Yesterday I noted in the DP Alert that Gold ($GOLD and GLD) had triggered PMO SELL signals as the PMO crossed below its signal line. Today Gold got hit with another whammy, an Intermediate-Term Trend Model Neutral signal. Looking at the chart for $GOLD, I note that price has bounced off the 200-EMA and has managed to claw its way back above resistance at the September low. This does appear the perfect place for Gold to reengage and get back to the business of sustaining a move above the 2011 top. However, the indicators are not properly aligned. The two bearish signals arrive with a negative RSI. Overhead resistance will likely hold at the 20/50-EMAs. I'm more inclined to look for a retest of the November low at $1750. I'll review GLD in the section on Gold.
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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 market appears disinterested in testing the bottom of the rising trend channel and instead consolidate sideways. This works for relieving overbought conditions, particularly on the RSI. The PMO is rising and with today's rally, it has accelerated higher. I would still prepare for a small decline to test the rising bottoms trendline.
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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 is still rising and tells us there is good participation among SPX members and the ultimate foundation, the GCI is showing over 88% of SPX stocks have "golden crosses" and consequently a bullish bias. The main problem is that both of those indicators are overbought. The BPI continues to decline, but hasn't dropped back into its previous declining trend.
The intermediate-term and long-term readings remain flat and overbought; although there's room for both indicators to move further overbought. What is important to note is that these overbought conditions have been a fixture since mid-November and can certainly persist.
Climactic Market Indicators: No climactic readings today. I note that the VIX is back above its EMA on the inverted scale and that is indicative of internal strength. However, readings are getting overbought in the near term.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
The Swenlin Trading Oscillators (STOs) pulled back slightly today on a rally. This is very bearish for the short term and suggests we will go down and test that rising bottoms trendline. Past that, the bias is clearly bullish with all that 'green' so I'm not expecting a serious correction.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL. The intermediate-term market bias is BULLISH.
The IT indicators look very bullish, although the ITBM/ITVM are beginning to reach near-term overbought territory. They still have room to run and are rising so they are looking very bullish right now.
CONCLUSION: The market is consolidating sideways, but given the decline in the STOs, I would look for a drop to test the current rising trend. Past that, the IT indicators are very bullish which leads me to believe the rising trend in the market will continue. In any case, the quote below tempers my bullishness.
"Great bull markets typically turn down when market conditions are still favorable, but subtly less favorable than they had been."
- John Mauldin, Mauldin Economics
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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.
Interest rates are dropping again after a huge run up. Consequently Bonds are beginning to rally again.
IT Trend Model: NEUTRAL as of 5/28/2020
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar is digesting its breakout move last week. Price is staying above the 20-EMA which is bullish and I can't argue with a rising PMO on an oversold BUY signal. The RSI has nearly reached positive territory. The Dollar should test overhead resistance at the 50-EMA shortly.
IT Trend Model: NEUTRAL as of 1/13/2021
LT Trend Model: BUY as of 1/8/2019
GLD Daily Chart: Looking at GLD, we see that it hasn't actually triggered the IT Trend Model Neutral signal, but it is destined to. The only way to avoid it would be a rally above the 20-EMA. I note that sentiment is very bearish on Gold right now based on the discount levels of PHYS, but unfortunately I don't see it as bullish for Gold yet. Sentiment is contrarian, but that works at extremes and we've seen higher discounts. The high discount level is more of a confirmation of the decline.
Full disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are being squeezed tightly between the rising bottoms trendline of the short-term trend channel and the declining tops line from the longer-term declining trend channel. Price closed below the 200-EMA today, so while it is clinging to the short-term rising trend, I don't believe it will hold it. The PMO has turned down and the RSI is negative. We do have very oversold indicators, but they haven't bottomed successfully yet and there is still room to fall.
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 RSI is very overbought, but Oil and the Energy sector are still rolling. The PMO is rising and the OBV is confirming this rally. So far this steep rising trend is holding up, but a pullback to decelerate this rising trend would be very constructive. The overbought RSI suggests price needs a pause and the PMO is getting overbought. Overall, I'm still bullish on Oil, it's just overbought and needs some consolidation. For now, it is holding onto that rising trend channel so I won't argue with it.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: Yields dipped again today and that is lighting a fire under TLT, as it should. We have an oversold and rising RSI and the PMO has bottomed. Support was found. I would look for a closure of last week's gap down or at least a test of the 20-EMA around $155.
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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