Not sure how many of you noticed the outperformance of the S&P400 and S&P600 today against the Nasdaq and SPX. Today the S&P600 (IJR) was up +2.63%, S&P400 (IJH) was up +2.34%, while the Nasdaq was up +1.25% and the SPX was up +1.29%. That's more than a percentage point higher than large-caps.
Below are the Silver Cross Index (SCI) and Golden Cross Index (GCI) charts for both IJR and IJH. The SCI for the small-caps has turned back up and is now extraordinarily overbought with 91.83% of components having their 20-EMA greater than the 50-EMA. IJH has a similarly overbought SCI that is also rising. Additionally, the GCI is thoroughly overbought on both.
Normally I would be cheering this relative strength. As I often say, you need full participation by small- and mid-caps to ensure a long-lasting bull market rally. Unfortunately, they are so overbought in the intermediate and long term timeframes based on the SCI and GCI. The large-caps began weakening when the rising wedge executed so this seems a last hurrah.
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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 SPY was up +1.35%, slightly higher percentage than SPX. Regardless, price did not get back up into the rising wedge. My sense is that this is a 'dead cat' bounce off support at the November top. The VIX has popped back up within the Bollinger Bands. Carl and I both pointed to the similar VIX activity prior to the September and October tops.
Total volume was about average today. The RSI remains positive but the PMO is still holding the crossover SELL signal that triggered yesterday.
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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.
Similar to IJR and IJH, the SPY saw its SCI turn back up. It isn't quite as overbought as IJH/IJR's. Overall the SCI and BPI are topping overall in overbought territory. The GCI continues to get more and more overbought as it reaches levels we haven't seen in nearly three years.
We saw a sharp reversal on %Stocks > 20/50-EMAs. The %Stocks > 200-EMA also turned back up. All of these indicators still look very toppy with today's readings revealing a likely upside climax or buying exhaustion.
Climactic Market Indicators: Speaking of an upside exhaustion climax, these indicators are climactic to the upside. This has the earmarks of an exhaustion climax, similar to the one we had in November. We didn't get confirming volume like we did back in November, but breadth numbers spiking after a decline is usually a sure sign of a buying exhaustion.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
The STOs were mixed today with the STO-B rising and the STO-V falling. If this was an initiation and not an exhaustion, both of these indicators should have risen. It is good to see the large improvement on the %Stocks with Rising PMOs, but we still have only about 1/3 or SPX stocks with positive momentum, even after a big rally day.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
Despite a strong rally today, both the ITBM and ITVM declined. Both are still overbought. The %Stocks with PMO BUY signals did rise slightly, but barely enough to notice it on the chart.
CONCLUSION: Price rallied strongly but wasn't able to recapture a position back within the rising wedge. While it was a very strong rally and it did improve some of our indicators, it also triggered a buying climax. We would read this as a buying exhaustion. The STOs are mixed and the ITBM/ITVM are still declining even after the +1.3% rally. This supports the buying exhaustion hypothesis. We expect to see price reverse and support fail at the November top.
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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: Support was lost at $24.40. The RSI is still negative and not really that oversold. The PMO has now accelerated lower. The Dollar is weak and is still trying to find a support level that will hold it up. It has further to fall.
IT Trend Model: NEUTRAL as of 10/14/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: The Dollar was down -0.33% while Gold (GLD) was up +1.4%. This suggests that there were plenty of buyers to push price higher. The RSI has now entered positive territory and the PMO is rising after a crossover BUY signal. Overhead resistance at the 50-EMA could still pose a problem but given the higher low that was put in today, we expect GLD to continue higher.
GOLD MINERS Golden and Silver Cross Indexes: GDX enjoyed a strong rally with the market with the tailwind of rising Gold prices. If we are bullish on Gold is makes sense that we would be bullish on Miners. The market could prevent Miners from breaking their declining trend should it reverse downward as we expect, but rising Gold prices will likely prevent a heavy pullback or correction. The indicators are improving and are coming out of oversold territory. I like Miners.
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 is getting overbought based on the RSI. Oil continues to rally, but that overbought RSI could become a problem soon. The PMO could certainly move higher. Oil prices should continue to rise, but supply and demand could become a more serious problem should lock downs spread across the country.
I still believe Carl's article on Energy and Oil last week are relevant, so go read it if you haven't already. The link is here.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: Yesterday's comments still apply:
"Yields are trending lower and that will help Bonds. The RSI is nearly back in positive territory and the PMO has triggered a BUY signal. So far price hasn't been able to overcome the 50-EMA, but the indicators and falling yields should push it over."
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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