The SPY hit new all-time highs today, but was unable to close at a fresh high. The 10-minute candlestick chart shows the breakdown in the last minutes of trading. The 10-minute PMO triggered a crossover SELL signal to punctuate the failure. It seems the stage is set for a pullback.
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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: Today's candlestick broke the very short-term rising bottoms trendline, signaling the end of the current rising trend. As noted yesterday, the SPY was gifted with a PMO crossover BUY signal yesterday that likely arrived late to the party. I've annotated overhead resistance for the VIX on the inverted scale. At this point it appears the VIX has peaked. Generally when that occurs, price follows with its own peak and decline.
The RSI remains positive and averted overbought territory with today's negative close and inability to breakout. Total volume is paring back suggesting a rally exhaustion.
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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.
It's hard to see, but both the BPI and SCI are still rising. Unfortunately with today's closing top, it has set current negative divergences in stone. The GCI continues with the same reading we've seen for days. It is extremely overbought and in the context of negative divergences it is likely warning us that the ice and air are getting thin as price moves higher.
In an intermediate-term context, we have negative divergences. If we compare the last short-term top with the current one, we lose the negative divergence on %Stocks > 20-EMA. However, the IT and LT %Stocks > 50/200-EMAs still show a negative divergence.
Climactic Market Indicators: We don't see any climactic activity today. We did see New Highs move slightly lower and as noted earlier, the VIX is stunted at overhead resistance on the inverted scale.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
STOs have turned down today in overbought territory. Negative divergences are persisting in the intermediate term.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT. The intermediate-term market bias is BULLISH.
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 was able to conjure up a new intraday all-time high, but was unable to close at a new high. The short-term rising trend was broken today. Price is butting up against the top of the intermediate-term rising trend channel. Additionally, many negative divergences were confirmed as they topped with price today. It seems an obvious time for a decline as the STOs have topped and the VIX is reversing after reaching overbought conditions.
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Bitcoin continues to move higher after executing a bullish falling wedge. It looks like a flag on a flag pole. That could mean that prices could see an upside target near 67,000. We don't necessarily believe it will hit that level. That is simply the minimum upside target calculation using a flag pole this about 32,000 in length. I added that to the breakout point of about 35,000.
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: 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: Gold has recaptured the trading channel, but hasn't broken above the 20-EMA. The RSI is still negative. The PMO is bottoming, but we've been faked out before. I won't trust any rally that doesn't get Gold above the 50-EMA.
Full disclosure: I own GLD.
Overhead resistance is more clear on the one-year daily chart. Price wasn't able to overcome resistance at the September low. This is a double-whammy area of overhead resistance given it lines up with the 20/50-EMAs as well.
GOLD MINERS Golden and Silver Cross Indexes: Miners is nearing a PMO BUY signal, but like Gold it is struggling with overhead resistance at the 20/50-EMAs. The %Stocks > 20/50/200-EMAs are showing some improvement, but overall, the OBV is confirming the declining trend and the SCI, GCI and BPI are not improving 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: 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 has bottomed and the RSI and PMO are rising again. Yields are still in a rising trend which will make it difficult for TLT to establish a rising trend.
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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