Last week the Utilities Sector (XLU) triggered an IT Trend Model Neutral signal as the 20-EMA crossed below the 50-EMA while the 50-EMA was above the 200-EMA. Had the 50-EMA been below the 200-EMA, it would've been a SELL signal. Since then, price has bottomed right along the 200-EMA. The PMO appears ready to turn back up as it has stopped its decline by holding the same -0.62 reading for the past three days. The indicators are oversold and are beginning to trend slightly higher. The RSI is still negative and those indicators do need more help, but I'd keep an eye on this sector moving into January.
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: What struck me immediately when I looked at this chart was the bearish engulfing candlestick we had today. While price may've popped briefly above the rising wedge, it finished lower on the day. The negative OBV divergence is still in play. Volume was pretty much average for a holiday week. The VIX closed below its EMA which is generally bearish. I put the thumbnail on today so that you can see that the PMO has topped below its signal line which is very bearish.
I still think we are looking at a likely island reversal pattern which calls for a gap down. The RSI is positive and not overbought, but other than that the chart is bearish.
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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 BPI topped below its signal line which is quite bearish. It also holds a negative divergence with price tops. The SCI is rising, but like the GCI, it is very overbought.
With today's top, we saw new tops on the indicators. They have now set up negative divergences.
Climactic Market Indicators: We did see a spike to the downside on Net A-D that could be considered a climax, but we didn't see any confirmation from Net A-D Volume. New Highs pulled back, but on a climax day we would expect to see a few new lows.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
The STOs continue to rise which is bullish for the short term. However, we are now down to only 25% of stocks with rising momentum. A rally needs fuel and with only 25% of the stocks doing the heavy lifting, it isn't really sustainable.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL. The market bias is SOMEWHAT BULLISH.
Both the ITBM and ITVM are falling and have serious negative divergences with price tops.
CONCLUSION: There are so many signposts today that suggest lower prices. Let us count them... 1) PMO top below the signal line, 2) Bearish engulfing candle, 3) VIX closing below its EMA on the inverted scale, 4) Downside spike on Net A-D, 5) Possible Reverse Island, 6) Negative divergences galore in all timeframes... For bulls, the STOs are rising and the RSI is positive. I would say the scales weigh heavily toward the bears.
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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 declining trend channel remains on the Dollar. It appears ready to test the bottom of the channel. The RSI is negative and not particularly oversold. The PMO has flattened and avoided what looked like a lock on a new crossover BUY signal. If price falters again tomorrow, the PMO will likely top below its signal line.
IT Trend Model: NEUTRAL as of 10/14/2020
LT Trend Model: BUY as of 1/8/2019
GLD Daily Chart: Gold continues to hold support along the rising trendline that forms the bottom of the bearish rising wedge. Price is also holding above the 50-EMA. The RSI remains positive and the PMO has nearly reached positive territory. Despite the bearish pattern, Gold looks healthy enough. Discounts remain very high which is bullish for Gold.
GOLD MINERS Golden and Silver Cross Indexes: Miners still haven't come back to life. However, the indicators are beginning to perk up and it is managing to hold a short-term rising trend. It seems a matter of time, but I wouldn't jump back in until it loses the longer-term declining trend.
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: The rising wedge is still in play and now we have an official PMO SELL signal. The RSI is still positive, but that overbought PMO SELL signal tells me the rally in Oil is likely ending or at the very least will pause just above the August top. If that support level is lost, I would expect a major pullback. For now, it is safely above the 20-EMA and comfortably above $31.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: The short-term positive divergence on the OBV isn't amounting to much. The RSI remains negative. The PMO has topped above the signal line so there may still be a breakout rally. The bearish descending triangle calls for a breakdown below $134 and with price unable to penetrate the 20/200-EMAs, a breakout will be difficult.
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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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