The market took a deep dive on the open that had prices down almost 2% within the first hour of trading. After that the market clawed its way back up, erasing the majority of those losses. We actually have a bull flag or "V" bottom on the 10-minute candlestick chart below. The RSI bounced off net neutral (50). The PMO had been headed straight into a crossover SELL signal, but in the final 10 minutes of trading, price popped higher and froze the PMO in its place. A "V" bottom would suggest higher prices tomorrow.
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: Price broke down from the rising wedge, but the crawl back up from today's low did have price closing back within the wedge (barely). The OBV negative divergence could be playing out with today's decline. Total volume was about average. The VIX spiked lower on the inverted scale. Fear clearly was in full swing earlier in the day, but as the market began to right itself, so did the VIX. The PMO has topped below its signal line which is especially bearish. The good news is that price is still maintaining above the November top.
Looking at the 1-year daily chart below, I am struck by the possible double-top that could be forming. The RSI is positive which is bullish, but the deterioration on all of the indicators tell me to expect at least a pause.
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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 GCI continues to more and more overbought. Over 85% of SPX stocks now have 50-EMAs above their 200-EMAs. This is the highest reading in three years. The SCI and BPI are beginning to accelerate downward.
These indicators are overbought, but they could certainly move higher.
Climactic Market Indicators: I expected to see a possible climax today given the deep decline on the open. While we do have elevated readings to the downside but volume wasn't excessively high. I like the VIX getting stretched out. It will start to separate the Bollinger Bands and then we can go back to watching upside punctures as bearish short-term signals and downside punctures (on the inverted scale) as bullish short-term signals. Today's puncture of the lower Band could be a bullish signal given the high negative Net A-D reading. It might be a small selling exhaustion.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
These indicators are rising even on a down day which suggests higher prices to me in the very short term. I won't read past that given the lack of participation. We have less than one-third of SPX stocks with rising momentum. This might not provide the fuel needed to move the SPX much higher.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
All indicators are falling from overbought territory. Notice that we have on one-third of stocks in the SPX with PMO crossover BUY signals. Again, rallies need fuel.
CONCLUSION: The market dove on the open and took most of the day to peel back the losses. The spike on the VIX and elevated Net A-D readings to the downside suggest a possible selling exhaustion was reached early in the day. Given the STOs are continuing to rise, there may be some more upside to be had. The rising wedge technically executed on this morning's decline, but price finished just within. Support is holding at the November top and I suspect it will continue to hold while Santa's sleigh hovers above.
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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) is making an attempt to reverse but the declining trend is firmly intact. The RSI is oversold and rising and the PMO does appear interested in moving higher, but we've seen this before. I don't expect this is the final low.
IT Trend Model: NEUTRAL as of 10/14/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: We have a new rising trend on Gold. The RSI is positive and the PMO is rising toward positive territory. Today we had another slight decline. The 50-EMA is holding as support. The very high discounts suggest very bearish sentiment which is bullish for Gold prices.
Full disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: Miners are looking positive despite struggling to overcome a longer-term declining trend. The PMO has triggered a crossover BUY signal in oversold territory and is rising. The RSI is positive and we can see the SCI and BPI beginning to perk up. Indicators are rising and healthy overall. They are somewhat overbought in the short-term %Stocks > 20-EMA, but given the PMO isn't overbought and neither are the SCI/BPI, it isn't likely a problem yet.
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: Oil pulled way back today with a 2.5% decline. The RSI was very overbought so this pull back cleared those conditions. The PMO is still on a BUY signal and the rising trend hasn't been broken yet. I suspect we will see a test of the August top.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: There is a bearish descending triangle on TLT. That is a flat bottom and a declining tops trendline to form the top of the pattern. The expectation is a breakdown. The RSI is negative and the PMO is flat and equal to its signal line. I would expect to see lower prices for Bonds and a test of the bottom of the triangle.
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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