It may only be a one-day bounce, but the questions that are already appearing..."Is the correction over in Technology? Is this a BUY point?" Below I have the chart of the Nasdaq, followed by the Technology Sector SPDR (XLK). The first chart is a longer-term daily chart that shows us the strength and weakness in participation by looking at the percent of stocks with price above their 20/50/200-EMAs. I have annotated numerous negative divergences that have occurred over time. I do think it is positive that price found support at the August low, but it didn't hold the 50-EMA. We are seeing some improvement on %Stocks above their 20-EMA.
What does Technology look like? Unfortunately, my thought was a bearish reverse flag the minute I opened it. However, it is holding onto its rising trend and is staying above the 50-EMA. The RSI is nearly positive and the PMO is less overbought. At this point, I suspect that Technology, like the market as a whole, will see a pause or sideways consolidation. The indicators aren't negative enough to expect another big leg down, but they aren't positive enough to suggest a sustained rally ahead. I think you could get back into the technology sector or hold onto your technology sector stocks. However, as far as entry, you may want to wait for a close above the 20-EMA. There are other areas of the market that I find more interesting these days which Diamonds readers can confirm.
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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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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: The SPY certainly has some of the flavor of the XLK chart. There is a clear trading range that has begun to develop between the 20/50-EMAs.
If you look at this on a line chart, you can see a short-term double-bottom which could suggest a nice rally into the 350's. I do find issue with total volume today. I prefer to see a pop in volume accompany a pop on price. We didn't see it today.
Climactic Market Indicators: More positive climactic readings to decipher today. While we didn't see much happen with volume, we did see another expansion of New Highs. These climactic readings are coming off a one-day rally from Friday. They are also arriving within a declining trend. I will read these as a buying initiation climax. One reason I'm leaning this way is that expansion in New Highs. Additionally, the VIX closed above its EMA on the inverted scale.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is OVERSOLD. Based upon the STO ranges, market bias is NEUTRAL. STOs are rising out of near-term oversold readings. Given their rise and the improvement on the %Stocks indicators, I have a bullish outlook.
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 BPI ticked up and the GCI is resuming its climb. The SCI is decelerating, but is still falling.
The intermediate-term market trend is UP and the condition is NEUTRAL. The market bias is NEUTRAL.
These indicators have turned up which is bullish. I would've liked to have seen a bigger upside move as far as %PMO Crossover BUY signals. Ultimately, with only 22% of components with rising momentum, I don't see a huge rally in our future.
CONCLUSION: Climactic indicators are suggesting some follow-through on today's rally. Swenlin Tradings Oscillators are rising from somewhat oversold territory and our intermediate-term indicators have turned back up. I don't see any major red flags right now, but conversely I don't see enough participation to push stock prices out of the current short-term trading range.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 5/28/2020
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: We have a nice cup shape developing at the end of a protracted decline. Additionally there is a gap that needs covering. The declining trend in the Dollar really hasn't been broken in a meaningful way yet and the RSI is beginning to fail. The PMO is rising, but it is also decelerating. This doesn't appear to be fertile ground to grow a strong rally.
GOLD
IT Trend Model: BUY as of 3/24/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: I see a bearish descending triangle on both Gold and Gold Miners. However, you could also make a case for a symmetrical triangle on a possible flag pole which is bullish. Right now I'm watching support at 1900 closely. The PMO is turning back up and the RSI has stayed mostly positive. Additionally we are still seeing discounts on PHYS. I think Gold will continue to hold up, but I'll certainly feel better when the declining tops trendline is broken.
Full Disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: I have high hopes for Gold partly based on the Gold Miners (GDX) chart. Notice that the declining tops trendline that forms the top of a bearish descending triangle has been broken to the upside. The indicators are healthy.
CRUDE OIL (USO)
IT Trend Model: SELL as of 9/8/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: USO is oversold based on the RSI, but I don't see anything that would tell me to expect a rally. The PMO has now moved below zero and there is new resistance at $28. I am not expecting much out of Oil this week.
BONDS (TLT)
IT Trend Model: Neutral as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: We could be seeing the formation of a small reverse head and shoulders, but we need to see a rally back to the September top to complete it. The PMO is flat, but it also is not falling. The RSI is making a move toward positive territory, but isn't there quite yet.
Full disclosure: I own TLT.
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Technical Analysis is a windsock, not a crystal ball.
Happy Charting! - Erin
Email: erin@decisionpoint.com
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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Price Momentum Oscillator (PMO)