I discussed Silver (SLV) on yesterday's big rally pop, possibly created by rumors that "Short Stoppers" had their eye on killing the shorts on Silver. I remarked that with an under 8% rally, it didn't seem likely. In fact, we see volatile fluctuations frequently so I didn't believe the rally was tampered with. Today SLV dropped back down to earth. Yesterday's pop was an upside exhaustion. This was hinted at given price had not closed above resistance.
The chart is still favorable overall with a positive RSI that is not overbought and short-term support available at the November top. The PMO did tick lower, but the crossover BUY signal is still intact. It would be difficult for the PMO not to tip over on a more than 8% decline in one day. If SLV is something that is interesting to you, I would be sure to set a tight stop just below the January lows; otherwise you'll likely be in for a ride down to the 200-EMA or even to support at $20.50...ouch.
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: The market continued to rally strongly today. This has helped the PMO flatten with the same reading as yesterday. Total volume was below average, and especially below average on a strong rally. However, price did trade and close above the 20-EMA. The top of the intermediate-term rising trend channel is likely the next pivot point for the market.
The RSI is positive and rising. The bounce off the 50-EMA looks very encouraging on this one-year daily chart.
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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.
The GCI remains stagnant at 90.40, an extremely overbought reading. The BPI bottomed today, but the SCI continued lower.
Participation improved greatly. We are seeing confirmation of this short-term rally as more stocks begin to rise above their 20/50-EMAs. The Stocks > 200-EMA continues to move sideways in support of the overall rising trend. It is an overbought reading, but as you can see overbought conditions persist in a bull market.
Climactic Market Indicators: Today's upside climax on Net A-D was virtually the same as yesterday. Net A-D Volume also stayed about the same. What did change was the vaulting VIX that nearly moved above its EMA on the inverted scale. I suspect yesterday's buying initiation is continuing.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
It appears we have a solid low on the STOs. Every indicator on this chart supports a rally continuation. %Stocks indicators have bounced out of oversold territory like they do before most major market bottoms. In mid-October and mid-September we saw similar readings rising out of oversold territory, but it didn't mark the bottom so caution is still warranted.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL. The intermediate-term market bias is BULLISH.
We saw these indicators reverse today out of near-term oversold territory. This is bullish for the intermediate term if they can continue to rise.
CONCLUSION: The indicators are bouncing out of oversold territory. Seeing oversold indicators popping higher with price suggests to me we will see a continuation this week. However, if indicators quickly become overbought, the market will be highly vulnerable given it is about to reach the top of the intermediate-term rising trend channel. Remember the phrase "sell into strength"? When price reaches the top of the channel, that will likely be the end of the "strength".
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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 Dollar is gaining strength after breaking out of its trading range yesterday. The PMO is rising out of oversold territory. I am not sure I trust this rally yet. We have strong overhead resistance arriving soon and the last two time it made it above the 50-EMA it failed to hold the rally. Current conditions were similar going into the September top. Back then the PMO and RSI looked almost identical. The second test of the 50-EMA in October had a different configuration for the PMO, but the RSI was rising just as it is now. Basically, I don't trust this rally yet.
IT Trend Model: NEUTRAL as of 1/14/2021
LT Trend Model: BUY as of 1/8/2019
GLD Daily Chart: The Dollar was up only 0.12% so the reverse correlation would say that Gold should fall about that much. Gold fell much harder and that suggests a plethora of sellers today. Interestingly we are seeing lower discounts which means participants are getting less bearish than previously. Gold is at the bottom of a short-term trading channel. The PMO isn't that negative, but the RSI turning down at the 50 mark is quite bearish. I suspect Gold will hold support within this channel. The bottom of the channel coincides with the 200-EMA.
Full disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: It really appeared that Miners were ready to rally after breaking out of a bullish falling wedge. Today price dropped nearly back into the falling wedge pattern. If we draw a declining tops trendline using the 2021 top and yesterday's top, we actually have a declining trend channel. I haven't annotated it yet as I didn't want to make price action more difficult to see than it already is. Participation dropped off quickly as well which suggests this was a fake out breakout.
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: Nice rally on Crude with price finally reaching the 200-EMA. This will be an important test. Given the rising PMO and the positive RSI, I suspect we won't have to worry about an island reversal. More likely we will see it consolidate or pause before breaking above the 200-EMA.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: TLT looks a lot like Gold and the Dollar as it travels within a short-term trading channel. The PMO and RSI are quite negative, but given the PMO is still technically on an oversold crossover BUY signal, I would look for support to hold at $150. I'd like to see it bounce there and give us a possible double-bottom, but let's not get ahead of ourselves.
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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