In spite of having its "ups" as a perennial winner, Apple (AAPL) also has its downs, and it may be setting up for one now. After a recent -35% decline from all-time highs, AAPL rallied +50% from the March low, nearly recapturing all of its losses. Now it looks as if there is a double top setup in progress. There are five technical issues I'm seeing: (1) there is overhead resistance at the line drawn across the all-time high; (2) price failed to reach the top of the rising trend channel before (3) breaking down through the rising trend line; (4) the daily PMO is overbought and close to topping; and (5) OBV shows that volume was relatively weak during the rally. To make matters worse, trade tensions with China are increasing, which is ill-timed to say the least.
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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.
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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.
IT Trend Model: BUY as of 5/8/2020
LT Trend Model: SELL as of 3/19/2020
SPY Daily Chart: This was an options expiration week, and we were looking for relatively calm price action toward the end of the week. On a closing basis it was calm. The daily PMO has topped and is about to cross down through the signal line. The double top confirmation line was penetrated on Thursday, but price reversed upward and the formation failed to execute. Could still happen next week.
I still like a full one-year daily chart for better context, and the zone of resistance is clear.
SPY Weekly Chart: The weekly PMO is rising in a labored manner.
Climactic Market Indicators: In the last two months there have been climactic events in both directions in about equal amounts. This can be accounted for by reversals of price in the trading range. I think we could claim that there is a flag formation in progress. This is normally bullish, but it could be a process of distribution.
Short-Term Market Indicators: The short-term market trend (days to weeks) is MIXED, and the condition is NEUTRAL to OVERSOLD. The condition is oversold enough to allow for a rally in this time frame, and we got a good start on one at the end of this week.
Intermediate-Term Market Indicators: There was a rather large pullback on the Bullish Percent Index.
The intermediate-term market trend is UP and TOPPING and the condition is OVERBOUGHT. The ITBM and ITVM have not reached the top of the three-year range, but they have definitely topped. The PMO has topped and is very overbought. The percentage of PMO crossover BUY signals has dropped to 45, which means that 55% of the S&P 500 stocks are signalling a potential decline or a decline in progress. This chart strongly suggests to me that the decline that started this week will continue.
FUNDAMENTALS: President Trump is pushing for negative interest rates, but Fed Chair Powell said this week that shouldn't be necessary. I hope not. California's Governor Newsom has threatened to impose martial law if necessary to enforce his lock-down orders. I hope not.
CONCLUSION: A topping process began two weeks ago, and the intermediate-term chart immediately above tells me that we're in for more downside. Often, when I begin my analysis on Friday, I don't know where I'm going to land. And today, as I went grinding through the market charts, it felt like a grind with no solid result. But as often happens, when I landed on that last chart it was clear what to expect. Granted, the two-day upside reversal we saw on Thursday and Friday could continue next week and bend those indicators skyward, but right now, at this moment, it doesn't look good for next week and beyond.
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IT Trend Model: BUY as of 3/13/2020
LT Trend Model: BUY as of 5/25/2018
UUP Daily Chart: Since April, UUP has moved within a trading range. The daily PMO is rising and has crossed the signal line, but it has been rather flat for two weeks, implying that the trading range will continue.
UUP Weekly Chart: The rising trend channel seems to be the dominant feature on the chart. For almost a year the weekly PMO has been positive and moving sideways, implying that the rising trend will continue.
IT Trend Model: BUY as of 12/26/2019
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Gold has broken out of a triangle formation, the daily PMO has turned up, and sentiment has been slightly positive for about six weeks. The chart is solidly bullish.
GOLD Weekly Chart: Gold is in a solid up trend in this time frame. I consider the down spike in March to be an outlier.
GOLD MINERS Golden and Silver Cross Indexes: Except for the Golden Cross Index, these indicators overbought, but they can stay there for some time. The trend seems to be where it was going before the March down spike.
CRUDE OIL ($WTIC)
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: Oil has rebounded nicely since the break below $10 in April. As economies open, $35 looks attainable.
$WTIC Weekly Chart: The weekly PMO has bottomed at very oversold levels. Again, $35 looks attainable.
IT Trend Model: BUY as of 1/22/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: I can't see interest rates going up any time soon. I think a move toward zero rates will send bonds a lot higher.
TLT Weekly Chart: The weekly PMO is very overbought, but I expect it will begin moving sideways as long as interest rates remain unmoved.
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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