Many know that I am mostly a technical analysis "purist", which is why I find it strange to continually be discussing the "news" and its effect on the markets lately. I believe that in most cases, all of it is "baked" into the chart. However, there is absolutely no arguing that stimulus talks have been affecting market behavior, particularly the past two weeks as the deadline to hammer out a deal approaches. Liz Claman on "The Claman Countdown" pointed out that the Dow moved across the "unchanged" line over 100 times today! Talk about chop! (I must admit that being interviewed on Liz's show is on my 'bucket list'!)
The declining trend began to accelerate yesterday and is still holding. The RSI is now negative and we have a PMO SELL signal below the zero line.
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: Yesterday I annotated a broadening formation, but that wasn't correct, it is a declining trend channel and that very well could be a flag on a flagpole from the September low. Total volume decreased again which could be telling us this declining trend is losing steam. Right now price is on strong support at the mid-September tops and early October tops, along with the 20-EMA. The RSI remains positive but momentum is still falling. Additionally OBV tops are confirming the declining trend.
I think the possibility of a longer-term double-top is not out of the question. It won't be a double-top pattern until it challenges the confirmation line at the September low.
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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 SCI and BPI are about ready for a negative crossover. 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 read higher than 67%.
Not much movement on these indicators today.
Climactic Market Indicators: No climactic readings. The VIX has punctured the lower Bollinger Band on the inverse scale and that usually indicates a day or two of rally ahead.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL. The STOs turned back down today. %Stocks indicators are falling, but not oversold yet.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
Yesterday's comments still apply:
"Today both ITBM/ITVM continued to contract which suggests intermediate-term weakness where we once had found strength."
CONCLUSION: Should the stimulus be agreed upon, the market will rally. The VIX readings are high, suggesting 'fear'. That will evaporate on a stimulus deal. I would expect more decline based on the STOs and ITBM/ITVM, but the news seems to have a stronger grip than normal on the markets. We could be looking at a bull flag formation that would execute on a decisive 3% breakout. Just keep in mind that intermediate-term indicators are falling and a large double-top could be forming on the SPY.
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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: I said that I would scuttle the cup and handle pattern if UUP dropped below $25. Well, in defiance I'm sure, it closed exactly at $25. The pattern should have executed on the breakout last week and it failed to. I suspect we will see a test of $24.75. The RSI is negative and the PMO triggered a SELL signal below the zero line.
IT Trend Model: NEUTRAL as of 10/14/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Yesterday's comments still apply:
"The bullish falling wedge continues to be the dominant feature on the Gold chart. We just got a PMO BUY crossover BUY signal and the RSI just entered positive territory. We are seeing discounts shrinking; that tells me there is more interest in Gold. I also notified by Diamonds subscribers that Gold and Gold Miners made a big appearance on my PMO crossover scan as many of the Gold ETFs and Miners shared the same crossover BUY signals." [My Diamonds Reports scan presented more Materials stocks today. You should take a look.]
Full disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"Miners were up and we saw a PMO BUY signal on GDX. The rising trend channel is intact but I'd have a higher confidence level if price could get above and stay above the 20/50-EMAs. I do like seeing the indicators moving higher as it suggests many of the Miner stocks are showing similar price strength."
CRUDE OIL (USO)
IT Trend Model: SELL as of 9/8/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: Oil took back yesterday's gains, along with last week's. I decided to annotate another line of support/resistance at the September/October tops. It happens to line up nicely with the August lows, June/July tops and the start of the April gap down. The RSI moved negative and the PMO remains underneath the zero line and its signal line.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: Yesterday's comments still apply:
"Okay, TLT, it's time to bounce. TLT has hit the moment of truth. A decisive (3%+) rally off the 200-EMA would be very bullish and would likely mean a move to test the September tops."
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.
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Price Momentum Oscillator (PMO)
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