The market is abuzz on the outperformance of so-called "Recovery" stocks and industries. These would include airlines, hotels, restaurants, gyms and cruise lines. One area you may not think of right away as a "recovery" industry would be Consumer Finance ($DJUSSF). This is where you will find some of the big credit card companies. If we are going to see an increase in travel, credit cards will be in full use. Another plus...apparently, consumers are using their stimulus to pay down their credit cards.
Looking at the $DJUSSF, we can see it is coming up on overhead resistance. I would look for a breakout here given the new PMO bottom above the signal line and the positive RSI that is not yet overbought. This group has been outperforming the SPX since the beginning of February.
My favorite stock in this group is American Express Co (AXP). The American Express Card is well-known as a travel credit card. We don't see traveler's checks much any more, but the credit card is used by most travelers. I presented the chart below to Diamonds subscribers last Thursday (along with Spirit Airlines (SAVE) as the other "recovery" trade out there). Since then it has rallied strongly. The timing turned out to be excellent on the pullback to the 20-EMA. This stock is a strong out-performer against the SPX and its industry group. I expect this one to keep climbing based on the PMO, but do be careful as the RSI is getting close to overbought territory.
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: So far the 20-EMA is holding as support. Given the new PMO crossover SELL signal, I wouldn't look for a reversal here. More likely we will have to test the 50-EMA. This is a bearish rising wedge so the market will be very vulnerable to a breakdown after it reaches the 50-EMA. Today we saw a pop in Total Volume on the selling which suggests a continuation ahead.
The RSI is still in positive territory and the VIX is still above its EMA on the inverted scale. The RSI should reach negative territory below net neutral (50) very soon. The VIX managed to close above its EMA but is trending lower. A VIX close below the EMA would signal internal weakness within the market.
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 today's 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 increased and is now at its highest reading since we began recording it in 2016. To say this indicator is overbought is an understatement. While this can provide a solid foundation for rallies, it is more likely a sign of "thin ice". Both the BPI and SCI continue lower with the BPI making a negative crossover its signal line.
Participation continues to decline with price, not a surprise. We aren't seeing long-term deterioration as %Stocks > 200-EMA has remained steady in overbought territory since November. It takes longer for this indicator to deteriorate.
Climactic Market Indicators: We saw a climax in Total Volume and somewhat with New Highs. It is strange seeing an increase in New Highs on a high volume decline, but consider this a reverse divergence. Even with an increase in New Highs, price still fell.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
The STOs are still declining. This is confirming the decline from the all-time highs. More stocks are losing support at their 20-EMAs and only half of the components have rising momentum.
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 continued lower but the ITVM halted its decline slightly. Both indicators are overbought. Notice we are seeing confirmation of the current decline as more SPX stocks log new PMO SELL signals. As noted in the chart above, %PMOs Rising is dropping off; that will translate into the loss of more PMO BUY signals.
CONCLUSION: The decline continues. Price has reached the 20-EMA and slight support at the January high. Given the new PMO SELL signal and declining indicators in all timeframes, this level won't hold. More likely we will test the bottom of the bearish rising wedge and the 50-EMA. While in the long term we have stocks with bullish biases (50-EMA > 200-EMA or "golden cross"), those stocks are losing momentum and support levels daily. The selling could get frenzied if we lose the 50-EMA and break down from the rising wedge. Determine your stop levels and decide how much decline your willing to suck up going forward. Consider divesting from cool areas of the market and moving toward the "recovery" stocks.
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!
Bitcoin finished today inside the parabola, but a breakdown is likely beginning. I noticed not only the breakdown from the parabola but a new PMO top. At the same time, it remains above its 20-EMA and market participants continue to be in love. Just be aware that when a parabolic breaks down it goes quickly down to its last base. When this breaks down, a correction to the 50-EMA would be best case.
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 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.
IT Trend Model: NEUTRAL as of 1/14/2021
LT Trend Model: BUY as of 1/8/2019
GLD Daily Chart: 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?!
Full disclosure: I own GLD.
This is a strong support area. The PMO has turned up and the RSI is about to reach positive territory.
GOLD MINERS Golden and Silver Cross Indexes: As with Gold, GDX is rebounding off support. Like Gold, it is still below its EMAs. Given that I'm bullish on Gold, I believe this rebound will at least test previous tops. The indicators are beginning to rise out of oversold territory. The SCI is rising and just had a positive crossover its signal line.
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: 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: You probably noticed the parabolic rise in yields right now. Hence we have the opposite on the TLT chart. Price will continue to accelerate lower as interest rates and yields continue to rise. The RSI is very oversold, but momentum remains highly negative and falling.
Support doesn't arrive until $137.50 on the daily chart. Price today closed lower than the close back in March suggesting more decline and a likely test of $137.50.
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.