a pennant on a flag pole. It's hard for me to get super bullish on Oil, but these are technical characteristics that I'm watching closely. The 50-EMA is posing very difficult overhead resistance.
IT Trend Model: BUY as of 1/22/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: The double-top is still in play, but price doesn't want to comply with its bearish expectation. The PMO is still falling but the 50-EMA is stout given the addition of the confirmation line as support. I'm still looking for an eventual breakdown.
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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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