We will look at the short-term negative divergences when we get to that segment of the report. Let's first examine the 5-month candlestick chart which shows that price is holding above support at the November high. I have annotated a bullish ascending triangle in red, but I am now considering a rising wedge which is bearish since price has already topped. There is an OBV negative divergence that does seem to suggest the bearish wedge is a better fit than the ascending triangle. Add to that the short-term negative divergences and we could have a problem.
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: One thing that popped out at me on this chart was the squeezing on the Bollinger Bands of the VIX. This is actually a bullish condition in my estimation. Notice on the chart that during squeezes, price is usually going up. The problems arise when the bands begin to expand. The VIX is also above its EMA on the inverted scale which is positive.
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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 dialed up the same reading again today. The BPI is moving sideways and avoiding a negative crossover, but it isn't showing any strength. The GCI is rising which is positive for the long term, but it is getting very overbought. In fact it is reaching the same level as it did at the bull market top.
Not much movement on these indicators. They remain overbought but are moving mostly sideways. There is only one negative divergence and it is short-term on %Stocks above their 20-EMA. The other indicators are measures for the intermediate term and long term.
Climactic Market Indicators: No climactic readings today, but we do see more short-term negative divergences on breadth.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL to SOMEWHAT OVERBOUGHT.
The STOs are mostly neutral, but they still are showing negative short-term divergences. At least the %Stocks with PMOs Rising is not overbought, but it isn't oversold either.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
The ITBM and ITVM are traveling in different directions with the volume indicator rising somewhat or maintaining its overbought height, while the breadth indicator is clearly in decline. I'm not sure what to make of this, except to say that the last time they diverged, it was just before the January top.
CONCLUSION: We now have a new short-term top that was set after today's intraday high was below yesterday's intraday high. That new top has presented us with some glaring short-term negative divergences. Indicators are still mostly overbought. You have what now appears to be a bearish rising wedge instead of a bullish ascending triangle. These are attention flags to mind our investments more closely. There is a very strong bullish bias (look at all of the "green" on the STOs and the ITBM/ITVM). At this point, I would look for best case, consolidation along this new support area and worst case a short-term pullback. We eventually are going to have to endure a deeper decline, but the table isn't quite set.
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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 continues to break down. It has 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 is continuing to rebound and has now reestablished itself above the 200-EMA. The PMO has turned up and the RSI is headed back to positive territory. The discounts on PHYS had gotten very extended (meaning that investors were very bearish on Gold) and we are seeing a reversal. They are still quite high. Gold has a challenge ahead as the September low and the 20-EMA collide to form overhead resistance.
GOLD MINERS Golden and Silver Cross Indexes: The rise in Gold certainly jump started this beat down group. Like Gold, it is now facing stiff overhead resistance at the 20-EMA. Additionally GDX has to fight against the 200-EMA. The PMO is rising nicely and the RSI while negative, is rising again. I discussed Gold Miners in today's Diamonds Report as the Diamond scans were revealing quite a few Gold Miners as potential candidates.
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 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: Bonds are looking more and more bearish. Price is now headed down to test the bottom of the declining trend channel which coincides with support at the June low. The PMO has not only topped below the zero line, it is about to trigger a crossover SELL signal. The RSI is negative and moving lower.
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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