The market traded lower and maintained this week's very short-term declining trend. A bearish descending triangle has now formed on the 10-minute bar chart. The expectation of this pattern is a breakdown. However, we are seeing short-term signs of life as the PMO generated a BUY signal at the end of the day, while the RSI nearly reached positive territory. The condition of the PMO and RSI are what I use to determine entries and exits on my positions. Based on the 10-minute bar chart indicators, we could see a breakout from this declining trend. However, I would direct you to look at the differences in the OBV from last week and compare it to this week. We're now seeing confirmation of this declining trend on the OBV.
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.
CLICK HERE for Carl's annotated Sector charts.
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 steeply rising bottoms trendline was broken today on light volume. The VIX didn't even reach the upper Bollinger Band before turning back down on the inverted scale. While the VIX is above its EMA on the inverse scale, we know the market is slightly less vulnerable to a big decline. We do have a clear negative OBV divergence, the first of many I will show you today.
Price is still holding above the declining trend, but is stymied by overhead resistance at all-time closing highs. The RSI is positive which tells us price isn't overbought at this level.
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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 BPI, which is a somewhat shorter-term indicator than the SCI and GCI, has begun to decline. We don't have any clear negative divergences on these indicators, but they are beginning to top.
We have very overbought indicators that have all topped today. This set up a short-term negative divergence on %Stocks > 20-EMA; another instance of short-term weakness.
Climactic Market Indicators: Very high climactic negative readings on breadth. I would look at these as downside initiation climaxes that will resolve with a decline or at best consolidation or pause. Carl wrote an excellent article today that explains climaxes on this chart. Here is a link.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
Here are more short-term negative divergences. The STOs fell quite a bit today which suggests more decline or weakness ahead. Note also that the %Stocks indicators are declining from overbought territory.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT. The market bias is BULLISH.
With the ITBM and ITVM as well as %PMO Crossover BUY Signals declining today, we have locked in three intermediate-term negative divergences as we start to see the market topping.
CONCLUSION: Negative divergences have been forming, but they were officially "locked in" as indicators finally turned lower today (it's not official to me until the second top is actually created). As Carl wrote in his article today, climactic readings can be an indication of a trend reversal or simply a pause. While there are a few bullish indicators to be had (RSI, PMO and rising SCI/GCI), there are numerous negative divergences that have appeared in all timeframes so I'm throwing my hat on the side of a decline. The intermediate term had appeared much more bullish until the ITBM and ITVM turned down today along with so many others. Now I'm more neutral to bearish for the IT. I explained to Diamond readers today that I would likely be divesting parts of my portfolio based on market weakness.
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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.
Bond markets were closed today so there are no changes to the yield chart.
IT Trend Model: NEUTRAL as of 5/28/2020
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: Yesterday's comments apply with additional:
"The Dollar is in a clear trading range. At this point it is making an attempt to reach the top of it again. The PMO still hasn't actually turned back up and now the RSI is flattening in negative territory. The 20/50-EMAs are proving difficult to overcome." Additional: I am neutral to bearish on the Dollar as it challenges overhead resistance at those EMAs.
IT Trend Model: BUY as of 10/21/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Gold was up today. Since the Dollar was unchanged, it tells me there were buyers out there that pushed prices higher. Discounts still remain high on PHYS which is bullish for the metal, but the RSI and PMO remain negative. As long as Gold can hold the longer-term rising trend, support at the early July top, I will continue to be bullish overall on Gold.
GOLD MINERS Golden and Silver Cross Indexes: Great to see some improvement on the Miners as Gold prices rose. %Stocks > 20/50-EMAs are oversold and ticked up today. The PMO still has a SELL signal but overall it's mostly flat. Negative RSI but beginning to reverse to the upside. There is a bullish falling wedge and currently price is holding strong support along the horizontal at the October low and the 200-EMA. Looking for Miners to improve more.
CRUDE OIL (USO)
IT Trend Model: SELL as of 9/8/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: After rallying this week, Oil pulled back some of the gains. It still remains above the 20/50-EMAs and the PMO is rising slightly while the RSI is in positive territory. This area of the market is waking up, but I suspect overhead resistance is going to be difficult to overcome.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: Strong follow-through on yesterday's small rally on TLT. Price closed above the 200-EMA, but until I see a PMO BUY signal and positive RSI, it's one of those "I'll believe when I see it".
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.
Helpful DecisionPoint Links:
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DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)