Today Consumer Staples ETF (XLP) triggered an Intermediate-Term Trend Model Neutral signal today as the 20-EMA crossed below the 50-EMA. The chart doesn't look half bad. I actually wrote about XLP in Tuesday's Diamonds Report as an area that could be awakening. The PMO is flattening and is preparing to turn back up. Price did not have to test the support at the prior low before turning back up. If it continues a bit higher, we'll have a short-term bullish double-bottom. With the market weakening and likely losing its rising trend soon, this defensive area of the market is actually beginning to look interesting. Mary Ellen and I discussed the defensive areas of the market in today's Chartwise Women show.
The S&P100 triggered a PMO SELL signal to join the ranks of the SPY, SPX and NDX. The Dow never managed a BUY signal is continuing lower. There is a strong negative divergence on 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 rising trend has held, but the 20-EMA did not. Total Volume was well above the annual average. The PMO is still declining, but the RSI has managed to stay in positive territory. The long tail on the candlestick bothered me so I took a peek at the intraday 10-minute candlestick chart.
When I saw the topping formation on the intraday chart I was startling. It is an almost perfect symmetrical rounded top that hasn't finished its decline. The selling accelerated after lunch. The 10-minute PMO SELL signal also looks particularly ominous.
Check out the line chart for the SPY. Notice the break of the 20-EMA that is unlike any of the other previous tests which were successful.
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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 GCI remains unchanged at 90%, an extremely overbought reading. The SCI and BPI both continued to decline despite the rally.
We did see slight improvement in participation. However, a rally needs fuel and a lack of participation means there is less in the gas tank, so any rally will likely run out of gas quickly.
Climactic Market Indicators: It doesn't rank as a climax day. The continues to stretch below the Bollinger Bands and that oversold reading is generally positive for the market. But as I did yesterday, I harken you back to September where we did see a small rally after those very oversold readings, but it didn't signal the end to the overall decline which continued through the remainder of the month.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is OVERSOLD.
The STOs are rising again. They are coming out of oversold territory which is positive for the short term. However, in September and October, they didn't signal much in the way of a continuation.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL. The intermediate-term market bias is BULLISH.
Both the ITBM/ITVM continue to decline. On a rally day, we still saw more stocks lose their PMO BUY signals.
CONCLUSION: Most of the indicators ticked up today in oversold territory. While this typically is a bullish condition, we know that the market is highly overvalued and needs a more sizable decline. Looking at indicator behavior in September and October, just because they have bottomed in oversold territory, does not mean we are out of the woods. Today's rally is tarnished by the negative divergences on many of the indicators and the lack of participation that is needed to sustain this rising trend. As a trader, I want to eke out as much gain as I can so I'm watching my stops closely and will likely begin booking profit on any subsequent strength. A rotation into more defensive areas of the market is a measured approach to limiting your exposure during any pullback or correction we eventually endure.
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It is bullish that price didn't have to test the bottom of the bullish falling wedge before bouncing. Closing above the 20-EMA is also positive. The PMO may be decelerating somewhat. The RSI has moved back into positive territory, suggesting a possible breakout ahead.
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: Yesterday's comments are spot on:
"The RSI is now positive and the PMO is rising again. The PMO is still below the zero line and price is still below both the 50/200-EMAs so there is still a bearish bias on the Dollar. For now it is stuck in a trading range; having hit the top of the range, I would expect a move down to test the bottom of the range."
IT Trend Model: NEUTRAL as of 1/14/2021
LT Trend Model: BUY as of 1/8/2019
GLD Daily Chart: GLD broke out during the day, but finished only slightly up. The very short-term declining trend that forms the handle on a cup, was broken intraday. Discounts rose today telling us that sentiment is bearish on Gold which is positive. Unfortunately the RSI is negative and the PMO is still falling. A break above the 50-EMA would have me reconsider my still bearish stance on Gold.
Full disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: GDX rallied strongly today, but the overall rounded top has not been abandoned yet. I do like seeing participation beginning to rise from oversold territory. However, the PMO, BPI and SCI are still trending lower. Price continues to struggle against all three EMAs. I'm not ready to move bullish on the Miners.
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: Price is testing the rising trend and the 20-EMA. This is a bearish rising wedge formation and the falling PMO suggest a breakdown ahead. While the RSI is in disagreement, I would keep my stops tight on any crude related stocks or ETFs.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: Price was stunted at overhead resistance. The picture was brightening for Bonds, but we can see an upturn in Yields put pressure on TLT. The RSI has turned down below net neutral (50). Seeing failure at that important resistance level is quite bearish. However, there is still a chance we could see a breakout here given the oversold PMO BUY signal and hammer candlestick.
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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