Yesterday I discussed the likelihood of a test of the 50-EMA and the bottom of the wedge. I didn't think we'd see that test today, but here we are. The market managed to close up, but the intraday low landed right on the 50-EMA and the bottom of the rising wedge.
Volume popped today on a positive close which made me question the possibility of a breakdown tomorrow. A quick look at the 10-minute candlestick chart shows that selling increased on lots of volume at the end of the day. However, it is now on support and perfectly capable of bouncing here.
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.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
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: On the one-year daily chart we can see the significance of the intraday low and the breakdown below the January high. The PMO is on a crossover SELL signal. We do have a positive RSI. I'll talk about the VIX in the "Climactic Indicators" section.
Free DecisionPoint Trading Room on Mondays, Noon ET
David Keller, CMT, Chief Technical Analyst at StockCharts.com will be joining Erin in the free DP Trading Room on March 1st! Dave will give us his take on the market and share his trading methodologies as both of us discuss your symbol requests.
David Keller, CMT is Chief Market Strategist at StockCharts.com, where he helps investors minimize behavioral biases through technical analysis. He is a frequent host on StockCharts TV, and he relates mindfulness techniques to investor decision making in his blog, The Mindful Investor. David is also President and Chief Strategist at Sierra Alpha Research LLC, a boutique investment research firm focused on managing risk through market awareness. He combines the strengths of technical analysis, behavioral finance, and data visualization to identify investment opportunities and enrich relationships between advisors and clients.
*Click here to register for this recurring free DecisionPoint Trading Room on Mondays at Noon ET!*
BELOW is a link to the last trading room recording:
Topic: DecisionPoint Trading Room
Start Time : Feb 22, 2021 08:57 AM
Access Passcode: L%tC6D47
For best results, copy and paste the access code to avoid typos.
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 stayed at the same extremely overbought reading. This is the highest reading we've had since we began tracking it in 2017. The SCI and BPI continue to accelerate lower. The BPI just had a negative crossover its signal line. We need to see these indicators decompress further.
Participation continues to fall in the short and intermediate terms. Those indicators aren't overbought anymore, but they are definitely not oversold. They should fall further. Long-term there hasn't been much change.
Climactic Market Indicators: Total volume popped as I mentioned earlier. We didn't see any climactic readings on breadth. New Highs pulled back somewhat but remain fairly healthy. The VIX tested the water beneath its EMA on the inverted scale. However, it closed above. This suggests there is still some internal strength left in the market. A close below the EMA will likely be a harbinger of continued decline.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
Not much change in these indicators. The STOs remain in neutral territory. They are trending lower and are not oversold which suggests more downside ahead.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The intermediate-term market bias is BULLISH.
The ITBM and ITVM are mixed with the ITBM falling and the ITVM rising. Regardless, they are overbought. %PMO crossover BUY signals continue to deteriorate.
CONCLUSION: The market closed higher, but was much lower intraday, testing support at the 50-EMA. The last 20 minutes of trading saw about 0.38% decline on very heavy volume. Given that negative finish, I would expect to see the selling continue barring any news triggers. There are still strong areas of outperformance in the market (read DP Diamonds for more on that) and while those stocks could be dragged down in the vortex of a large decline, many of them should continue to rise. The next leg down on a breakdown will likely take price to 370 or to the January low.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact firstname.lastname@example.org for more information!
The parabola has been broken. The 20-EMA was lost as support, but currently it is back above. Support lies at 42,500 and the 50-EMA. I expect to see it break down to that level soon given the PMO is about to trigger a crossover SELL signal.
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:
"UUP triggered a new PMO SELL signal. This crossover comes below the zero line which is especially bearish. The RSI is negative and not oversold. I would look for a test of the January low."
FREE UPCOMING WEBINARS NEXT WEEK!
Erin will be presenting at THREE excellent online conferences next week. Here is the registration information for two of them. We would very much appreciate it if you would register for both events. If you can't go, a recording will be sent.
Erin presents on MARCH 2nd, 2021 at 4:00p ET:
"Using Charts To Improve Your Trading Success"
- How To Identify Powerful Chart Patterns
- Ways To Calculate Upside and Downside Targets
- Top Signal To Know It's Time To Exit
- Best Way To Set Stops To Minimize Losses
REGISTER here for the Festival of Traders conference!
3rd Annual Women Teach Trading and Investing (March 1-5) My Presentation on MARCH 3rd at 3:30p ET:
"Building Blocks of Technical Analysis"
- Everything you need to know to start using stock charting to improve your portfolio
- Support and Resistance, Overbought v. Oversold and Volume
- Basic Market and Stock indicators
- Trendlines and Chart Patterns
- Stops, Entries and Exits
REGISTER HERE for the TimingResearch.com and TradeOutLoud.com webinar event.
IT Trend Model: NEUTRAL as of 1/14/2021
LT Trend Model: BUY as of 1/8/2019
GLD Daily Chart: Yesterday's comments still apply with addition:
"It appears we have a solid bottom on Gold. With the demise of the Dollar and the likelihood it will continue, this is Gold's time to shine. I am cautiously bullish as this looks a lot like the last rally out of the earlier February low. Discounts are back in force suggesting participants are bearish on Gold. Sentiment being contrarian and seeing this large discount after recent premiums, I would read this as bullish for Gold. The stars are aligning...can we finally get some follow-through?!"
Apparently we have to wait another day before we see some follow-through on the latest bounce in Gold. I don't like that the RSI has turned down below 50, but the PMO still looks alright.
Full disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: Miners pulled back after reaching the 20-EMA. I expect them to hold this area of support. The indicators are oversold. If Gold rallies like I believe it will, GDX should get some love. For now it is vulnerable to a test of the $31 level.
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: Yesterday's comments still apply:
"Not much of a pullback in crude oil. Price remains highly overbought, but it is staying within the rising trend channel. The PMO has now bottomed above its signal line. I had hoped to see a deeper pullback to the 20-EMA given the highly overbought RSI, but the bullish bias is strong. A decline is needed. We will have to pay attention to supplies given the freeze in Texas and overseas production levels. A pullback is still needed."
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: Bonds are in free fall. I don't generally sell my "Buy and Holds", but I shed TLT a few weeks ago. I don't see any relief in sight for long Bonds.
Support doesn't arrive until $137.50 on the daily chart, but on the monthly chart below, support doesn't arrive until $130. Notice the strong breakout in yields. I doubt Bonds will find support until the 2016 high.
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.
Helpful DecisionPoint Links:
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs, trading rooms or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.