It was a great rally today...almost too good. I had to revisit the 10-min bar chart that I reviewed in Thursday's DP Alert. I was looking at Friday's action more closely and noticed that near vertical rally at the end of the day and the volume that came in. This was setting the stage for today's gap up. However, I have issues with today's rally and the chart below. First and foremost this looks like an island, not a jumping off point. Second, notice the deep dive the RSI took and the configuration of the PMO. And third, volume did NOT come in on today's big move.
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DP INDEX SCOREBOARDS:
TODAY'S Broad Market Action:
One 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: Today price closed within the bearish ascending triangle and as noted in the opening it has set up a possible island reversal pattern. Back at the beginning of June the island took a few days to form, so maybe there's a bit more upside to eke out here. It isn't only the pattern that's a problem. Price has yet to overcome and close the February gap. The PMO did turn up which is a point for the bulls. I really would've liked to have seen the OBV overcome its previous top. Also look at the huge drop in volume from Friday to today.
Climactic Market Indicators: Indicators were far from climactic on the big gap up today which is another bearish undercurrent. While the inverted VIX didn't puncture the upper Bollinger Band, it came darn close. Generally those punctures are followed by a price decline.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL. Based upon the STO ranges, market bias is SOMEWHAT BEARISH. The STOs were negative today, but they did rise which could be a positive.
Intermediate-Term Market Indicators: The following chart uses different methodologies for objectively showing the depth and trend of participation for intermediate- and long-term time frames.
- The Silver Cross Index (SCI) shows the percentage of SPX stocks on IT Trend Model BUY signals (20-EMA > 50-EMA).
- The Golden Cross Index (GCI) shows the percentage of SPX stocks on LT Trend Model BUY signals (50-EMA > 200-EMA).
- The Bullish Percent Index (BPI shows the percentage of SPX stocks on Point & Figure BUY signals.
The SCI negative divergence has firmed up as it topped. The BPI negative divergence is still in play despite its ticking up.
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. Both indicators are in decline and bearish. It's always suspect when you see a rally and it is accompanied by LOWER percentage of stocks with PMO BUY signals.
CONCLUSION: My portfolio was happy with today's trading (go UNG!) but the indicators were not. We saw paltry volume, negative STOs (albeit rising slightly today), declining ITBM/ITVM, an island reversal forming and a decline in PMO BUY signals across the SPX. I don't like it. I felt better about the market this morning when I recorded "Your Daily Five" because I hadn't seen these indicator charts.
IT Trend Model: NEUTRAL as of 5/28/2020
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: Well, well... the Dollar finally decided to turn it around on Friday, but it did nothing today except fail at closing the gap. The RSI is very oversold so we could see a bit of upside to clear those conditions. The PMO is trying to bottom as well.
IT Trend Model: BUY as of 3/24/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Gold seems to be decelerating right now and may finally be ready to pull back. Sentiment is still bearish which is positive since sentiment is contrarian, but price has really been stretched out. The RSI is really overbought, as is the PMO.
Full Disclosure: I own GLD long-term.
GOLD MINERS Golden and Silver Cross Indexes: I was a little sad that I got stopped out of Newmont Mining last week, but it is starting to look like a good move in the very short term. I agree with Carl's assessment on Friday that Miners should hold up if Gold does. Seeing the rising trend adjusting to a less steep rising trendline is good. Yet both Gold and Miners seem ripe for at least a breather if not a decline.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 1/27/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart:
From Carl's Weekly Wrap: "Things have settled down for about three months, and I have decided to switch back to using USO to track crude oil. As we can see, USO has moved into a very narrow range, between 28 and 30 for the last month. I included the thumbnail panel because it shows a break in pattern this week. There seems to be little upside potential at present."
I'd add that the PMO doesn't look great. Although I do note that today's price action covered last Thursday's gap down and pretty much recaptured support at the 20-EMA.
IT Trend Model: BUY as of 6/26/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: I still own TLT but I am considering selling part of my position given the quick turn back from overhead resistance. Additionally the PMO turned down today.
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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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