Today volume was well below average, so holiday trading has now begun after yesterday's high volume upside initiation climax. As I studied the 5-month candlestick chart of the SPY, I noticed a bullish ascending triangle. These formations have flat tops and a rising bottoms trendline. The expectation is an upside breakout and a minimum upside target for a rally (measured by the height of the pattern which is calculated using the first bottom and first high) would be around $378 to $380 on the SPY.
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: The market was flat today and was unable to set a new all-time intraday or closing high. The RSI remains positive and the PMO is still rising, although it has begun to decelerate 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.
All indicators are rising, but are overbought which is always a concern in the intermediate term. However, remember overbought conditions can and many time will stick around in a bull market, especially one with a bullish bias like we have now.
%Stocks above their 20/50/200-EMAs are still rising. They are overbought, but not extremely so right now. Of the three indicators we have only one negative divergence on the %Stocks > 20-EMA.
Climactic Market Indicators: Yesterday we saw an upside initiation climax, but today we have nothing as far as climactic behavior. The chart is rather neutral. I do note that the VIX is climbing on the inverted scale toward overbought territory, but it isn't there yet.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
This chart is one of the reasons I am bullish in the short term right now. The STOs are both rising and the STO-B is now back in positive territory. %Stocks indicators did tip over today, but not by much. They are only mildly overbought and could move higher if needed to support a rally.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
Today we had mixed readings as the ITBM dropped slightly today and the ITBM continued higher. The %PMO Crossover BUY Signals reading stayed above the 10-EMA which is positive. It is decelerating and could turn back up before making that negative crossover. The negative divergences are still here. The question is whether they played out on the decline from the previous all-time high. Given these are intermediate-term indicators, I don't think that decline was enough. However with a strong bullish bias and indicators not at extremes, we should be okay for awhile longer.
CONCLUSION: The buying initiation from yesterday didn't play out today and with Friday likely being another low volume trading day given most actually have the Friday after Thanksgiving off, I'm not expecting a rally pop nor am I expecting a strong pullback. For now, we should enjoy what looks like a bullish short term based on positive and rising STOs, but prepare for a possible reversal in the intermediate term when those overbought intermediate-term indicators begin to deteriorate.
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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 moved slightly lower and managed to avoid a breakdown below $24.75. Given the negative configuration of the EMAs, RSI and PMO, I would prepare for a breakdown.
IT Trend Model: NEUTRAL as of 10/14/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Gold paused today perched just above the 200-EMA at the close. This would be the perfect place for Gold to find its legs again. The Dollar looks ready to break down and that is good for Gold. Also notice the very high discounts we have right now. They peaked yesterday and generally speaking those oversold peaks occur before upside reversals. The RSI and PMO are both negative which means this area of support may not hold. Prepare for the worst, hope for the best on Gold right now.
GOLD MINERS Golden and Silver Cross Indexes: With Gold digesting yesterday's decline, Miners were able to take advantage and bounce. I wouldn't count on this to hold, we aren't at a significant support area yet. As the indicators get more and more oversold, we will be able to look for a reversal at the February top if we don't see follow-through on today's rally to set up a new area of support.
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: Today we got the important breakout on Oil that we have been waiting for. The RSI is now getting overbought, but the PMO is rising nicely and isn't overbought yet. Momentum is on USO's side. I've also included the $WTIC chart below USO. $WTIC actually broke out yesterday which tells me to look for follow-through on USO. I'm bullish on Oil and many of the industries associated it with like Pipelines and Exploration & Production.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: TLT is in a declining trend channel now. The RSI just turned negative and the PMO just topped below the zero line which is especially bearish. The 200-EMA is offering near-term support, but with the indicators this negative, I would look for a trip down to test the bottom of this declining trend channel. (FYI: The Bond markets will be closed on Friday)
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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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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