Yesterday saw a bullish "hammer" candlestick which indicates a rally to come. Well, we got the rally today, but we also got a bearish "shooting star" candlestick which tells us to expect a breakdown tomorrow. There certainly is the possibility that this will not result in a decline given that the breakout held above prior overhead resistance. However, I do now note a negative divergence between price and the OBV.
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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 and the PMO is still rising so the indicators are telling us not to expect a giant pullback. Total volume today was about average, no climactic volume on today's gap up. The VIX closed on its high today, but it remains comfortably above its EMA on the inverted scale which typically signifies internal strength.
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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 remains flat, but the BPI is not rising after avoiding a major negative crossover. I'll feel more bullish if the SCI begins to rise. All of these indicators are overbought, but we have certainly seen higher readings so more upside could be accommodated.
These indicators remain overbought, but haven't hit extremes. %Stocks above 50-EMA is rising sharply which is bullish, but again, overbought conditions are still a problem.
Climactic Market Indicators: We didn't have climactic readings today, but came very close. An upside push on breadth and the significant increase in New Highs does suggest to me that we had an exhaustion climax today. Remember, these indicators are very short-term. Sometimes they arrive before longer-term trends, but mainly they give us clues on what the market will do in the next day or two.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL to SOMEWHAT OVERBOUGHT.
Yesterday's comments still apply:
"The Swenlin Trading Oscillators (STOs) are mostly flat with the STO-B in neutral territory and the STO-V somewhat overbought territory. We have a short-term bullish bias based on the persistence of positive or "green" readings."
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
Like the STOs above, we are seeing a similar flattening of readings in our intermediate-term indicators. They are overbought, but like many of our overbought indicators, there is still more headroom should the rally continue. I don't like the negative crossover on %PMO crossover BUY signals.
CONCLUSION: In the very short term, there is a shooting star candlestick that is bearish. It does appear we have an exhaustion climax today based on elevated breadth and New Highs, so we should expect to see a decline tomorrow. Indicators in all timeframes are overbought. However, there is headroom on all of them to proceed higher so we aren't looking for a correction at this point. More than likely it will be a short-term pullback or even more consolidation to relieve overbought conditions.
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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 continued its break down. Today it dropped and closed below the March low. The RSI is getting oversold, but the PMO is firmly in a decline so expect more follow-through on this decline.
IT Trend Model: NEUTRAL as of 10/14/2020
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Gold rebounded today after moving below the 200-EMA. The RSI and PMO are both turning up. This was Gold's time to reverse. Indicators were oversold and this was an important area of support along the April top. There is overhead resistance at the September low to contend with soon, but we could be seeing a reversal on Gold. Should the Dollar continue its decline, Gold will likely begin reestablishing itself within the previous trading range.
GOLD MINERS Golden and Silver Cross Indexes: Price was stopped at overhead resistance at the October low. Like Gold, Miners were at a reversal point with extremely oversold indicators. The RSI is improving and the PMO has turned up. It was an over 3.6% rally today, so I won't diss it for not vaulting resistance. We will know if this is a true reversal very soon as price will be testing resistance at the 20-EMA in addition to resistance at the October low.
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: Yesterday's comments still apply:
"We are starting to see USO struggle against overhead resistance. This doesn't worry me too much as the PMO is still rising and the RSI is still in positive territory. Another reason it doesn't worry me is that $WTIC has already made the breakout and is maintaining above new support."
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: Yields jumped higher today and that put pressure on Bonds. I was settling in with a bullish falling wedge yesterday, but given today's big drop, it is more likely we have a declining trend channel with price headed down to test the bottom of the channel. The PMO has turned down below zero, the RSI has dropped into negative territory and price also closed below the 200-EMA--this is especially bearish.
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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