We've been following the bearish rising wedge on the SPY for days now. After yesterday's active selling, we did expect to see some follow-through to the downside. We got it and now the pattern is resolving downward in textbook fashion. Currently price is holding above short-term support at the early November buying exhaustion. We don't expect that to hold. The PMO has now officially topped in overbought territory and we have a negative OBV divergence leading into this decline. The VIX has finally dipped below its moving average on the inverted scale which suggests weakness and likely volatility ahead on more selling.
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.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
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: While the RSI is positive and flat, the tipping PMO suggests more decline ahead. Total Volume was high, but not above average.
***Click here to register for this recurring free DecisionPoint Trading Room on Mondays at Noon ET!***
Did you miss the 12/7 trading room? Here is a linkto the recording -- access code: fNN=Q8h9
For best results, copy and paste the access code to avoid typos.
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 turned back up, but the BPI dove lower and crossed below its signal line which I find very bearish. Also, very bearish, the GCI which has been steadily rising, it handed us the same reading as yesterday. The SCI and GCI in particular is very overbought.
We can now see more serious deterioration of the %Stocks > 20/50-EMAs. While the %Stocks > 200-EMA is dropping more slowly, it is at multi-year highs.
Climactic Market Indicators: No climactic readings today. As noted earlier the VIX is falling below its EMA on the inverted scale and that implies weakness.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
The STOs continue to fall which is confirming this current short-term downtrend. I continue to shake my head at how quickly stocks are losing positive momentum. We were already seeing this deterioration in the form of negative divergences.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
The ITVM has finally turned over...barely. No matter, it has been so overbought that it was already a problem. Meanwhile the ITBM continues to decline. Currently only half of the SPX are on PMO BUY signals.
CONCLUSION: While overbought conditions can persist, current overbought conditions are very dangerous right now, especially within the context of a bearish rising wedge downside resolution. On the bright side support is holding at the early November buying exhaustion. Declining indicators, particularly the STOs, suggest we should expect more decline. I'm currently evaluating my portfolio with an eye toward locking in profits.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact email@example.com for more information!
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.
The rising trend in yields is breaking down which will be good for Bond prices.
IT Trend Model: NEUTRAL as of 5/28/2020
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar was beginning to look slightly bullish, but as I said yesterday, I expected this short-term rally to fizzle. The RSI has turned back down and the PMO is declining. Price didn't even reach the 20-EMA before turning back down.
IT Trend Model: NEUTRAL as of 10/14/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Gold finished mostly unchanged. With the Dollar declining today, you would expect to see Gold rising. Sentiment is still highly bearish which is generally bullish for Gold. Right now, no one is ready to climb on board. The RSI failed to stay in positive territory. The PMO flattened but is still on a BUY signal. Eventually I would expect to see this extremely negative sentiment will pay off. Looking at the weekly chart, it generally is prescient.
GOLD MINERS Golden and Silver Cross Indexes: The PMO BUY signal tells me that there is positive momentum under the surface. Additionally we don't see overbought readings on the other indicators. They seem to have paused with price. We may see a test of support at the November low before they turn around depending on the market environment as a whole. However, I do expect Gold prices to rise and that will be good for Miners. I still own mine.
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 broke out today, but we have a shooting star candle which is bearish. This looks like a reverse island. Carl did a bang up job yesterday discussing the Energy Sector and Oil in particular in his free article today so I'm going to link to it here.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: I noted earlier that yields are now breaking their rising trend. This will be bullish for Bonds.
Here are my comments from yesterday which I believe still applies, "Carl and I have been cautiously optimistic about Bonds and our patience may be getting ready to pay off. The PMO is beginning to turn up. The RSI is negative, but is currently rising. Overhead resistance is going to be tough to overcome. All three EMAs are converging together to form that resistance. Yields are currently in a rising trend and that will put downside pressure on Bonds, but this week they are declining and helping TLT's cause."
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:
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.