It wasn't a pretty morning as the market opened substantially lower, enough to cause a break in the rising trend. However, just like the Monty Python movie I referenced yesterday, the market once again wearily lifted its head from the wheelbarrow of victims to whisper again, "I'm not dead yet". The market clawed its way back up with the SPX spending maybe a minute in positive territory before dropping slightly to end the day down -0.15%. On the 5-minute bar chart below, we have a bearish rising wedge.
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: I have the 5-month candlestick chart on top and then I zoom out slightly to a 1-year chart below that. The short-term rising trend has been compromised, but we do have horizontal support at about $340. The RSI remains positive and the PMO is rising, albeit decelerating. The VIX didn't quite puncture the lower Bollinger Band on the inverted scale, but it is now negatively below its EMA. We actually want that lower Band to be broken as that infers very bearish market participants. Sentiment being contrarian, we generally see a short-term rally after that break. This does have the look of a bull flag, but I'm not convinced we will breakout just yet.
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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 GCI look pretty good, but we do have a topping BPI which isn't good for the market.
Overbought conditions are being relieved somewhat with the recent decline. So far we haven't seen much technical damage done to these indicators so there are players out there with some internal strength that could prevent a correction.
Climactic Market Indicators: New Highs contracted again slightly. No climactic readings, but it is bullish to see positive Net A-D numbers on a decline. Total volume pulled back today which means a lack of conviction in today's decline especially when you consider the work done to get those losses covered. Speaking of covering, tomorrow is options expiration, so we will likely see quite a bit of volume, but not that much price movement.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is SOMEWHAT OVERBOUGHT. These indicators have pulled way back. They continue to do so which suggests more short-term decline on the way. However we did see more stocks come in with rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH. These indicators continue to rise but they are overbought, verging on extremely overbought. Interesting move on %Stocks with PMO Crossover BUY signals, it likely made the reversal on the power of the rising trend of the market out of lows today.
CONCLUSION: The market's short-term rising trend is essentially broken. Yet the market continues to fight declines, meaning we have a strong bullish bias. There's also nearby horizontal support. The STOs tell us to expect lower prices and overbought IT indicators suggests a decline might get legs, turning a decline into a correction. I continue to slowly divest from my portfolio. As I said in an interview this morning with FinancialSense, "I hope I'm wrong". (I'll send out links to the interview when the podcast is available tomorrow night.)
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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 cup and handle pattern is trying to execute with a breakout today from the handle portion of the pattern. It's a good start, but price needs to overcome resistance at the 50-EMA. Good news is there is a positive RSI and a PMO is rising.
IT Trend Model: NEUTRAL as of 10/14/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Gold will not benefit from a rising Dollar. It does appear that Gold will take another trip to the bottom of the bullish falling wedge. The RSI is still negative and the PMO is flat and below zero.
Full disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: I've been skeptical of the Gold Miners breakout and recapture of the EMAs. Yes, the PMO and RSI are positive and the SCI just crossed its signal line, but Gold is likely ready to decline and I believe the market as a whole is in trouble. Those conditions are not good for the Miners. However, I'm still holding mine, I don't think we will have a correction; I just don't think GDX is going to do much.
CRUDE OIL (USO)
IT Trend Model: SELL as of 9/8/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: Not much happening in Oil. We saw a nice rally on Tuesday and Wednesday, but ultimately price is stuck below overhead resistance. We do have a PMO BUY signal and a positive RSI so it has an opportunity here.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: Bonds failed to get above the 50-EMA and now price is below the 20-EMA again. As I discussed in my interview, I don't see Bonds doing much. TLT did hold onto 200-EMA support and there is a PMO BUY signal. Yet the RSI is negative and the PMO is below the zero line. I'm neutral on Bonds.
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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