Interestingly, on the anniversary of Black Monday 1987, the markets dove lower to end the day. The deadline for stimulus arrives soon and that seems to be what market participants are waiting for. In any case, according to CNBC.com:
Both the Dow and the S&P 500 had their worst day since Sept. 23. The Nasdaq posted its biggest one-day loss since Oct. 2. It also logged its first five-day losing streak since August 2019.
Carl brought the 1987 daily chart below to the DecisionPoint Show today for a trip down memory lane. His main point is that the chart "pattern" March-April is nearly identical to the pattern September-October but the conclusion was quite different. The warning came when support was not held. You can see the rising bottoms in the early 1987 pattern. However, the second time around, that level was broken. Granted that would already mean a large drop in your portfolio, but it did give you warning before the 20%+ decline.
The DecisionPoint Alert Weekly Wrap presents an end-of-week assessment of the trend and condition of the Stock Market, the U.S. Dollar, Gold, Crude Oil, and Bonds. The DecisionPoint Alert daily report (Monday through Thursday) is abbreviated and gives updates on the Weekly Wrap assessments.
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MAJOR MARKET INDEXES
One Week Results:
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:
Top 10 Performers:
THE MARKET (S&P 500)
IT Trend Model: BUY as of 5/8/2020
LT Trend Model: BUY as of 6/8/2020
SPY Daily Chart: The short-term declining tops trendline continues. The RSI is now nearly negative and the PMO has now topped. A few pieces of good news are support holding at the 20-EMA and September tops and a VIX puncture of the lower Bollinger Band on the inverted scale. An increase in the VIX readings suggests "fear". When that hits extremes, it usually results in an upside reversal for a day or two. Additionally, we didn't see especially high volume on this deep decline.
The rising trend channel as officially been broken.
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Participation: 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 increase in the GCI is encouraging, but given the length and strength of the rally out of the bear market low, we would expect to see the GCI to read higher than 65%. The SCI tipped over today and the BPI continues lower.
Overbought conditions have been relieved, but all three indicators continue to decline.
Climactic Market Indicators: We did get some climactic readings. The Net A-D negative readings were considerable and while Net A-D Volume did officially drop below 2000, it is somewhat climactic. Had we seen more total volume, I would consider this a possible selling exhaustion. While it could be, I suspect we won't see it until the stimulus issue is resolved one way or the other.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL. We now have negative readings on the STOs and look at the contraction in stocks with positive momentum. It will be difficult to see a sturdy upside reversal when 65% of SPX stocks have declining PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH. Today both ITBM/ITVM contracted which now suggests intermediate-term weakness where we once had found strength.
CONCLUSION: The market slid lower and has now taken the PMO down with it. The intermediate-term picture is looking more shaky as the ITBM/ITVM have topped. If we're lucky, we will get a bounce tomorrow since readings were somewhat climactic and the VIX dropped below its Bollinger Band on the inverted scale. Unlucky will be if the stimulus isn't resolved and it is the catalyst to the bigger decline. If we drop on good news regarding the stimulus, that will raise my eyebrows.
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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: NEUTRAL as of 5/28/2020
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The "handle" on the cup is getting unruly. I suspect this pattern will bust soon. $25 continues to be the make or break point for the pattern and the Dollar. The PMO is now below its signal line and the RSI is back into negative territory.
IT Trend Model: NEUTRAL as of 10/14/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Gold still hasn't had a positive PMO crossover. The RSI is improving but still negative. The bullish falling wedge is intact. Overhead resistance is very strong with the 2011 top and declining tops that form the top of the wedge. Discounts continue and that is generally good for Gold prices. Looking at the UUP and Gold charts, no one wants to take the lead and breakout.
Full disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: Big decline for the Miners today but they haven't compromised the rising trend channel. The EMAs are proving difficult to hold, but we do have a PMO BUY signal still. The RSI has turned negative. The other indicators are now getting oversold. Line in the sand for Miners is $37.50. If it loses that support I will definitely be selling my gold mining stock.
CRUDE OIL (USO)
IT Trend Model: SELL as of 9/8/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: Price continues to dance with the 20/50-EMAs. We are in a wide trading range between $26-$31. I suspect Oil has found its resting place in the tighter trading range between $28-$29. The indicators are basically neutral, so I'm looking for a big move in Oil anytime soon.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: TLT is preparing to test the 200-EMA. Price is now getting squeezed between the 50/200-EMAs. The PMO is attempting to crossover to trigger a BUY signal, but the RSI is quite negative. I suspect we will see the 200-EMA hold up as support. If it doesn't, I will be selling my long-term position in TLT.
Full Disclosure: I own TLT.
Technical Analysis is a windsock, not a crystal ball.
Happy Charting! - Erin
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
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:
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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)