It's been almost a month with the Dow on a PMO SELL signal. Since then the SPX, OEX and NDX have flipped PMO signals twice. Now all four indexes have PMO BUY signals. As I noted yesterday after the SPX's new PMO BUY signal, I suspect it has arrived late. Granted the Dow is continuing to make new all-time highs, but the top of its rising trend channel is arriving and we already know that the SPY is attempting to top.
I am reminded of the saying "climbing the wall of worry". DecisionPoint isn't alone in seeing bearish signs as we came out of the January low. It hasn't materialized in a sustained decline...yet. My Diamonds subscribers will periodically ask me why I'm still so exposed to the market or continuing to present buy-side trades when clearly I'm not very bullish in the DP Alert. Well, I'm climbing the wall of worry trying to eke out gains. Additionally, there are always pockets of strength and I've been presenting those in Diamonds. My stop levels get tightened whenever we are in a situation like the one we are in now.
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: We logged a new intraday all-time high, but have yet to close up the last two days despite making those new intraday all-time highs. The PMO BUY signal looks good, but price action doesn't. We can see the market struggling mightily to break out of the current intermediate-term rising trend channel. Las week's rising trend was broken yesterday.
The RSI is very positive and not overbought. Total volume did increase somewhat on today's decline.
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BELOW is a link to Monday's recording:
Topic: DecisionPoint Trading Room Start Time : Feb 8, 2021 Meeting Recording: https://zoom.us/rec/share/mlBq7ioWI3ZRqyrhQZ95MYuBQAVXBzsO_FdkMzTMaSbghcMy3auqs466fnQw3ZaJ.5oEYZb_QCuqh9xHI Access Passcode: H!2B$fn3
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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.
All three of these indicators rose today, including the GCI which has been stagnant for the past week. This puts the GCI further into overbought extremes. The negative divergences are still in play even as both the BPI and SCI rise.
Participation didn't change much today. We continue to see negative divergences in the intermediate and long terms.
Climactic Market Indicators: New Highs continue to rise and that is bullish. No climaxes to report. The VIX is hitting overbought territory. When it tips over on the inverted scale, we will likely begin seeing the pullback toward the bottom of the intermediate-term rising trend channel.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
STOs continued lower which suggests more decline ahead. There are negative divergences on the %Stocks indicators and they remain overbought.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT. The intermediate-term market bias is BULLISH.
Yesterday's comments still apply:
"The ITBM/ITVM are still rising but have set up negative divergences. It is encouraging to see the improvement on the %PMO BUY Signals. If that indicator tops that will confirm a negative divergence as well."
CONCLUSION: The SPY is struggling to push past all-time highs and the top of the rising trend channel. I prefer that it not pop out above the channel, it would be quite constructive if price would pull back here. The STOs suggest it will pullback further. While the ITBM and ITVM look positive and rising, the many negative divergences in the intermediate term tarnishes that. We expect to see a pullback or at the very least some consolidation. Everyone is very bearish right now and that does suggest we could see a little more upside since sentiment is contrarian, but I wouldn't bank on a big breakout anytime soon. Erring on the side of caution with stops will let you take advantage of the "wall of worry" more safely.
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Bitcoin is pulling back toward support at the January high which it needed to given the overbought condition of the RSI. However, the PMO still looks strong. A pullback to $42,500 seems likely, but that positive PMO suggests it will launch again from there as it forms a short-term bull flag.
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:
"After tightening up my annotations I determined we have a bearish rising wedge (slight wedge, almost a rising trend channel). In any case, price broke the rising trend. The RSI has moved negative and the PMO is topping below the zero line. This could be a larger reverse flag which would indicate a minimum downside target around $23. At this point I would prepare for a decline to test the January low."
IT Trend Model: NEUTRAL as of 1/14/2021
LT Trend Model: BUY as of 1/8/2019
GLD Daily Chart: The rally continues in Gold and today it broke above the 20-EMA but failed to close above it. The PMO looks to be bottoming, but given the deep decline last week, it hasn't been completely successful. The RSI is still negative. I note that sentiment is getting less bearish with discounts shrinking. I am expecting Gold to at least challenge the 50-EMA.
Full disclosure: I own GLD.
On $GOLD chart we can see the long wick that pushed price above resistance, but once again it closed below.
GOLD MINERS Golden and Silver Cross Indexes: I know we are all chomping at the bit to get back into Miners. We have been faked out on rallies and I don't want to get faked out again. I want to see those EMAs vaulted. Like Gold they are struggling to overcome resistance at the 20/50-EMAs. This has been a problem all of 2021. It is encouraging to see a PMO BUY signal today and I like that participation is improving and we nearly saw a positive crossover on the SCI. The BPI already had the positive crossover. I believe the chart is bullish enough to begin entries, but as I said, I prefer to wait for the declining trend and EMAs to be broken first.
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:
"It appears the bearish rising wedge is disintegrating as price continues to rally above it. The RSI is very overbought as is the PMO. Yet, the PMO is on a BUY signal and the OBV looks very healthy. We will likely see continued growth in the Energy sector, but price is getting overbought and could use a pause."
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: TLT is looking good, but overhead resistance at $150 is nearing. The RSI is positive and rising. The PMO hasn't really gotten on board this rally. It looks like a healthy and sustainable bottom, but yields may not cooperate much longer as they are in a rising trend, annotated on the second chart.
Looking at the volume by price bars we can see this is likely a new support level. We will likely see a rally, but overhead resistance at $150 and the June low will likely prevail with yields in a rising trend.
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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