The topping formation on the SPY is visible on a daily chart, but the perfection of the dome's fit on the 10-minute candlestick chart is illuminating. The final hour of trading caused the 10-minute PMO to top. The dome suggests more downside. Support certainly could be had at 3890, but I'm looking toward the next level at gap support.
Many have asked why I use a 10-minute candlestick chart instead of a 5-minute candlestick chart I use in the trading rooms. It's a matter of preference and presentation. I get a more complete look at the past ten days of trading on the 10-minute chart without smashing the candlesticks. I choose to refine the chart to a 5-minute version for trades as it zeros in on the market action for the best entries and exits of that day.
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.
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: We can certainly see the topping formation on the daily chart as well. You can see support nearing at 385 and the 20-EMA. The PMO has now topped so even if price does hold there, it won't be a solid foundation...more like thin ice.
The RSI has turned down. On the bright side total volume continued lower which could imply a reluctance to sell by traders. There is a strong bullish bias but that is beginning to change.
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BELOW is a link to today's recording:
Topic: DecisionPoint Trading Room
Start Time : Feb 16, 2021
Access Passcode: i^96E7mf
For best results, copy and paste the access code to avoid typos.
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.
All three of these indicators declined today. This seals the negative divergences that set up before the current price decline.
Not surprisingly, participation continues to wane as more stocks lose support at their 20/50-EMAs. We aren't seeing much damage in the long term, but those readings are still very overbought.
Climactic Market Indicators: No climaxes today, but New Highs continue to decrease. The VIX also has a lovely rainbow above its head as it topped in overbought territory on the inverted log scale. It remains precariously above its EMA. I consider a VIX above its EMA to imply internal strength, however seeing it rolling over leads me to believe that is melting away (remember the "thin ice" reference?).
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
These indicators have moved into a neutral position but they are still declining. More deterioration can be seen on the %Stocks indicators continue to decline and are far from being oversold.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The intermediate-term market bias is BULLISH.
These indicators have now topped. This sets up a strong negative divergence in the intermediate term.
CONCLUSION: Price is peaking along with all of our indicators in all timeframes. Were any of them rising? The answer is "no". Just scroll back up. We don't usually see every indicator in decline so the bullish bias is slipping away. Short-term support is available at 385, but given the context of bearish indicators everywhere, I have changed my mind about it holding up for any period of time. I highly doubt price will rebound in a meaningful way at the 20-EMA. I'll be reevaluating all positions in my portfolio, likely shedding the majority of my short-term investments.
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Bitcoin may be getting ready for a pause. It is much needed. The PMO is still rising, but the RSI is very overbought. Consolidation makes sense here, but let's face it, not much about Bitcoin actually makes sense. It's still in the parabola.
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: Just when you thought the Dollar was ready to rally, it failed. Today price fell below the 20-EMA after yesterday's bearish shooting star candle. The PMO is still rising, but remains below the zero line. The RSI has turned negative again. We still have a slight rising trend coming out of the handle on the cup and handle formation, so this could just be a hiccup.
IT Trend Model: NEUTRAL as of 1/14/2021
LT Trend Model: BUY as of 1/8/2019
GLD Daily Chart: Gold is clinging to support. The Dollar's demise today probably helped that. The RSI is getting oversold, but the PMO hasn't reversed direction.
Full disclosure: I own GLD.
This would be a natural stopping point to the decline. Premiums found their way on the chart today. Looking at the previous times we've had these lower premiums, they generally are good for Gold.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"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: It was time for Crude to have a pullback. The intraday high put price right against the top of the rising trend channel. Given the bearish engulfing candle, I would expect the decline to continue. The RSI is very overbought, as is the PMO. Those conditions need to be worked through. Consolidation would do a fine job of that.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: TLT could be forming a reverse island here.
Carl wrote an excellent article about yields and interest rates yesterday. You can find it here.
Looking at the one-year chart, I doubt this is the bottom. The RSI is very oversold and that could mark a reversal point; however, the PMO is still quite negative and yields continue to be in a rising trend. I expect to see a reversal closer to $142.50 if at all.
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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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