To begin, I want to inform all of our DP Alert subscribers that there WILL be a Weekly Wrap tomorrow and on Thursday 12/31. We want you to see the closing weekly charts and next week, the closing monthly charts with brief commentary.
The SPX 10-minute candlestick chart shows that the market peaked just after lunch. What struck me when I looked at this chart was the candlestick for the final ten minutes of trading. We were already seeing weakness as the PMO had a crossover SELL signal, followed by the RSI moving negative. This final drop has given the PMO strong downside momentum. It isn't totally unusual to see opening and closing candlesticks like the ones we saw today. I just find it interesting that the day finished with a selling frenzy. I suspect it is related to traders closing positions ahead of the holiday.
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: Trading took place within the bearish rising wedge. The PMO is still headed lower despite a positive close today and we can see the OBV still has a strong negative divergence with price tops. The VIX is rising out of oversold territory on the inverted scale but remains below its EMA which suggests weakness.
Total volume was low and typical of holiday trading. The RSI remains positive and not overbought, but the negative PMO overrides this bullish condition.
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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.
It's not completely visible, but the GCI which had topped yesterday, turned back up today. The SCI turned back down today. While we do see a rising BPI, overall the BPI is showing a negative divergence with price tops. Both the GCI and SCI remain highly overbought.
Overall price location on the SPY components is healthy, but they have been trending lower. %Stocks > 50/200-EMA are overbought.
Climactic Market Indicators: No climactic behavior on these indicators. They responded as we'd expect on a day where price spent all of today in positive territory. We saw an increase in New Highs, but not a climax.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
The STOs were mixed today. Given they are traveling in opposite directions right now, I would label it neutral overall for the market. I still question the possibility of a breakout to new all-time highs given we only see 26% of stocks in the SPY with rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL. The market bias is SOMEWHAT BULLISH.
Both of these indicators continued to drop. They remain "green" so I would list intermediate-term market bias to be neutral, along with the readings that are nearing the zero line. Only 27% of stocks have a PMO that is above the signal line. We need to see this number improving not contracting for a rally to be supported.
CONCLUSION: Holiday trading gave us even lower volume today than yesterday. Traders were bullish the majority of the day, but in the final minutes selling began in earnest. Price is still in a bearish wedge and I don't see enough participation to support a breakout. As I continue to say, favorable seasonality or "Santa" will likely keep price within the wedge and/or above support at the November top. When we move into January, I would look for initial buying as vacationers return to their portfolios, but ultimately that likely will not be sustainable given the negative indicators and lack of participation.
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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 (UUP) remains in a declining trend channel. Not that the previous two tries to test the top of the channel failed early with price never reaching the declining tops trendline. The PMO has topped below the signal line and the RSI which was already negative is falling and not oversold. A breakout doesn't seem likely.
IT Trend Model: NEUTRAL as of 10/14/2020
LT Trend Model: BUY as of 1/8/2019
GLD Daily Chart: Gold rebounded today and stayed within the bearish rising wedge. I like that the RSI turned up before going negative and the PMO is still rising despite the recent decline. The Dollar looks weak so I am still expecting Gold to do well, but I certainly don't like the rising wedge. Discounts remain very high which is bullish for Gold.
GOLD MINERS Golden and Silver Cross Indexes: It appeared GDX was ready to breakout when price moved above the 50-EMA last week. Instead we've seen a pullback as that breakout failed. The good news is that we can see rising bottoms on the %Stocks indicators. The GCI turning down does not inspire confidence so I am cautiously bullish.
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: It appears USO took care of its pullback and is ready to rebound again. I like that price has not even come close to testing the 20-EMA. Note that price has not had to actually test the 20-EMA since it bottomed at the end of October so I am looking at this as an orderly pullback that is setting up higher prices. The decline did its job by bring the RSI out of overbought territory. The PMO is still above its signal line.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: On the 6-month chart, you can see the bearish descending triangle. It suggests that we will see a breakdown. The PMO is flat and far from helpful. I do like today's hammer candlestick as that suggests higher prices tomorrow. Unfortunately the RSI failed to reach positive territory and has turned down. The PMO has also topped. We also have a short-term rising trend on yields which is putting downside pressure on 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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