Carl and I like to monitor Nat Gas (UNG). Many of you may recall last summer when UNG was a "Diamond of the Week". The timing of the entry and subsequent exit in July was quite profitable. UNG continues to set new all-time lows. There doesn't seem to be a bottom for UNG. When you look at the monthly chart, you can see the very negative configuration of the PMO as it topped below its signal line. My point is, the monthly chart suggests price could move even lower.
I really wanted to believe that the last PMO BUY signal was signaling the rebound for UNG. Unfortunately, the RSI never reached positive territory and hence it never reached my portfolio. Using this last price top, we can see that UNG is in a solid declining trend channel. Today's giant gap down made it clear that UNG isn't ready to bottom. I remember trading UNG in this price range back in 2010. It's hard to believe it is back there and even lower. Avoid it for now.
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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: Today's big gap up looks like an exhaustion climax. We don't have the total volume behind that, but given holiday trading, today's volume was respectable. Price is still bounded by the rising wedge. The PMO did tick up today. The OBV is still sporting a strong negative divergence with price tops.
The RSI remains positive but is getting somewhat overbought. Looking at today's price bar on the one-year chart, I see a likely island reversal.
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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 BPI has a clear negative divergence and the SCI is flat. The GCI is extremely overbought and it is still rising.
We still have a negative divergence in the short-term timeframe and all indicators are overbought.
Climactic Market Indicators: Today's price bar may look climactic, but we aren't seeing climactic readings. The VIX has made it above its EMA, but this tight squeeze of the Bollinger Bands generally precedes a volatile decline.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
Both STOs are rising which is bullish for the short term.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL. The market bias is SOMEWHAT BULLISH.
The ITBM technically rose today, but the ITVM is still in decline. Neither is oversold. %Stocks with crossover BUY signals is still below 30%. This suggests that there only a handful of stocks carrying the index higher. We need more participation to ensure a rally continuation. When the leadership stocks begin to fade, the market could decline very quickly.
CONCLUSION: Today's gap up looked like a possible exhaustion climax. However, climactic indicators didn't confirm this. I suspect this is an island reversal, meaning we should see a similar gap down tomorrow. Working in the market's favor is seasonality or what we call the "Santa Claus Rally" or effect. The rising STOs will also work in the market's favor. So rather the typical resolution of an island reversal with a gap down and decline, I suspect price will gap down, but consolidate sideways.
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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 declining trend. It recently rallied, but failed at the declining tops trendline. The RSI is negative and not rising. Although the PMO is nearing a BUY signal, price will not likely have a sustainable breakout here.
IT Trend Model: NEUTRAL as of 10/14/2020
LT Trend Model: BUY as of 1/8/2019
GLD Daily Chart: Despite a negative day, price did stay above the 50-EMA and stayed within the bearish rising wedge. The RSI is positive and the PMO is nearing positive territory so despite a negative chart pattern, I could see this rising trend continue.
GOLD MINERS Golden and Silver Cross Indexes: Price closed beneath the 200-EMA suggesting we may have to endure a drop to the bottom of the declining trend channel. What works in GDX's favor are the improving internals. Those indicators are not at all overbought and are trending higher overall.
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: Rising wedges are everywhere right now and that includes USO. Price is hugging the rising trendline and staying above the 20-EMA. The RSI is positive, but the PMO is about to trigger a SELL signal suggesting a breakdown from the wedge is likely.
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. There is a slight positive divergence with the OBV in the short term, but the RSI is still negative and the PMO is nearing a crossover SELL signal. I also note that price is struggling to reach above the 200-EMA.
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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