Today's sell-off in the market erased the recent PMO BUY signal on the SPX and SPY. The NDX and OEX are still clinging to their PMO BUY signals as noted in their charts below. The Dow was already on a PMO SELL signal. While today's action wasn't completely surprising, the voracity of the decline was. The rising trend is still intact.
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 short-term rising trend was abolished with the gap down today. The RSI has now moved into negative territory. We had a huge pop in total volume today which suggests we may have had a climax day. The longer-term rising trend remains intact, but there is a very good chance we will see prices continue lower until we have tested the 50-EMA.
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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 BPI tumbled today and the SCI continued its decline. Interestingly, the GCI moved higher and is now in extremely overbought territory.
Participation dropped like a rock in the short and intermediate terms. We now are nearing oversold territory in the short term, but no such luck in the intermediate term as we have seen much lower readings for the %Stocks > 50-EMA.
Climactic Market Indicators: I would rank this a climax day given the pop in volume and particularly the screaming move on the VIX which took it down well below the lower Bollinger Band on the inverted scale. This is a very oversold reading. However, I am reminded of the VIX readings right after the September top. We saw multiple penetrations of the lower Bollinger Band as price pulled back. So, despite the VIX reading stretching lower, we aren't necessarily out of the woods yet.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is OVERSOLD.
STOs are both showing negative readings. The STO-B is now oversold, but the STO-V could move lower as it is only mildly oversold. We are still vulnerable in the short term. The %Stocks readings are oversold, but we know they can definitely move lower.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL. The intermediate-term market bias is BULLISH.
Both the ITBM/ITVM continue to decline, but haven't reached negative territory yet so they can accommodate lower prices for some time. %Xover BUY signals is oversold, but not as oversold as we've seen it before.
CONCLUSION: We quickly reached the bottom of the rising trend channel which suggests more decline is ahead. Price hasn't yet tested the 50-EMA. Indicators are reaching oversold levels and we did see climactic readings in the VIX, Total Volume and Net A-D. Normally that would call for a rally over the next day or two, but this is likely a selling "initiation" not a selling "exhaustion". I would look for lower prices the rest of the week with a test of the 50-EMA at a minimum.
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Bitcoin is testing the 50-EMA, so far successfully based on its current reading. However, the PMO is still very ugly so I would expect a test of the bottom of the bullish falling wedge.
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 RSI is now positive and the PMO is rising again. The PMO is still below the zero line and price is still below both the 50/200-EMAs so there is still a bearish bias on the Dollar. For now it is stuck in a trading range; having hit the top of the range, I would expect a move down to test the bottom of the range.
IT Trend Model: NEUTRAL as of 1/14/2021
LT Trend Model: BUY as of 1/8/2019
GLD Daily Chart: I annotated a cup shape this week and the last two days of decline could be forming a handle. It's hard to get bullish on Gold here given the ugly PMO and RSI, but the 200-EMA is arriving as support. I would expect a flight to Gold, but we see in September it wasn't a safe place on the decline. I don't think this cup and handle will work out, but it does suggest a possible bullish reversal. I just wouldn't look for it now.
Full disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: Miners took it on the chin. Support is very close at the November low, but I suspect we will be testing the June low before we see a rebound. Indicators are very oversold and the GCI is now out of overbought territory, but the winds of the market and Gold combined will weigh heavy.
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: Price is testing the rising trend and the 20-EMA. This is a bearish rising wedge formation and does suggest a breakdown ahead. The PMO is also suggesting a breakdown. However, the RSI is in disagreement. I put more weight on the PMO and price action which leaves me neutral to bearish on Crude.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: The rally continues on TLT as Bond yields continue to fall. One big problem is overhead resistance at the November/December lows. I am fairly confident that we will see a breakout here given the PMO BUY signal and price staying above the 20-EMA today.
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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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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