Volume was climactic today, but does that mean we have an actual climax? You can see on the 5-month candlestick the pop in total volume on the SPX. I would also like to point out the "hammer" candlestick. While on the SPY we have a small wick on top, the SPX candle is a textbook with no wick.
Let's analyze volume today on the 10-minute candlestick chart. Carl correctly pointed out during the DecisionPoint Show that much of the volume came in the morning with sellers. Don't be fooled by the shorter volume bar. The OBV tells the story. The amount of negative volume was heavy, people dumping positions. In the end (as is customary), the final 10-minutes saw a piling in of buyers. We have a PMO on a BUY signal and a positive RSI. Momentum is on the upswing in the very short term. This bodes well for trading tomorrow, as does the climactic volume and bullish hammer candlestick.
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
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.
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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: Today's low hit support at the September top and as we know from the 10-minute candlestick chart, price reversed and is trending higher going into tomorrow. The VIX rose early in the day but finished on its low for the day as market participants saw the market rising again.
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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 flat. So far the SCI hasn't tipped completely over and the BPI is maintaining above it signal line. The GCI is confirming long-term strength. It is beginning to get very overbought. On the bright side, there are no negative divergences currently in play.
I like seeing some improvement on %Stocks above 50-EMA, but I note the other two indicators have topped and are headed lower.
Climactic Market Indicators: Interestingly, we didn't have climactic breadth readings to accompany today's pop in volume. They are elevated to the downside and we are seeing New Highs diminishing. Therefore we aren't labeling today as a "climax day".
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL to SOMEWHAT OVERBOUGHT.
The Swenlin Trading Oscillators (STOs) are mostly flat with the STO-B in neutral territory and the STO-V somewhat overbought territory. We have a short-term bullish bias based on the persistence of positive or "green" readings.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
In the case of the IT indicators, both the ITBM and ITVM are overbought. Today both topped. Topping indicators in overbought territory is generally bearish, but again we have a strong bullish bias here with positive readings since October. Overbought conditions in a bull market or a period where the bias is strongly bullish, can persist. You can see this coming out of the bear market. There were strong negative divergences at that time. We still have negative divergences on two of the three indicators, but it certainly doesn't look as dire as it did nearing the September top.
CONCLUSION: Total volume on the SPX was climactic, but it wasn't accompanied by climactic readings on our very short-term indicators. In any case, we are leaning bullish based on elevated breadth readings to the downside that could suggest a selling exhaustion. Throw the strong bullish bias in the mix with a bullish "hammer" candlestick and we should look for a rally in the next day or possibly two. After that, we will need to reassess the indicators given the STOs and ITBM/ITVM are moving lower.
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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: UUP closed on its high for the day which is a good sign, but that still keeps it right on overhead resistance at the September low. However, it also bounced off support at the March "pinocchio" low. The PMO may appear to be turning up, but it isn't. The RSI has turned up but is still negative. This is the place for the Dollar to reverse if it is going to. Regardless, until it can stay above the 20-EMA, I'll remain bearish on the Dollar.
IT Trend Model: NEUTRAL as of 10/14/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Gold broke down further today below the 200-EMA and support at the April top. The next support area is at $1700. The RSI and PMO are very oversold and discounts are very high. Those conditions are good for Gold. If the Dollar loses support, that would also be good for Gold, although I do note that the correlation with the Dollar is moving positive. That means that Gold and the Dollar are traveling more in concert with each other. This is an unusual circumstance as there is typically a near perfect reverse correlation between the two.
You need to see the monthly chart as the PMO just turned down which is very bearish in the long term.
GOLD MINERS Golden and Silver Cross Indexes: It appears GDX may've formed a new support level. Last week's gap down was covered on today's rally. If Gold continues to decline, that will put pressure on the Miners. Overhead resistance at the October low is nearing, as is the 20-EMA. It may be worthwhile to see if GDX can break that resistance level before adding to a Miner position or opening a new one. While indicators are improving, the RSI is still negative and the PMO is still falling. It's not ready for "prime time" as they say.
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: We are starting to see USO struggle against overhead resistance. This doesn't worry me too much as the PMO is still rising and the RSI is still in positive territory. Another reason it doesn't worry me is that $WTIC has already made the breakout and is maintaining above new support.
Additionally, we have a monthly PMO that just turned up. We don't think Oil's rally is over just yet.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: I've been trying to decide which chart pattern I want here. You can easily make a case for both a declining trend channel and a falling wedge. The channel is of course bearish, the falling wedge however is bullish. For now, I'm leaning toward a bullish wedge based on the indicators. The RSI is mostly neutral so that's not much help. The PMO is rising which is bullish. Yields are beginning to trend lower and that is bullish for Bonds overall.
Full Disclosure: I own TLT
The monthly PMO is flattening and the RSI is no longer overbought, both could be signaling a possible upside reversal as it closes in on the rising bottoms trendline.
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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