Before we get into the plethora of negative divergences shaping up with today's new all-time high, I want to notify you of the new PMO crossover BUY signal on the NDX. At this point, the PMO isn't that helpful given it is flat and somewhat twitchy. We aren't putting much stock behind this new BUY signal (pun intended). Currently price is flirting with another break above the current rising trend channel. This happened before at the end of January. At that time it signaled an exhaustion. This could finish similarly.
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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: The market hit a fresh all-time high today. It is nearing the top of the rising trend channel and we don't have a PMO crossover BUY signal yet. More than likely it will arrive late to the party.
The RSI is at least positive and not overbought. Total volume increased slightly but is still below its 250-day EMA.
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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.
With new all-time highs being hit today, I moved our red vertical "cardinal top" line over. We are hitting new all-time highs, but we have deep negative divergences. They can be alleviated if the SCI turns around and the BPI can set a higher high before tipping over again. I find both of those possibilities highly unlikely.
Participation improved again today, but we have negative divergences on the new all-time high. Similarly, if these can rise and top above previous tops, that would clear those divergences, but again...highly unlikely.
Climactic Market Indicators: No official climaxes today but we did see highly elevated readings on Net A-D. This looks like a possible buying exhaustion in the making. The VIX looks very similar to both September and November. Hopefully we'll see a resolution similar to November, but we should be alert in case it turns into a top like September's.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
All of these indicators rose today, but again, we have negative divergences on new all-time highs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL. The intermediate-term market bias is BULLISH.
The ITBM reached positive territory and the ITVM continues to rise. However, we have strong negative divergences in play.
CONCLUSION: Price hit new all-time highs today, but indicators have not and likely will not. That has set in motion a plethora of negative divergences. Not all of them are "official" given we don't have second tops on most of them, but the point is they haven't risen as quickly as price. The VIX is rising and in positive territory and the majority of our indicators are rising. Something is brewing under the surface given these stark divergences. Watch your stops and as I mentioned previously this week, it might be time to sell into strength.
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Yesterday's comments still apply:
"The bullish falling wedge executed and the PMO has now turned up in oversold territory. Believe it or not, it appears we might see 42,000 again, if not more."
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: The rally in the Dollar has resumed. Overhead resistance is nearing at the September low. It doesn't appear that will be a problem given the positive RSI and rising PMO. The PMO has nearly reached positive territory. The reverse head and shoulders also could be hinting at a breakout as well.
IT Trend Model: NEUTRAL as of 1/14/2021
LT Trend Model: BUY as of 1/8/2019
GLD Daily Chart: I decided to circle today's candlestick in case you missed it. While the chart isn't particularly bullish, this could be a reversal point. The November low is arriving as support, but in the very short term, we have a bullish hammer candlestick. The RSI isn't quite oversold, but we can see last time it did reach oversold territory, that did mark a reversal point. At that time the PMO looked just as ugly as it does now.
Full disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: Miners were hit especially hard today likely on the pullback on Gold itself. The bullish falling wedge may not be an accurate depiction, but I'm leaving it there simply because major support is arriving. Like Gold, this could be setting up a short-term reversal. Overall, I'm not thrilled with the industry group and suggest there are better options in the market right now.
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: USO triggered a PMO crossover BUY signal today. I like that price remained above the 200-EMA today. However, I'm not thrilled with the overbought RSI. I like this area of the market, but it may be time for a pause.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: TLT just showed us that the bottom of the chart isn't support. The question is where is support. Let's look at the one-year chart.
Support is a long way away around $142.50. The PMO looks quite ugly, as does the RSI. On the bright side, the RSI may move oversold. Notice this year that has marked fairly good price lows. The problem for TLT and other Bonds and Bond Funds is that yields have broken out. You can see the breakout quite clearly on the yield chart presented earlier in the blog. I would look for lower prices.
Full Disclosure: I own TLT.
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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