Oil has taken a pause after rallying strongly to begin 2021. While $WTIC was up +0.96% on the day, momentum continues to be lost. Today the PMO crossed below its signal line and triggered a crossover SELL signal. Other than the PMO, the chart doesn't look half bad. Price found support and bounced off the rising bottoms trendline. The RSI is also positive. At issue would be the bearish rising wedge pattern that accompanies the now failing PMO. I'll review USO in the section on Oil. It also triggered a PMO SELL signal today.
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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 channel remains intact. Today's intraday low nearly hit the 20-EMA. If price continues to rally tomorrow without a puncture of the 20-EMA, that would suggest internal strength. It tells us that price didn't have to even test the longer-term rising trend before reversing. Considering the ugly open followed by a strong recovery, the 20-EMA may indeed hold. Interestingly that low keeps the shorter-term rising trend intact.
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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.
After a +0.39% gain today, it is concerning to see the BPI in free fall. The drop this morning didn't help, but even so the BPI has topped below its signal line and accelerating lower. The SCI is directionless, basically moving sideways. The GCI seems to have plateaued, but hasn't turned down. Both the SCI/GCI are very overbought, but it is easy to see that those conditions can persist.
Participation is strong, but we do have negative divergences in the short and intermediate terms.
Climactic Market Indicators: Not a climax day, but we did see above average volume and a penetration of the lower Bollinger Band by the VIX on the inverted scale. I've annotated using green lines to show you what typically happens on these punctures. They may not lead to long-term rallies, but they usually catch short-term bottoms. New Highs are in a declining trend, but it is at oversold lows with a VIX puncture that we see short-term price bottoms.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEAR-TERM OVERSOLD.
The STOs reversed today moving slightly higher. The readings are near-term oversold and while this is bullish, they could certainly move lower so don't get complacent.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT. The intermediate-term market bias is BULLISH.
Negative divergences are in play on the IT indicators. The ITBM/ITVM readings are moving lower which is bearish in the intermediate term. Notice the anemic reading on %PMO crossover BUY signals and its continued decline. More participation is necessary to keep the rally going.
CONCLUSION: The 20-EMA is holding as support so far. Even if that level is lost, it won't damage the longer-term rising trend channel. If we get the bounce here, that will establish an accelerated rising trend channel that will be more difficult to maintain. The VIX's puncture of the lower band on the inverted scale is a bullish phenomenon based on history. The bullish bias remains strong and suggests the rising trend will continue.
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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: UUP's chart is improving as far as the indicators go. Price action is less than exciting. Given the nearly positive RSI and rising PMO, I would expect another trip to the top of this trading range and a test of resistance at the 50-EMA.
IT Trend Model: NEUTRAL as of 1/14/2021
LT Trend Model: BUY as of 1/8/2019
GLD Daily Chart: Gold is being obstinate as usual. GLD is bounded by the 20/50-EMAs on top and the 200-EMA on the bottom. The PMO is flat and the RSI is negative. I have annotated a cup-like structure that is bullish. Discounts are paring back somewhat which tells us participants are slightly less bearish than previously, but overall this messy price action isn't particularly helpful.
Full disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: Miners just aren't that interesting right now. They are completely stuck up against the EMAs and the declining trend. Indicators are oversold, but I don't like the long-term damage on the GCI. At least it is no longer overbought, but I would want to see that indicator stop declining before getting back into Miners. The other indicators keep attempting an escape from oversold territory, but it just isn't happening. The SCI is declining as well. For now I believe there are better areas of the market to invest in.
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: As noted in the intro today, USO had a PMO crossover SELL signal along with $WTIC. It is an orderly pullback that hasn't damaged the rising trend and the RSI is still positive. I continue to like this area of the market, at least as long as it can maintain the rising trend. We have a bearish rising wedge, so the expectation is an eventual breakdown.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: Well, the cup and handle pattern executed today with a big rally. The PMO has now turned up and the RSI is nearly positive. You'll note that yields are beginning to top again and that will put the wind at the back of Bonds ETFs.
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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