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There is a large double-top formation that has nearly triggered. It closed above. A close below 30,000 would initiate a possible decline the length of the pattern down to 18,000. The PMO SELL signal and decline certainly suggest we will see a breakdown.
Here's the latest chart:
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
For the week:
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.
For the Week:
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: With the formation of a new price top, we've adjusted the rising trend channel. Price turned down after reaching the top of the channel and appears ready to move lower to test the bottom of the channel. Last time the market only had to get down to the 20-EMA before turning up. We expect to see the 20-EMA at least tested next week.
The PMO has flattened. It is still rising, but looks like it is ready to turn over. The RSI remains positive and not overbought.
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SPY Weekly Chart: The weekly RSI is nearing overbought territory and the weekly PMO is already overbought. The PMO is very overbought.
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.
While we don't have negative divergences on the SCI and GCI, there is a clear one with the BPI.
Even as prices continue to trend higher, participation is beginning to trend lower in the short and intermediate terms. While we don't see a negative divergence in the long term, the %Stocks > 200-EMA is overbought.
Climax Analysis: We didn't see any climaxes this week, but we are seeing a deterioration in New Highs, even as price continued higher. Breadth has been negative both today and yesterday. One of the keys will be the VIX. It hasn't reached overbought territory by penetrating the upper Bollinger Band. If that happens that would be a clear signal that a heavy decline will be ahead.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
The STOs have been declining all week. They logged negative readings for the first time today and have a negative divergence with price. Negative divergences litter most of our indicator charts.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
We have negative divergences on all of these indicators. The ITBM/ITVM have topped this week.
CONCLUSION: This week negative divergences popped as a new all-time high was set. The rising trend remains intact, but the PMO is beginning to turn over. Additionally, price hit the top of the rising trend channel and is beginning to pullback. We would expect to see a continuation of today's decline and a likely test of the the 20-EMA next week.
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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 is range-bound right now. Price bounced off the bottom and formed a bullish hammer candlestick. Given the PMO has turned back up, we would expect to see UUP rising to test the top of the range next week.
The longer-term daily chart shows a possible rounded bottom that would imply higher prices ahead.
UUP Weekly Chart: There is a large bullish falling wedge that would imply a breakout ahead. The weekly PMO has turned up. Overall, the Dollar looks like it wants to rally. Unfortunately with more dollars being printed and spent by our government, it will be very difficult for it to do so.
IT Trend Model: NEUTRAL as of 1/13/2021
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: GLD is being squeezed between the 200-EMA and the 20/50-EMAs. This was Gold's time to shine this week, but instead we saw selling even with a declining Dollar. The RSI has turned down and the PMO has topped below the signal line.
GOLD Weekly Chart: We have very large flag structure on the weekly chart, but again this week Gold failed to escape the flag. The weekly PMO is very negative and not oversold yet so we would expect to see more of the same for $GOLD--sideways consolidation between the 17-week and 43-week EMAs.
GOLD MINERS Golden and Silver Cross Indexes: Miners are very oversold. It appeared they might breakout, just like Gold, but they failed to break free from the intermediate-term declining trend. The RSI is negative and the PMO is declining on a SELL signal. If Gold prices are stunted next week as we expect, Miners will have a battle ahead as the market will likely decline.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: In the short term we have a double-top pattern that resolved downward as expected today. Price is headed for a test of the 20-EMA and the rising trend. There is a bearish rising wedge that will likely be tested next week. Given the overbought and declining PMO and the RSI on its way down, there is a high likelihood that USO will break down.
USO formed a rounded top below the 200-EMA. $31 is a strong support level and should hold.
USO/$WTIC Weekly Chart: $WTIC led the major markets this week, closing up 8.81%. USO did not close higher. The weekly chart looks quite favorable as the PMO is rising and trying to find purchase above the zero line. Resistance lies nearby around $38 or the 43-week EMA, so upside potential could be limited.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: Erin annotated a short-term cup and handle pattern. It's a bullish pattern and would suggest a rally to overhead resistance at the November/December lows. The RSI is beginning to rise again and the PMO is trying to rise. Next week's expectation would be a breakout.
TLT Weekly Chart: TLT is at a decision point. It is barely hanging onto current support. Downside pressure will likely prevail based on the now negative weekly PMO. Additionally, the 17-week EMA is about to cross below the 43-week EMA. The next level of strong support is at $145.
Technical Analysis is a windsock, not a crystal ball.
-- Carl and Erin Swenlin
Our job is not to see the future, it is to see the present very clearly.
-- Jawad Mian, stray-reflections.com
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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