The market finished the day higher, but it didn't improve the overall technical picture. The rising wedge is still there. The PMO topped below its signal line last month and is continuing lower. The OBV still holds a negative divergence with price tops. On the bright side, the RSI does remain positive and price held above the 20-EMA. Support below the 20-EMA at the November top is still available.
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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: On the one-year daily chart for the SPY, we can also see strong support at the September top. A drop to that level would mean a 4.5% decline. That's manageable, although not so likely given the declining PMO and negative OBV divergence. Total volume was high, but pulled back slightly on today's rally.
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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 continues to tumble lower. This tells us that participation is waning. The BPI is indecisive, but shows a clear negative divergence. The GCI continues to make its way further into overbought extremes.
The %Stocks > 50/200-EMAs are overbought. The short-term Stocks > 20-EMA isn't overbought, but has trended lower since the November top, creating a negative divergence.
Climactic Market Indicators: No climaxes today. I do note that the VIX is retreating back inside the Bollinger Bands on the inverted scale. I point you to the VIX in September. This is very similar. Normally a VIX puncture of the lower Bollinger Band on the inverted scale is bullish, but back in September it marked a pause not a reversal.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
The STOs are finding their footing. The STO-B declined slightly, while the STO-V rose slightly. Overall they are indecisive and neutral. Nearly 1/3rd of the SPX have rising momentum; we want to see far more to support higher prices and keep the rising trend intact.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL. The intermediate-term market bias is NEUTRAL.
The ITBM and ITVM are also moving sideways in neutral territory. They sport a negative divergence in the intermediate term to price tops.
CONCLUSION: I noted in yesterday's conclusion that we could see prices bounce today given the stretched out VIX. The VIX is still reading high, but we saw the same in September. It marked a pause that was followed by another decline. Given the declining PMO and rising wedge, this scenario makes sense. Support is near enough to keep prices propped up a bit longer. Consider tightening your stops. I continue to pare down my own portfolio in preparation for a likely correction.
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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: Today UUP whipsawed right back into a PMO SELL signal. The RSI is very oversold, but it has been that way since the beginning of December. The PMO tried a few times in December to turn back up, but ended up with two tops below the signal line to show for it. Yesterday's PMO BUY signal finally had the Dollar looking like it would finally rally. Nope. The Dollar remains weak and despite favorable indicators, like an OBV positive divergence, price cannot break from the declining trend channel.
IT Trend Model: NEUTRAL as of 10/14/2020
LT Trend Model: BUY as of 1/8/2019
GLD Daily Chart: Surprisingly, Gold didn't back track today after its stunning gap up yesterday. There is still a distinct possibility we have a reverse island formation. The RSI nearly entered overbought territory today. The PMO is still very bullish as it accelerates higher. GLD hit overhead resistance at the November top and stuck there. I don't know about you, but looking at that November island gives me deja vu.
Full disclosure: I own GLD.
The island isn't as much of a problem on $GOLD. However, like GLD, it could get hung up on the November top. The RSI on $GOLD is overbought.
GOLD MINERS Golden and Silver Cross Indexes: A reverse island is still a risk on Gold Miners. This breakout above an already rising short-term trend channel could be a buying exhaustion. Short-term indicators are overbought, but intermediate- and long-term indicators are not. However, the PMO has just hit positive territory and the RSI is positive. We should see a positive 20/50-EMA crossover that would generate an IT Trend Model BUY signal. Overall I'm bullish on gold 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: I thought we were finally going to see a large pullback or correction on Oil, but instead USO rallied strongly with a nearly 5% gain! The PMO is overbought, but it could give us another BUY signal. Risk here is that price might need to go test the bottom of this rising trend channel after such a strong rally.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: Yesterday's comments still apply:
"Price has now drilled nearly all the way through the symmetrical triangle. Price is being stymied by the 50-EMA. Despite a PMO BUY signal that came in last week, price is unable to breakout. The RSI is neutral. Given the trouble price continues to have with overhead resistance at the 50-EMA, I suspect we will see a breakdown before a breakout."
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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