The lone SELL signals on the DecisionPoint Sector Signal table have been owned by the beat down Energy sector. Today I was finally able to replace the IT Trend Model SELL signal with a new BUY signal. You'll note that XLE's 20-EMA crossed above the 50-EMA or had a "Silver Cross". A Silver Cross triggers an IT Trend Model BUY signal.
The BPI and %Stocks > 20/50-EMAs are extremely overbought. In addition, the RSI is now overbought. The Trend Models do lag and the 200-EMA is where the last rally failed spectacularly with similarly overbought conditions. This is a powerful rally to the upside, but it could have some difficulty overcoming that overhead resistance especially given it is carrying heavy "overbought" baggage with it.
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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: Price pulled back somewhat today, but it remains above overhead resistance at the September top. Total volume was on the low side today. The VIX remains comfortably above its EMA which suggests internal strength.
The RSI remains positive and it has continued to avoid overbought territory. The PMO is on a BUY signal and still rising nicely.
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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.
Yesterday's Comments Still Apply:
"The BPI has bottomed above its signal line which is very bullish. We can see both the SCI and GCI have increased their acceleration upward."
Indicators are overbought and appear to be turning over. That generally precedes a decline, although we do note that overbought conditions can persist in a bull market.
Climactic Market Indicators: No climactic readings today, but after talking to Carl this morning, I need to revise my comments from yesterday. We had talked about a buying initiation extending another day. This is a very very short-term chart and thinking of "continuations" on these indicators doesn't make sense. We determined that moves generally begin with an initiation and end with an exhaustion. So despite getting the same positive climactic readings yesterday as we did on Friday, yesterday's climax should've been labeled an exhaustion. As we study these indicators on a daily basis, our analysis improves as we experience unique market conditions and readings.
Short-Term Market Indicators: The short-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT.
Today the STOs topped and moved lower. This would suggest more churn given the short-term bullish bias.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
I included the thumbnail today on this chart. We did see these indicators briefly pullback, but they now are rising steadily again. Additionally the %PMO Crossover BUY Signals are overbought and tipping over. Given these overbought conditions, the market is vulnerable to a reversal.
CONCLUSION: Indicators are overbought on nearly every chart in every timeframe. The STOs turned lower but the bullish bias is very strong and price is holding support. I would expect more churn or consolidation in the short term. Overbought conditions in the intermediate term tell us to be prepared when those indicators turn south for a more rigorous decline. For now, I suspect we will see consolidation along support at the September top until we see some fear registering on the VIX.
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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: As expected, UUP is headed down to test support. The PMO is headed lower after topping twice at the zero line. The RSI is negative and not oversold so I'm expecting price to hit $24.75 before rising again.
IT Trend Model: NEUTRAL as of 10/13/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: I apologize. The IT Trend Model signal above has been listing the last BUY signal. It has been on an IT Trend Model Neutral signal since October. Gold continues in its sideways trading range. It is due for a breakout from this bullish falling wedge pattern, but I suspect we will end up seeing a "drift" break price above the declining tops trendline. What I mean is that price will likely break through that trendline even with price moving sideways. If I don't see a strong breakout here, I will be scrapping the pattern in favor of simply following the green trading channel. The PMO and RSI are basically neutral, so I don't think I'm far off with this conclusion.
GOLD MINERS Golden and Silver Cross Indexes: Miners will be testing support at the October low very soon. Indicators are extremely oversold right now. Given that 100% of members have a 50-EMA > 200-EMA (Golden Cross Index), I believe support will be held along the 200-EMA. The BPI has flattened, but the SCI has topped below its signal line. If we see more deterioration among components in the longer term, I'll look for a serious breakdown. For now, I believe that level of support will hold.
CRUDE OIL (USO)
IT Trend Model: SELL as of 9/8/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: Another rally day for Oil. Price is technically in a very short-term declining trend, but it is holding above the 20/50-EMAs. Speaking of which, they are likely to see a "silver cross" which will trigger an IT Trend Model BUY signal.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: Looking at current price conditions on TLT, the RSI is nearly in positive territory above net neutral (50) and today the PMO triggered a crossover BUY signal. I decided to check and see if we had a falling wedge or a declining trend channel on TLT. Turns out it is a declining trend channel. Your eyes may play tricks on you, but I basically clicked on the declining tops trendline and dragged a copy of it down to see if it matched price lows. It is a declining trend channel. So even with an improving chart, overhead resistance is nearing at the top of the trend channel and more importantly, the 50-EMA. More food for thought: Bonds are showing improvement, but until yields lose their rising trend, we shouldn't expect this will result in a breakout from the declining trend.
Full Disclosure: I own TLT.
Technical Analysis is a windsock, not a crystal ball.
Happy Charting! - Carl
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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