Carl and I had a discussion offline last week about the pending brick wall that is the economy and the dichotomy of the stock market rising despite terrible economic news nearly everyday. I explained to him that when I see this bifurcation between fundamentals and technicals, I become more of a technical analysis "purist". I rely almost exclusively on what the charts and indicators are saying without considering my bearishness on the economy. Carl wrote an excellent article on determining the "bias" of the market that can help us rely more heavily on the indicators to determine the market temperature regardless of what the economy is doing. I highly recommend you read his article on "bias" from Friday. We have adjusted our indicator charts to reflect bias more clearly.
Below is a 10-minute bar chart of the SPX. I wanted to point out that since drifting out of the rising trend, price has mostly been consolidating sideways. 3080 is the make or break support level that I'm watching closely.
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DP INDEX SCOREBOARDS:
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: BUY as of 6/8/2020
SPY Daily Chart: The PMO continues to decompress as price consolidates sideways. We're working off a bearish reverse divergence. At this point, price is holding the 20-EMA as support. I'm concerned that the VIX is still below its 20-EMA as that suggests internal weakness.
Climactic Market Indicators: No climactic readings today. Let me reiterate that the VIX has not been able to get back above its moving average on the inverted scale. We moved price into a rising trend channel rather than keeping the bearish rising wedge. Volume pulled back after options expiration last Friday which saw very high volume.
Short-Term Market Indicators: The short-term market trend is NEUTRAL and the condition is NEUTRAL. Based upon the STO ranges since the March price low, market bias is BULLISH, though not as bullish as between mid-October through mid-February. I do not like that the STOs are in a declining trend, but we are consolidating so it shouldn't be a surprise to see these indicators moving closer to zero. Flat readings on the %Stock indicators reaffirm the Neutral condition of the market.
Intermediate-Term Market Indicators: The Silver Cross Index (% of SPX stocks 20EMA > 50EMA) is falling and the Golden Cross Index (% of SPX stocks 50EMA > 200EMA) is rising. We have a bearish confirmation of the BPI which has now formed declining tops. More of a concern would be the top below the signal line for the BPI.
The intermediate-term market trend is UP and the condition is OVERBOUGHT. With most of the ITBM/ITVM readings since the end of April being above the zero lines, the market bias is BULLISH. The ITBM/ITVM are in declining trends just like the STOs but remain above zero. %PMO Xver BUY Signals continues to decline as more PMOs within the SPX cross back below their signal lines. I will feel much better when we start seeing that indicator rising again.
CONCLUSION: When I look at these charts in total, I see a market consolidating with indicators that are neutral to bullish. I am looking for more sideways action with little price movement.
IT Trend Model: NEUTRAL as of 5/28/2020
LT Trend Model: BUY as of 5/25/2018
UUP Daily Chart: Price turned down at the 200-EMA and consequently took the RSI down with it. Overall I'm still bullish on the Dollar given the new PMO BUY signal. Unfortunately we are seeing price failing to reach overhead resistance at the $26.75 level which does suggest weakness.
IT Trend Model: BUY as of 3/24/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Gold broke out today though not yet decisively (3%+). I do expect it to rally now. The PMO has finally triggered a crossover BUY signal and we are still seeing discounts on PHYS.
GOLD MINERS Golden and Silver Cross Indexes: Today Miners did breakout decisively with a 3.93% upside move to take it well above the declining trend. That constitutes an execution of the bull flag. The minimum upside target of that flag is over $54 but I'm not thinking it will reach that. Given the bullishness of Gold, the wind should be at the back of the Gold Miners. The RSI just moved into positive territory above 50 and the PMO is rising nicely out of near-term oversold territory. With a big price move today, you may want to try and enter on a pullback on the stocks in this industry group. Today in DP Diamonds I wrote about Newmont Mining (NEM) as a "diamond in the rough".
CRUDE OIL ($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: The gap has nearly been closed and the PMO is beginning to flatten. The gap resistance and 200-EMA could pose serious resistance given the PMO is still very overbought and the RSI is just about to pass the 70 level.
IT Trend Model: Neutral as of 6/5/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: I talked about this chart on "Your Daily Five" today. Currently price is unable to break out of the declining trend, but that PMO BUY signal combined with a move above 50 by the RSI suggests we should get that breakout in 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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