The SPY is currently up +7.26% this week so I'm not surprised to finally see some of our Neutral ST Trend Model signals move to BUY signals. A ST Trend Model BUY signal is generated when the 5-EMA crosses above the 20-EMA. While we don't generally include the 5-EMA on our DP Alert report charts, but I do use it to help find DP "Diamonds in the Rough". We had an additional BUY signal on the Dow. The Dow was the only Scoreboard index that lost its IT Trend Model BUY signal on the October pullback. Today it righted the ship and is back on an IT Trend Model BUY signal. There's one small problem with these signals, they tend to lag. Moving averages are more of a reporter than a forecaster, so sometimes those signals are late to the party. I believe that is the case currently.
I've included the four daily charts of Scoreboard indexes below with the signals marked for you. One general characteristic of all of these charts is the nearness of overhead resistance and the development of a price range. I also have annotated declining tops trendlines. We're entering a strong resistance level (all-time highs) and price now has to break a declining trend. The NDX is getting there. We will likely be reporting ST PMO BUY signals tomorrow or Monday barring a big decline.
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
One Week Results:
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.
One Week Results:
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: As noted above the PMO is about to give us a crossover BUY signal. The SPY has been headed straight up since bottoming last Friday, but overhead resistance at all-time highs looms large. I believe it is too early to start talking about a triple-top. I'm mainly interested in this trading range and the likelihood that price will test the bottom of it again. The VIX is now above its average on the inverted scale. That is bullish in the very short term. Total volume was average, not sickly for a nearly 2% upside rally.
Let's look more closely at this declining trend. It's gentle, but combined with overhead resistance at the all-time highs that will be challenging to break from. However, the PMO and RSI are very bullish in the short term.
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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 nearly had a positive crossover its signal line. All three indicators are rising. In particular the SCI and BPI are rising from oversold territory.
I decided to look at a shorter-term version of this chart. These indicators are getting overbought, but for now are rising nicely.
Climactic Market Indicators: Yesterday's dichotomy between Net A-D/Net A-D Volume readings and price were concerning. Today we are back to climactic readings on both of those indicators. Additionally New Highs continue to rise. New Highs are overbought right now and we declining tops on Net A-D which tends to precede market tops.
Short-Term Market Indicators: I like that the STOs are rising, but they have already hit overbought territory. %Stocks indicators are overbought, but not at extremes.
Intermediate-Term Market Indicators: Rising and not overbought ITBM and ITVM confirm the disintegration of the IT double-top formation. We also see that %PMO crossover BUY signals is rising and not overbought. The intermediate term looks superior to the overbought short term.
CONCLUSION: It may seem strange to open this article with the discussion of Short-Term Trend Model BUY signals and then conclude that the short term is bearish right now. Short-term indicators are overbought nearly across the board. Climactic indicators tell me that we are ready to see an exhaustion of this upside move. This arrives just as price has hit the declining trendline and is about to make new all-time highs. However, the intermediate term looks very bullish--indicators aren't overbought and they are rising. We won't be talking triple-top until those indicators turn way south on this likely short-term buying exhaustion.
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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 is in a trading range. No point in trying to suss out a chart pattern. Given the very negative configuration of the RSI and the PMO (which topped below the zero line), UUP will be lucky to hold $24.75.
IT Trend Model: NEUTRAL as of 10/14/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Finally a breakout from the bullish falling wedge! Patience is a virtue. The RSI was beginning to improve and now we have a new PMO BUY signal on a price breakout above the 20/50-EMAs and the 2011 top as well as the declining tops trendline. The spike on the PHYS discount is good for Gold as well.
Full disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: The falling wedge on GDX also executed today with a massive upside move. As part of this rally, the PMO triggered a BUY signal and the RSI entered positive territory. I've been expecting good things from this industry group given its predominance in my Diamonds PMO Scan results and the bullish chart pattern. My concern right now would be the very overbought %Stocks indicators.
CRUDE OIL (USO)
IT Trend Model: SELL as of 9/8/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: We got a slight pullback on USO. The EMAs continue to pose strong resistance. The RSI just turned down, keeping it in negative territory. The PMO is flat. It's a wide price range and I don't see price moving out of it anytime soon.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: TLT broke out of the bullish falling wedge yesterday. We didn't see much follow-on action, but the PMO is rising and on a new BUY signal, so would expect Bond prices to rise.
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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Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)