The holiday trading week opened with the SPY higher on the day, but looking at the 5-month candlestick chart we see that overall, price is moving sideways. Volume was about average on the day. Price did close above the support/resistance line at the September top and the support level at the October top is holding up well.
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: It's clear on the one-year daily chart that there is no particular short-term trend in play given price is congregating around the support/resistance area of the September and October tops. The RSI remains positive and not overbought. The PMO is mostly flat.
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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.
I added the thumbnail on this chart so that the bottom on the BPI is visible. We nearly had a negative crossover on Friday, but today it reversed and preserved its location, perched above its signal line. The SCI and GCI are still rising which is bullish for the intermediate and long terms.
As I reviewed this chart more closely, I noticed that between the October and November tops, only the %Stocks > 20-EMA has a negative divergence with price tops. The big takeaway from this chart is not that %Stocks > 50/200-EMAs have rising tops, it is that we have overbought conditions and the indicators are slowly declining.
Climactic Market Indicators: No climactic readings for the day. New Highs did improve somewhat. The VIX remains above its 20-EMA and is flat. This suggests to me that there is short-term internal strength, but seeing market participants this complacent is worrying. Downside reversals often occur when the VIX turns down from overbought territory. Granted VIX readings are no where near the top of the upper Bollinger Band, they are still steady, but know that a reversal on the VIX could have bearish consequences.
Short-Term Market Indicators: The short-term market trend is FLAT and the condition is NEUTRAL.
The STOs continue to decline. The STO-B has now hit negative territory but overall these indicators are neutral.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
These indicators have been somewhat mixed as the ITBM is declining and the ITVM really isn't. I note that %PMO Crossover BUY Signals is continuing to decline and may give us a negative crossover soon. The negative divergences are definitely something to be concerned about given we've only recently logged a cardinal price top.
CONCLUSION: Volume was average on today's small rally and we didn't see any climactic readings. The short-term indicators are falling and continued to fall despite today's gain. The STOs are in neutral territory and the VIX remains fixed above its EMA. Carl and I agreed on Friday that this week likely wouldn't see much volatility due to the upcoming Thanksgiving holiday and these short-term indicators are supporting that with their neutrality. The intermediate-term picture is more bearish. Negative divergences led into this current price consolidation and weakness. We haven't seen the decline that usually follows these negative divergences so the market is still very vulnerable to a pullback/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.
IT Trend Model: NEUTRAL as of 5/28/2020
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar is in a sideways trading range. It came close to touching support today but finished higher. The 20/50-EMAs could pose difficult resistance, but given the RSI is rising and the PMO is trying to bottom, I suspect we will see price move toward the top of this trading range soon.
IT Trend Model: NEUTRAL as of 10/14/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: A rally on the Dollar could add insult to injury for Gold. However, today, the Dollar wasn't really the issue. It was up only +0.16% and yet Gold was down a sizable -1.85%. This tells us that sellers were the primary reason Gold broke down today. Note the pop in the discount for PHYS. This is another strong indication that sentiment is very bearish for Gold right now. Sentiment is contrarian so a discount this high is very bullish. Yet looking at this chart, there's not much to be bullish about. Price support was lost at the September low and the long-term rising trend was broken. Lucky for Gold, support is right there for it at the 200-EMA and April top. Given the very negative RSI and PMO, it could be difficult for Gold to reverse its decline at that support.
GOLD MINERS Golden and Silver Cross Indexes: We already knew that Gold Miners were having problems when the 200-EMA was lost on Thursday. The rally on Friday gave us hope that this was it as far as a decline, but with Gold getting hammered today, it wasn't surprising to see GDX declining. The voracity of the decline was surprising to me given how oversold the indicators are, but the RSI and PMO were configured very negatively, so it shouldn't have that much of a surprise. The RSI could hit oversold territory soon. Components of GDX are dropping quickly. In fact currently there are no components of GDX that have price above the 20/50-EMAs. The next area of support is around $31 at the February top and June low. Best to avoid this industry group.
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: USO triggered a new IT Trend Model "silver cross" BUY signal on Friday. The RSI and PMO are positive and rising. The top of the longer-term trading range is just above $31. I don't see any reason why that level couldn't be tested.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: There is a bullish falling wedge visible on the TLT chart and Friday it technically executed with a breakout. Today price pulled back toward that breakout point, but remained outside of the pattern which I find positive. Note that 20-year treasury yields have broken their rising trend, this bodes well for Bonds. The RSI is in positive territory and the PMO is rising.
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.
Helpful DecisionPoint Links:
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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)