Last night as I studied the 5-month candlestick chart, I debated whether to adjust the trendlines on the rising wedge. I was seeing more of a rising trend channel. I still believed there were enough bearish technicals, like an OBV negative divergence and a PMO that had just topped below the signal line, to keep the more bearish rising wedge on the chart. Today it became more clear that we have a longer-term rising trend channel.
This of course puts a much more bullish spin on market behavior. I don't think we are out of the woods, but the situation is less dire than the previous rising wedge implied.
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.
CLICK HERE for Carl's annotated Sector charts.
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: Total Volume was very high today on the rally. The RSI remains positive but the PMO is still in decline. I haven't erased the negative OBV divergence, but it is beginning to break the declining 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 continuing its decline which makes participation in today's rally somewhat suspect. The BPI had a positive crossover, but we've seen this a few times already. I'll be more impressed if it can break its declining trend. The GCI is getting more and more overbought in the long term.
We did see an increase in overall participation as many stocks moved above their 20-EMAs. The SCI measures how many of those stocks have 20-EMAs above their 50-EMAs and you can see above that the number is decreasing. However, with EMAs, once price is above the EMA, it will rise toward it. That could get the SCI to move upward which would confirm the rising trend. The Stocks > 50/200-EMAs remains overbought, but has moved mostly sideways and has avoided serious negative divergences.
Climactic Market Indicators: We saw climactic readings today not only in the increase in Total Volume, but also in New Highs. I realize I just annotated a bullish rising trend channel, but if you look at the times that New Highs spiked like this, it came at a buying climax. The VIX is squeezing together again and is still showing intraday movement below the bottom Bollinger Band on the inverted scale. While that could be considered a bullish event as it suggests bearish sentiment, it also can suggest weakness when it closes below its EMA on that inverted scale. Certainly mixed messages, but given this has the earmarks of a buying exhaustion, I suspect we will see a pause over the next day or two.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
The STOs popped today. The readings could be considered somewhat overbought in the near term, but not in the intermediate term. We saw vast improvement on SPX stocks showing rising momentum which is not overbought at 63%.
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 also improved. Additionally we have a positive crossover on %PMO Crossover BUY signals indicator. We need to see more improvement as this will support higher prices in the intermediate term.
CONCLUSION: The bullish bias is returning as the STOs and ITBM/ITVM begin rising. The spike in New Highs and Net A-D numbers as well as the well-above average Total Volume suggest a buying exhaustion rather than an initiation. However, with the bullish bias returning, I suspect we will see a pause rather than a breakdown from this rising trend channel. The PMO needs to turn back up on the SPY to complete the bullish picture on the daily chart.
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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: Yesterday's comments still apply:
"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: As expected, Gold fell after completing the reverse island. On the bright side, the rising trend is holding up just fine. The PMO paused but is not falling and the RSI moved out of overbought territory and remains positive. Discounts are paring back which means investors may be getting a bit more bullish on Gold. With the Dollar still looking so negative, I would expect Gold to do just fine. The technicals still look pretty good.
Full disclosure: I own GLD.
I added the correlation of Gold to the Dollar. Currently it is in a near perfect reverse correlation. This means their relationship is on track. Typically a rising Dollar leads to declining Gold and vice versa because Gold is denominated in dollars. UUP is very negative and with the government spending more and more and printing more and more dollars, I would expect Gold to continue rising if the correlation holds up. But, as Carl often notes, Gold doesn't always play nice. Also, if you look at a longer-term correlation over 50 days instead of 20 days, you can see they aren't correlated at all, meaning in the intermediate term they aren't bounded by any relationship.
GOLD MINERS Golden and Silver Cross Indexes: The reverse island is still a risk for Gold Miners as price backed into the rising trend channel. I updated the declining trendline from the August top and you can see that price hit the top of that declining trend and turned back down today. The 20-EMA is nearing a positive crossover with the 50-EMA which would give us an IT Trend Model BUY signal. The RSI is positive and not overbought and the PMO is now in positive territory and rising. We do have some overbought readings on the %Stocks > 20/50/200-EMAs, but they aren't extremely overbought and high numbers support rallies. Price is currently sitting on the May top. My concern is price dropping to test the bottom of the rising trend channel. If Gold does breakdown, that will put pressure on GDX to do the same.
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: Oil is rallying again. The PMO is nearing a BUY signal and the RSI is positive and not overbought. Like Miners, my concern is the possibility that price will return to the bottom of the channel before rallying more. However, the indicators are very positive (other than an overbought PMO) and I'm seeing Oil related stocks in my Diamond scans.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: I have been expecting a breakdown in Bonds based on the negative RSI and price's inability to get above the 50-EMA over and over and over. Despite a PMO BUY signal price really didn't do much. The PMO is now diving lower on a brand new crossover SELL signal.
Full Disclosure: I own TLT
The one-year daily chart does enlighten us a bit more. This gap down resolved a bearish descending triangle as expected to the downside. However, price hit the June low and held up so this could be a bullish reverse island.
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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