It turns out that the VIX, our indicators "%Stocks PMO Rising" and "%Stocks > 20-EMA" (the only positive indicators yesterday) foreshadowed today's strong rally. Every other indicator was bearish yesterday. Yet, the market flouted those bearish indicators and pushed to close the gap that formed the island reversal last Thursday. Unfortunately there is a "hanging man" bearish reversal candlestick that formed today that tells us to expect lower prices tomorrow. I'll talk more about that later.
I apologize, but I missed the PMO SELL signal that came in on the NDX on Friday. It is interesting that the strongest index triggered that bearish signal before the others. We are still waiting on the Dow to trigger the same signal.
** Announcement **
I will be traveling July 1 - July 15. I will be writing on the road, but broadcasting will likely be suspended during that time. It's going to be an adventurous road trip for me and my husband. We will be taking a train from Los Angeles to New Orleans, visiting family, checking out retirement areas and then renting a car to make our way back to California with various sightseeing stops along the way. I'll be sure to post a picture or two and I'm sure I'll have funny stories to share along the way. It'll be interesting to see the various stages of the reopening of America. A heads up to Bundle subscribers, the LIVE Trading Room is on hiatus as Mary Ellen will also be out of pocket in the upcoming month. We hope to reopen in late-July. Please direct questions to erin@decisionpoint.com.
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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SECTORS
SIGNALS:
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.
TODAY'S RESULTS:
One WEEK Results:
STOCKS
IT Trend Model: BUY as of 5/8/2020
LT Trend Model: BUY as of 6/8/2020
SPY Daily Chart: As noted in the introduction, I obviously didn't expect to see this rally today coming off very bearish indicators. Volume was about the same as yesterday. Notice that the OBV did get above its previous top, but price was unable to, that tells us that despite the heavy volume of the past three days, price hasn't been able to advance past the June top. It's a subtle but bearish sign.
Climactic Market Indicators: Readings were definitely climactic today to the upside. The VIX moved higher but hasn't reached above its 20-EMA. Honestly, given the bearish candlestick and the VIX below its average on the inverted scale, I suspect this is a buying exhaustion, not an initiation to higher prices. The candlestick, exhaustion and VIX are all VERY short-term indicators. They suggest a decline tomorrow or possibly Thursday. Whether we get followthrough on this exhaustion remains to be seen and given the positive indicators in the next few sections, I'm thinking support will hold at 295-300.
Short-Term Market Indicators: The ST trend is DOWN and the market condition is NEUTRAL based upon the Swenlin Trading Oscillator (STO) readings. Yesterday I noted: "%Stocks >20-EMA popped today". I believe that was an initiation impulse and next time will give it more weight in my analysis. The STOs have ticked up. Would've liked to have seen them "pop" like %Stocks > 20-EMA did yesterday...but they didn't. I think it is positive they have turned up as they have been fairly accurate at reversal points. Their positivity gives supporting evidence that 295/300 support level should hold.
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 rising. The SCI has topped in overbought territory, but BPI and GCI are moving higher. This is positive for the intermediate term.
The IT trend is UP and the market condition is OVERBOUGHT based upon the ITBM and ITVM. I think it is positive that these indicators are rising again but they are very overbought.
CONCLUSION: The ST trend is DOWN and IT trend is UP. Market condition based on ST indicators is NEUTRAL and IT indicators condition is OVERBOUGHT. Today's rally was overshadowed by selling pressure that caused the "hanging man" candlestick. We saw very climactic readings on the Net A-D indicators. Our main indicators are now turning up and looking bullish which tells me support at 295/300 on the SPY should hold. However, I'm looking for a decline tomorrow or Thursday in response to the likely buying exhaustion that lined up on the climactic indicator chart.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 5/28/2020
LT Trend Model: BUY as of 5/25/2018
UUP Daily Chart: Yesterday's comments still apply: "The PMO is flat and the RSI is falling back down toward oversold. Volume was very light on today's decline, so I am looking for higher prices. Overhead resistance would be the 200-EMA. "
GOLD
IT Trend Model: BUY as of 3/24/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Yesterday's comments still apply: "Gold continues to travel sideways but has narrowed into a symmetrical triangle. Since the previous trend was rising, the expectation is an upside breakout. The PMO is flat but looks ready to turn higher. The RSI is neutral. I do note that the very high negative correlation reading with the SPX suggests that a market downturn could be good for Gold. I like seeing discounts on PHYS, that generally leads to higher prices."
GOLD MINERS Golden and Silver Cross Indexes: I was just getting bullish on Miners but it appears they have a bit more work to do as the "flag" gets longer on the flagpole. Most of the indicators are declining now, we should watch the %Stocks > 20/50-EMAs as they tend to be leading indicators.
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: Given the very negative PMO, I didn't expect price to find support at the 20-EMA, but it did. It did NOT close the gap yet. I will remain bearish until gap resistance is broken.
BONDS (TLT)
IT Trend Model: Neutral as of 6/5/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: Big decline on Bonds today but the PMO is still rising and is nearing a BUY signal. I suspect it will rebound soon. There are few areas for price to find support.
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Technical Analysis is a windsock, not a crystal ball.
Happy Charting! - Erin
Email: erin@decisionpoint.com
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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)