The market looked much healthier this morning in the DecisionPoint Trading Room with a giant gap up and what appeared to be a routine pullback to gap support. Instead it picked up momentum and dropped much lower. This decline triggered PMO SELL signals on the SPX, OEX and Dow Industrials. I've included the daily charts for those indexes beneath the DecisionPoint Scoreboard Summary. Rising wedges dominate all three.
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.
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: Bulls will point to support holding at the November top. The bearish combination of a rising wedge breaking down and the VIX closing below the bottom Bollinger Band tells me to expect more downside. Typically a close below the bottom Band leads to a day or two of upside price action, but right now it is thin ice since it is coming in on the heels of a bearish pattern resolution to the downside. Harken back to the Bollinger Band "squeezes" at the end of August and mid-October. Despite puncturing the lower Band, prices continued lower as volatility expanded. Volatility expansion is nearly always associated with a pullback or even correction.
The PMO SELL signal arrived today. The RSI continues lower but it isn't in negative territory yet. Total volume was about average.
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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 continue to move lower after negative crossovers their signal lines. The GCI continues to rise despite being highly overbought. We should heed the warning when we see a decline of this indicator.
All of these indicators are falling. The short-term %Stocks > 20-EMA is only about halfway to oversold territory. Both the other two are very overbought and tipping over.
Climactic Market Indicators: No climactic readings today, but we did see high negative readings. We will wait for a selling exhaustion or possible upside initiation. Right now the readings aren't climactic enough to draw those conclusions.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
This is currently my "go to" market indicator chart. The directional changes on the STOs have been prescient and the %Stocks indicators give us participation information. I will point you to the %Stocks with PMOs rising. We only have 21% of SPX components with rising momentum. Rallies are fueled by stocks with rising momentum. This isn't a particularly oversold reading either.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
We may have a bullish bias on these indicators with all the "green", but they are now retreating from overbought territory. More and more components are seeing their PMO BUY signals disintegrate and this indicators is not that oversold, we could see more of those BUY signals disappear.
CONCLUSION: This morning I was questioning my bearish stance going into this week. By midday I realized that today's gap up was likely the market's last gasp before finally succumbing to the gravity of overbought conditions and bearish indicators. The one positive that bulls can hold on to is that short-term support did hold at the November top. None of the indicators are oversold yet so it doesn't seem likely that support line will hold this week.
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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 seemed as if it was bottoming (it still could be), but price fell hard today. Support was held at $24.40 and the PMO is trying to turn back up. The RSI has moved out of oversold territory, but it is still very negative. If the Dollar is going to rally, it needs to get going soon. If it loses $24.40 as support, I would look for lower prices.
IT Trend Model: NEUTRAL as of 10/14/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: With the Dollar pulling back, we would expect to see Gold rally. When we don't see Gold rally, it usually means there were plenty of sellers to offset the changes that occur based solely on the value of the Dollar. Currently sentiment remains very negative based on the discounts on PHYS. Typically when we see very bearish sentiment, it signals a likely upside reversal on the way. The RSI is still negative and declining, but the PMO is on a BUY signal and is still technically rising.
GOLD MINERS Golden and Silver Cross Indexes: GDX is on its way down to test support at last month's low. The PMO is trending lower again, but it is still above its signal line. The RSI is basically ugly. The indicators are very oversold, but not rising yet. A reversal point is nearing and I believe it will be at the near-term low. Gold is poised to turn it around and Miners will benefit from rising Gold prices.
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. The PMO could certainly move higher. We do have a "hammer"-like candlestick which suggests a likely price rise coming tomorrow. I would have more faith in that candle if it were coming off a decline. 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: Yields are trending lower and that will help Bonds. The RSI is just now reaching 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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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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