In order to uncover the best "Diamonds in the Rough" possible, I always take a look at our DecisionPoint Sector ChartList. My exclusive Diamond scan results will generally lead me to outperformance, but for confirmation, I always look at the sector chart. I noticed that Healthcare stocks have been somewhat absent in my scan results so I decided to take a gander at the XLV chart. I added an extra indicator window that measures price relative to the SPX at the bottom. The chart is beginning to look sickly.
Let's start at the top and move down. The RSI is positive and we could have a bullish ascending triangle forming this month. After that, the rest of the chart is bearish. The PMO is on a SELL signal and there is an OBV negative divergence. The Silver Cross Index (SCI) has been in decline for the past month. The BPI had a negative crossover and remains below its signal line. Participation is beginning to lag as more components lose price support at the 20/50-EMAs. The Golden Cross Index (GCI) is declining from overbought territory. And finally, confirming what we have noted already, XLV is underperforming the SPX.
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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.
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: The SPY finished up slightly. No real price deterioration today. I've annotated a support level that we should test very soon. It also coincides with the 20-EMA. Price has begun to consolidate sideways. This is flattening out the PMO, and also decompressing some of our previously overbought indicators, like the STOs. When there is a strong bullish bias consolidation helps. We are overdue for at least a pullback, but the bias remains strong and the bubble is getting bigger.
The RSI is positive and not overbought. Total volume continues to be below the annual average.
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Topic: DecisionPoint Trading Room
Start Time : Feb 16, 2021
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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.
Both the SCI and GCI ticked up today, but the BPI topped. Overall, the negative divergences remain on the SCI and BPI. The GCI doesn't show a negative divergence, but it is extremely overbought.
Participation continues to lag and will likely continue lower as price consolidates sideways.
Climactic Market Indicators: No climaxes today. New Highs pulled way back which could be read as buying exhaustion. The VIX appears to have topped on the inverted scale. If it loses support at its EMA, it will likely signal the beginning of a decline. When the VIX is above its average on the inverted scale it implies internal strength.
Short-Term Market Indicators: The short-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT.
The STO-V moved up slightly today. The STO-B continues lower. Both are in somewhat overbought territory. %Stocks indicators are continuing to trend lower. The STO-V may appear bullish in its reversal, but until we see confirmation with a rising STO-B and rising %Stocks indicators, I wouldn't consider its move higher as particularly bullish.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The intermediate-term market bias is BULLISH.
Negative divergences still populate the intermediate-term chart. However, the IT indicators are still rising. That tells me while we could see a market reversal, it won't likely be the beginning of a correction.
CONCLUSION: The bullish bias is still in force. Sideways consolidation has managed to decompress many of the short-term indicators like the STOs. The intermediate-term indicator chart is still quite bullish, but price is traveling within a large bearish rising wedge. There are still negative divergences peppering indicators in all time frames. Right now my gauge is the VIX. If it drops below its EMA on the inverted scale, we will see that test of support at the 20-EMA or 385 level on the SPY.
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Bitcoin continues higher. I noted that the minimum upside target (conservatively) based on the large bull flag is $64,500. Is that possible? Likely yes given speculation absurdly continues.
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.
Carl wrote an excellent article on yields and bonds, here is a link.
IT Trend Model: NEUTRAL as of 5/28/2020
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The cup and handle pattern is now resolving as expected. The past two days of trading was more of a "drift" out of the pattern not a breakout. The RSI is now positive and the PMO has bottomed above its signal line. I'd look for a test of the $24.80, although tomorrow may not be a continuation given the "tail" or "wick" on the candlestick today.
Even if we get a rally, strong overhead resistance will arrive at $24.80.
IT Trend Model: NEUTRAL as of 1/14/2021
LT Trend Model: BUY as of 1/8/2019
GLD Daily Chart: Gold has hit support at the November low. The RSI isn't oversold yet and the PMO doesn't look remotely interested in turning up.
Full disclosure: I own GLD.
This is a very important support level. We should expect a reversal soon with price testing these lows, but the indicators are very negative. We saw a premium on PHYS yesterday, indicating a possible renewed interest in Gold, but it hasn't helped it yet. If this support level is lost, $1700 is the next level at the March tops.
GOLD MINERS Golden and Silver Cross Indexes: Support was hit today, but I don't believe this is it just yet. The RSI and PMO are not oversold. The SCI ticked lower today and moved back below its signal line. The remaining indicators are very negative and not as oversold as they can get. The PMO had just given us a BUY signal and it has already reversed into a SELL signal. This could be a reversal island which would suggest higher prices tomorrow. However with the bearishness of the rest of the chart, I would look for a deeper decline to test the February 2020 top.
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: I decided to adjust our annotations of the rising trend channel by measuring from the November 11th and 25th tops. Price is still pressing against the top of this channel in an attempt to break above it. The RSI is extraordinarily overbought. The PMO is overbought as well, but is rising strongly. Today volume popped above its annual average. That could be a buying exhaustion, but I suspect it is a strengthening of interest in this area given the problems in Texas with the weather right now.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: Yields fell today giving TLT a shot in the arm. The PMO may be decelerating and the RSI is rising out of oversold territory. While all of this is positive, yields are in a strong rising trend. That will continue to cause problems for TLT.
Carl wrote an excellent article about yields and interest rates yesterday. You can find it here.
The next areas of support would be around $142.50 and $137.50. Yields will need to cool or we will likely see a test of both of these support levels.
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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