The SPX triggered a new Price Momentum Oscillator (PMO) crossover BUY signal today. It seems to be arriving late given the sharp rally this month. It is highly likely that this is coming at an exhaustion point. Price is challenging the top of the intermediate-term rising trend channel on the SPX chart below. The RSI is positive and this PMO BUY signal is bullish. However, the market is due for a pullback or at the very least, a pause to refresh.
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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: On the 6-month candlestick of the SPY I've annotated the current short-term rising trend. It is steep and will be very hard to maintain, especially when we see price butted up against the top of the intermediate-term rising trend channel. The OBV is breaking to fresh highs along with price. However, note the VIX. I'll be elaborating on it, but we saw it pullback slightly on the inverted scale, meaning traders are getting nervous.
Total volume is pulling back on the rally to new all-time highs. This suggests a possible buying exhaustion.
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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.
We saw fresh all-time highs today so not a surprise to see the SCI and BPI rising. They are still displaying negative divergences. The GCI stagnated again today with another 90.6 reading. This GCI reading is highly overbought, but so far a correction has been avoided.
The negative divergences are beginning to dissipate and these readings, while overbought, they are not exceedingly so.
Climactic Market Indicators: No climax today. However, note that the VIX reached overbought readings and is now turning down. Normally we watch for a penetration of the upper Bollinger Band to signal a possible exhaustion or decline. In order for the VIX to hit the upper Band it would require a reading of 16. That isn't likely. Today's reversal on the VIX suggests a decline in the next day or two.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
Negative divergences are beginning to clear on the short-term indicators. However the STOs are both overbought. When they turn down, watch out.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT. The intermediate-term market bias is BULLISH.
Both indicators are rising but are beginning to reach near-term overbought readings. The negative divergences are still in play.
CONCLUSION: More all-time highs have created overbought conditions and some negative divergences. Normally after a new PMO BUY signal we can expect more rally. However, in this case, price has reached the top of the intermediate-term rising trend channel. The current short-term rising trend will be very difficult to maintain. Given the VIX turned down in overbought territory and short-term indicators are overbought, we would expect the market to decline or at a minimum pause and consolidate sideways. The new PMO BUY signal likely has arrived near the end of the current rising trend.
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The breakout from the falling wedge suggested we would see a challenge of the all-time high. The PMO has just triggered a BUY signal and now we have fresh all-time highs. Elon Musk bought over a $1B in bitcoin which has certainly helped. Technically, the chart looks solid I would expect prices to push even higher.
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 Dollar has formed a rising trend channel. Price is about ready to test the bottom of the channel. The RSI is positive and the PMO has just entered positive territory. I would expect a bounce off the 20-EMA.
IT Trend Model: NEUTRAL as of 1/14/2021
LT Trend Model: BUY as of 1/8/2019
GLD Daily Chart: Gold fell through the floor of its January trading channel. Before challenging the November low, Gold rebounded which is positive. Price has now reached back into the trading channel. It has a fight on its hands with the 20/50-EMAs arrive long before the top of the trading channel. While the picture is brightening somewhat on Gold. Neither Carl nor I trust this current rally.
Full disclosure: I own GLD.
Gold is hitting overhead resistance at the September low as well.
GOLD MINERS Golden and Silver Cross Indexes: Miners are beginning to rally, but they have work to do. Participation is beginning to look much better, but after many failed attempts to break above the 20/50-EMAs, I don't believe we will see a sustained rally yet.
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 check if we had a rising trend channel or are we still dealing with a bearish rising wedge. The wedge hasn't completely been abandoned, but with today's breakout, the new rising trend channel I've annotated might be most accurate. I'm expecting price to challenge the top of intermediate-term rising trend channel before reversing to alleviate an overbought RSI.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: TLT is thinking about bottoming here. Don't mistake the bottom of this chart for support!
Support is around $142.50 when we look at the 1-year bar chart. The PMO and RSI are beginning to show signs of life. I decided to use the volume by price overlay to see if I could decipher a intermediary area of support on the way down to $142.50. We could find support here. However, if it continues to decline, I don't see volume support until we hit $142.50.
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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