We will analyze the ST Climax chart further in the article, but the Up/Down Volume Ratio chart is confirming today as a climax day. Up/Down and Down/Up volume ratios can be used as climax detectors. We use the 9:1 ratio suggested by the late Dr. Martin Zweig in his book, Winning on Wall Street.
These climaxes happen less frequently than on our regular Climax chart but they can be used to clarify a climactic event. We didn't see the Ratio climax on the NYSE chart, but we did see it on the SPX. Good news is that it likely is a selling exhaustion. However, read on, there are many other factors to consider.
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: Total Volume continues to be well-above the annual average. Today price broke down from the rising trend channel. It penetrated the 50-EMA, but managed to close above it. The OBV is confirming the decline with declining tops of its own. A continuation of this breakdown would likely take price down to the $355 level.
The RSI has now moved negative but is not oversold yet.
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SPY Weekly Chart: Price has pulled back to the top of the bearish megaphone this week.
S&P 500 Monthly Chart: The monthly PMO didn't sustain much damage on this month's decline. The RSI is now moving out of overbought territory.
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 GCI has been right around 90% all week. This is a very overbought reading and this pause could be prepping for a downturn. The BPI is getting into near-term oversold territory, but the market skids much lower, we can see that it can move much lower.
Participation is waning. It has nearly hit oversold extremes in the short term. Intermediate term is somewhat oversold but the long term is still quite overbought.
Climax Analysis: It is clear that today was a climax when you read the chart below. Net A-D and Net A-D Volume stretched much lower and the VIX continues to puncture the lower Bollinger Band on the inverted scale. This has the earmarks of a selling exhaustion, meaning this is likely signaling some upside on Monday or Tuesday. New Highs continued to diminish.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is OVERSOLD.
STO's are oversold as are the %Stocks > 20-EMA and %PMOs Rising.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL. The market bias is NEUTRAL.
For the first time since September, we have a negative reading on the STO-B. This could be considered near-term oversold for this indicator, but the STO-V has room to move lower.
CONCLUSION: Today's indicators suggest we had a selling exhaustion climax. While this is usually good news for bulls, we don't expect to see the beginning of a big rally. More likely we will see the market churn like it did back in September after the selling exhaustion. If you have to expose yourself to the market, consider more defensive areas of the market like Utilities (XLU) which was down the least in today's decline.
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We have added Bitcoin to our weekly and daily coverage because interest is huge, but its inclusion should in no way imply a recommendation.
A breakout from the bullish falling wedge is taking place today. So far it remains inside the wedge, but this is positive for Bitcoin which could be executing a shorter-term double-bottom. The PMO is decelerating, suggesting a possible continuation of the current rally.
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: Dollar continues to snooze, moving in a trading range since breaking out earlier in the month. The PMO is technically rising and the RSI is positive, but overall the chart is neutral. More sideways consolidation is likely ahead.
In the bigger picture 1-year chart, it does appear we have a rounded bottom basing pattern and price is holding above the 20-EMA. If the Dollar we're going to rally, this is a good place to do so.
UUP Weekly Chart: The bullish falling wedge and the rising weekly PMO do suggest we will see an upside breakout.
UUP Monthly Chart: The monthly chart isn't nearly as positive. The RSI is negative and the PMO is on a SELL signal and falling. We are seeing the RSI bottoming in oversold territory and $24 could be considered a support area.
IT Trend Model: NEUTRAL as of 1/13/2021
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Like the Dollar, Gold is in a trading range. Price is still bounded by the 50-EMA and 200-EMA. The RSI is negative and falling as is the PMO. Conditions are not ripe for a breakout.
Discounts are high which suggests investors are bearish on Gold. However, they aren't bearish enough to signal a reversal.
GOLD Weekly Chart: Gold is in a declining trend channel and the PMO is falling. The RSI is neutral and not helpful. Gold again failed to breakout this week and given the negative indicators, we don't expect that breakout to arrive before a test of the November low.
GOLD Monthly Chart: The monthly chart is encouraging as we have a positive and not overbought RSI. The PMO is flat and not yet declining. Currently the correlation with the Dollar is as expected with a high reverse correlation. However, both the Dollar and Gold are in trading channels with a slight advantage going to the Dollar based on daily and weekly charts. More than likely both will remain bounded within their current trading ranges.
GOLD MINERS Golden and Silver Cross Indexes: Miners have a rounded top. Although they are holding above support, they haven't broken out of their declining trend nor broken out above the EMAs. Indicators are oversold and could be improving here, but the OBV is confirming the downtrend and the SCI and GCI are still trending lower. While it may seem a good time to get in with price possibly bouncing off support, the RSI and PMO are configured very negatively.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: So far the rising trend is holding up, but today it was certainly challenged. The 20-EMA is holding up and the RSI is positive. However, the PMO is falling on an overbought SELL signal.
The 200-EMA is posing overhead resistance, but the 20-EMA is acting as support.
USO/$WTIC Weekly Chart: The weekly chart is very favorable with a rising PMO on an oversold BUY signal and a positive RSI. This chart tells us to expect higher prices.
$WTIC Monthly Chart: The monthly chart is in agreement with the weekly chart. We have a PMO BUY signal and a positive RSI. Price should test the declining tops trendline soon.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: TLT had just begun to rally this week, but was turned away at overhead resistance. The RSI is negative and the PMO is topping below the zero line. With yields on the rise again, we expect support at $150 to be tested.
On the one-year chart we see that price is struggling to hold support at the June low.
TLT Weekly Chart: This week we had a negative 17/43-week EMA crossover. The monthly PMO has just moved below the zero line and the RSI is negative. The rising trend in yields will continue to put pressure on Bonds. We will likely see a breakdown of the current support level.
TLT Monthly Chart: The monthly low is testing the top of the earlier rising trend channel. The PMO is very negative, turning down in oversold territory. We see that price has penetrated the confirmation line of a long-term double-top, suggesting more downside.
Technical Analysis is a windsock, not a crystal ball.
-- Carl & 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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