The market managed to eke out a +0.16% gain. It wasn't enough to get it back into the wedge to recapture that previous rising trend. I was curious to see if the SPY had formed a rising trend channel to negate the bearish rising wedge. I checked, it is still a wedge and not a rising trend channel. The PMO is continuing lower. Total volume was below average on a rally. The VIX is still beneath its EMA on the inverted scale which usually implies weakness. The VIX looks eerily similar to August.
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: The RSI is still positive, but that doesn't outweigh the negative configuration of the PMO.
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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 SCI and BPI ticked up today, but as you can see, overall they both are very overbought and mostly flat or tipping over. The GCI continues to rise and is at a multi-year high.
I am always concerned when I see indicators turn down on a rally day. This chart is an excellent measurement of participation. Today the decline suggests a thinning of upside participation.
Climactic Market Indicators: We didn't see a climax today. Yesterday's climax appeared to be a buying exhaustion. Although prices rose today, the thinning participation noted in the chart above as well as the negative breadth readings on this chart, suggest we should look for a pause or decline in the next day or two.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
The STOs continue to travel in different directions. Ultimately, they are negative and are not oversold. Without consensus on these indicators, I would look for a pause or possible decline. Only 1/3 of the SPX have rising momentum and the number is slipping.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
Another rally and another day of decline for these indicators. Indicators that don't respond to rising prices always worry me.
CONCLUSION: Despite a small rally today, many of the indicators fell, including our breadth readings on the climax chart. The market is acting "toppy" but it appears Santa may come to the rescue. The market is likely to pause rather than decline heavily given favorable seasonality. This means overbought indicators will likely get more overbought. That will set the stage for a rough January.
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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 still hasn't found support. The RSI is getting very oversold, but the PMO is accelerating lower. We don't anticipate a recovery yet.
IT Trend Model: NEUTRAL as of 10/14/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: GLD is now pushing against the 50-EMA. We set a higher low this week which is bullish. The PMO is on a BUY signal and rising. The RSI just hit positive territory. Discounts remain very high which favors Gold. We should see a breakout above the 50-EMA shortly.
GOLD MINERS Golden and Silver Cross Indexes: We have a similar configuration on the Gold Miners chart. A higher low was set and we have a PMO on a BUY signal. Price closed above the 20-EMA and is setting the stage for a rally to the 50-EMA. Under the hood, the indicators look good. They are rising quickly and aren't particularly overbought yet. If Gold does well, typically Miners will do well.
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 continues to rally and that has pushed the RSI into overbought territory. The PMO is still rising. Now that the RSI is in overbought territory and the PMO is overbought, we should prepare for a pause or pullback soon.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: Yields have been in a declining trend, but they are beginning to rise again which puts pressure on Bonds. The RSI is now negative and the PMO has just about topped in negative territory. After tapping the top of the declining trend channel, it appears it is headed back down to test support at the December low. I wouldn't expect that to hold, especially if we continue to see yields rise.
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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