After falling heavily on Monday, Oil is rallying strongly. Today the PMO crossed above its signal line to trigger a new crossover BUY signal on USO. Unfortunately it is arriving in very overbought territory. USO still looks strong. Overall I continue to be bullish on Oil. I've found many stocks and ETFs in the oil related industries popping up on my Diamonds Report scans. My concern is a pullback toward the 20-EMA which could occur when the RSI gets too overbought for too long.
A quick note regarding the trend channel. Technically we don't have a top on the trend channel. We only have one cardinal top. The second top hasn't actually been established as price continues rising. It's a good fit so I'm keeping it. I just wanted to explain that to my technical analysis brethren at the Chartered Market Technicians (CMT) Association.
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: The market continues to march onward and upward after the deep decline on Monday. Price hit the top of the rising trend channel today. The RSI hasn't technically reached overbought territory, but it will soon and that could be the sign that price will retest the bottom of the channel. The PMO is rising again and should trigger a new crossover BUY signal soon.
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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 reversed and had a positive crossover its signal line. The BPI continues to rise strongly after its positive crossover yesterday. The GCI continues to push further into overbought extremes. Participation is improving.
Numbers were higher on these indicators, but they didn't move much. That is okay with me; they are already overbought and I want them to take their time as they proceed higher. None of them have topped so there is no negative divergence yet.
Climactic Market Indicators: Indicators aren't showing a climax today. The New Highs continued to rise and are overbought. The VIX is rising on the inverted scale but hasn't hit the upper Bollinger Bands yet which bodes well. Total volume was above average today on a strong rally which is bullish. I'm getting concerned by the overbought nature of New Highs. While it can fuel a rally, it could also suggest an exhaustion on its way.
Short-Term Market Indicators: The short-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT.
Rising STOs are good for the market. While they are near-term overbought, we could certainly see them move higher. We saw more improvement on %PMOs Rising. 2/3rds are now participating in this rally which is bullish since the reading isn't overbought.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL. The intermediate-term market bias is BULLISH.
The ITBM and ITVM look very bullish. With more stocks on PMO crossover BUY signals, this rising trend can be supported.
CONCLUSION: Today's rally took price right to the top of the rising trend channel. When it's at the top of the channel, it is likely to fall and test the bottom. I would look for that when the VIX penetrates the upper Bollinger Band on the inverted scale and the RSI moves into overbought territory. Now that PMO and other the indicators are turning up and we are seeing more rally participation, I'm not as concerned about a major breakdown in the market. Mary Ellen McGonagle and I discussed the implications of a new president. Typically the first year for a new president is very positive for the market regardless of their policy.
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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 PMO could whipsaw back into a BUY signal after breaking out of the falling wedge pattern. The RSI is negative but rising. Today's breakout from the falling wedge could finally get UUP out of the basement. The positive OBV divergence, the rising PMO and an oversold RSI rising have been calling for this breakout. The question is whether it will hold and begin a nice rally. Today's long wick on the candlestick is a bearish pattern. A decisive breakout is 3% or more. That would put price above the 20-EMA which has held strong since November. Until then, this breakout is still suspect.
IT Trend Model: NEUTRAL as of 10/14/2020
LT Trend Model: BUY as of 1/8/2019
GLD Daily Chart: With the rally on the Dollar, Gold fell today. I do note that UUP was up 0.58% and Gold was up 0.26%. This tells me that there were enough buyers to negate the reverse correlation and that is bullish for Gold. Price is continuing to hold the rising trend, but it is in a bearish rising wedge and the PMO has flattened. The RSI is positive. I remain bullish on Gold, but the minute it loses the 20/50-EMAs, I would look for a decline to $1800.
Full disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: The reverse island is still there as GDX pulled back today. It remains in a short-term rising trend channel, but most importantly it remains above the May top. We should see an IT Trend Model BUY signal on GDX soon as the 20-EMA has closed the margin with the 50-EMA. What keeps me from being wildly bullish is that price was stopped at the top of the longer-term declining trend channel and while it is positive to have strong indicator readings, they are very overbought. I always point back to June/July where we saw extremely overbought indicators the entire time, so that isn't a primary concern.
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 looked at the 6-month candlestick chart in the opening so let's look at the 1-year daily bar chart. Price has managed to hold above the long-term basing pattern since its early December breakout. The next area of overhead resistance is at the 200-EMA. It should be able to get there, but it will need to work out that overbought RSI and PMO.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: Bonds continue to lose favor and support as yields march higher. Technically price still closed right on support at the June low, but I don't think it is ready to reverse yet. The next area of strong support is at the January top and that is a long way down. The RSI is oversold and that has marked bottoms for TLT, so we could see a rebound soon to clear that condition. Overhead resistance is now going to be very close so I don't think TLT will make much headway.
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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