The SPY and other major indexes started out the day with a bang, gapping up and hitting all-time highs. However, the NDX ended lower on the day and the majority of the big large-cap names in the SPX were down most of the day in a big way. What was the catalyst today? Two things. First, the news of a vaccine release next month helped the Healthcare (XLV) sector pop. Second, Oil and Energy led, possibly given a Biden presidency that would likely have Oil and fossil fuels cut back. In this case, demand isn't the issue, it is supply. Market makers clearly believe that supply may be limited in the future and that could be translating into rising prices on Energy stocks. Below I have the intraday chart for the SPX. Notice that the rising trend was broken at the end of the day. Good news on the intraday chart would be a very oversold RSI, but we need to see the PMO on the 10-min candlestick chart to begin rising or at least decelerating.
I also want to share the SPX chart to point out the candlestick today. The wick is long and the close was beneath overhead resistance. This looks like a fake out breakout.
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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:
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 SPY candlestick looks very different from the SPX candlestick. In this case, the open on the SPY was higher. The PMO is rising on the BUY signal, so momentum looks good. Look at the climactic total volume today on the SPX! The previous days marked with a pink "*" denote options expiration. I note that the VIX closed on its high for the day which tells me as prices began to fall, so did bullish enthusiasm.
The RSI is positive and not overbought, so based strictly on the PMO and RSI, the outlook is bullish.
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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 are rising and not particularly overbought. The BPI, however, is now getting overbought.
We are seeing nearly 80% of the SPX stocks have price above their 20/50/200-EMAs. The reading is somewhat overbought.
Climactic Market Indicators: No question, it was a climactic day. This is the first time we've seen a spike of this magnitude on the Net A-D Volume since the June top. New Highs are at the highest level we've seen since the June top as well. Notice technically we didn't see a climactic reading on Net A-D. The VIX came close to the upper Bollinger Band, but didn't penetrate it so we could see a little more upside. However, I would look at this as a signal of a possible buying exhaustion rather than initiation.
Short-Term Market Indicators: STOs rose again today and are overbought. However, they aren't as overbought as they were at the June top.
Intermediate-Term Market Indicators: They continue to rise but are sporting a negative divergence with price. %PMO crossover BUY signals is overbought, but not exceedingly so.
CONCLUSION: Today's rally was accompanied by climactic volume and climactic New Highs. It was also a day where we saw prices closing on the day's lows and a pullback that doesn't seem over when you look at the 10-minute candlestick chart. The NDX was down over 2% today. The technology leaders are struggling. This could be a matter of sector rotation, but the dichotomy bothers me as these stocks tend to take the market with them. I suspect we have a buying exhaustion that will prevent us from seeing solid follow-through this week. However, the intermediate term remains positive and not overbought so I'm not expecting a giant correction.
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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.
Rates are beginning to rise quickly. This will put pressure on Bonds and possibly Real Estate (XLRE).
IT Trend Model: NEUTRAL as of 5/28/2020
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: UUP hit the bottom of its trading range is headed back up. The PMO hasn't quite reversed itself and the RSI remains negative, although rising. We likely have more sideways movement ahead.
IT Trend Model: NEUTRAL as of 10/14/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: So the Dollar (UUP) was up +0.64% and yet Gold was down nearly -5%. This suggests we had a lot of sellers today. The RSI is negative and the PMO has turned down. It hasn't quite erased its crossover BUY signal. Gold is now on important support again. Additionally it is going to need to keep the intermediate-term rising trend intact. I didn't adjust the top of the bullish falling wedge, but I will tell you that if I adjusted it, it will still be a bullish falling wedge and not a declining trend channel. I am expecting a reversal here.
Full disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners took it on the chin today along with Gold. They are now back inside their falling wedge too. I also checked to see if we are morphing into a declining trend channel, but as with Gold, it is still in a falling wedge. GDX is ready to test the 200-EMA one more time. The RSI is mostly neutral although falling. The PMO remains on a BUY signal. We saw quite a bit of technical damage to GDX as its components lost support at 20/50/200-EMAs. They are somewhat oversold, but could certainly move lower. I had highlighted how overbought conditions can persist in this industry group, but we aren't there anymore.
CRUDE OIL (USO)
IT Trend Model: SELL as of 9/8/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: Big upside move on Oil today. It has managed to bring the RSI into positive territory. The PMO hasn't generated a BUY signal yet and it remains in a declining trend channel. Like the market, it closed near its low. I see this as a likely reverse island formation.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: Rising yields did quite a bit of damage to TLT. It had finally begun to look bullish with a breakout from a falling wedge, but that failed on Friday and today's follow-through barely kept it inside the wedge. The PMO is declining. It escaped a crossover SELL signal by a hundredth of a point. Unlike most everything else, TLT closed almost on its high for the day which gives us a "hammer". Getting this on a gap down, I would consider this a reverse island.
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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