The DecisionPoint Scoreboards needed an update today as the OEX lost its 1/8 PMO BUY signal. Currently the SPY has some margin between the PMO and its signal line that could protect it from the same fate as the OEX. I've annotated a rising trend channel similar to the SPY. It looks like price is headed down to test the bottom of the channel. Unlike the SPY there is a strong OBV negative divergence which suggests it will decline soon.
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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: Today we see a bearish engulfing candlestick which suggests more downside tomorrow. Despite the negative close, we can see that price is only moving sideways. The weakness is beginning to show as we see the PMO falling and nearing a SELL signal. The RSI is still positive, but I would look for a test of the rising trend before we see a big 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 tanked today, diving lower and crossing below its signal line. This tells us the intermediate-term participation is beginning to break down. On the bright side we saw the BPI decelerate on a price decline. The GCI continues to rise unabated into extremely overbought territory.
Short-term participation is waning as more stocks lose the 20-EMA as price support. In the intermediate and long terms, we are seeing some deterioration, but the readings are still bullish.
Climactic Market Indicators: It wasn't a climax day, but we saw a few more New Highs while the SPX was gaining. There was high total volume today on the decline, most of which was accumulated in the last 20 minutes of trading. The VIX isn't helpful as it sits on its EMA.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
The STOs continue to pullback and suggest further decline. We're seeing a loss in momentum among components of the SPX based on the %Stocks with PMOs Rising.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT. The intermediate-term market bias is BULLISH.
Yesterday's comments still apply:
"The IT indicators look very bullish, although the ITBM/ITVM are beginning to reach near-term overbought territory. They still have room to run and are rising so they are looking very bullish right now."
CONCLUSION: We may have a bullish rising trend channel, but it is time for price to test the bottom of it. Overbought conditions have been worked out of most of the short-term indicators with the consolidation, but today's continued deterioration of the STOs is quite bearish. The intermediate term still looks favorable. The turning point will be when price hits the rising bottoms trendline. Either the bulls will carry the day and price higher, or we will see a breakdown of that rising trend. I'm leaning toward the breakdown. Too many of my colleagues are getting bearish to very bearish and while sentiment is contrarian, these folks tend to get it right.
Tomorrow is options expiration so we expect to see high volume and very little price movement in either direction.
"Great bull markets typically turn down when market conditions are still favorable, but subtly less favorable than they had been."
- John Mauldin, Mauldin Economics
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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 formed a big bearish engulfing candlestick today which suggests more downside. The RSI is negative and falling again. The PMO is rising but nearly flat. Based on the candlestick, I would expect to see UUP to lose support at the 20-EMA.
IT Trend Model: NEUTRAL as of 1/14/2021
LT Trend Model: BUY as of 1/8/2019
GLD Daily Chart: $Gold triggered an IT Trend Model NEUTRAL signal yesterday and today GLD generated the same. Carl reminded me that we use the ETFs to mark signal changes so I have adjusted the IT Trend Model Neutral signal's date to today. GLD is also struggling with getting back above resistance at the September low. Even with a declining dollar, GLD couldn't put together a rally today. The RSI is negative and the PMO is on a recent SELL signal. I will be very surprised if GLD manages to stay above its 200-EMA.
Full disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"Gold Miners are being squeezed tightly between the rising bottoms trendline of the short-term trend channel and the declining tops line from the longer-term declining trend channel. Price closed below the 200-EMA, so while it is clinging to the short-term rising trend, I don't believe it will hold it. The PMO has turned down and the RSI is negative. We do have very oversold indicators, but they haven't bottomed successfully yet and there is still room to fall."
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: So many engulfing candlesticks today! USO has a bullish engulfing candlestick which suggests price will rally again tomorrow. It broke its steep rising trend. The RSI is very overbought, but the PMO continues to rise nicely. USO could do for a pause or a move into a less steep rising trend. I suspect we'll get a positive close, but there will be more damage to the current rising trend.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: TLT had just managed to get back above the June low and now it has turned back down. Yields rose sharply today so this isn't surprising. The RSI is negative and falling again and the PMO is declining. I still believe this is a good area of support and I do expect a rally soon given conditions are so oversold. I wouldn't look for a huge rally, I'm just looking for a test of the November/December lows and the 20-EMA.
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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