Utilities rallied strongly today and in fact, was the only sector to finish higher today. This set up a "silver cross" of the 20/50-EMAs and triggered a new Intermediate-Term Trend Model BUY signal. The PMO has only recently entered positive territory. The RSI turned up before reaching negative territory. The "under the hood" indicators show a BPI and Silver Cross Index (SCI) that are strongly rising, albeit getting overbought. The participation within this sector is healthy; %Stocks within Utilities that are above their 20/50-EMAs is in the 80% range. While this is somewhat overbought, we need to see these readings to support a new rally and breakout above the January high. The market continues to look toppy and weak, this nearly always is bullish for defensive sectors like Utilities and Consumer Staples (XLP).
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: Price is now being squeezed between overhead resistance at the February top and the 20-EMA. The PMO didn't officially trigger a crossover SELL signal. It is a few hundredths of a point away. Total volume increased on today's selling and the VIX saw slightly higher readings, but it is still overbought on the inverted log scale.
We now have a more defined bearish rising wedge in the short to intermediate terms. The RSI is still in positive territory, but appears ready to fall below net neutral (50).
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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 SCI continues to rise which is positive. It is overbought right now, but it could move higher. The GCI held the same value today as yesterday. It is extraordinarily overbought and it did set up a negative divergence earlier as price topped at all-time highs. The BPI is continuing lower after a negative crossover.
Participation fell off a cliff in the short term, but interestingly is continuing higher in the long term. %Stocks > 20-EMA has actually reached near-term oversold territory, but we know it can move much lower should price continue to decline. In the intermediate term, %Stocks > 50-EMA is contracting, but remains overbought.
Climactic Market Indicators: We did see climactic readings on breadth today and New Highs contracted once again. I don't see this as a selling exhaustion since the market closed higher yesterday. Given the overbought VIX, I am voting for an initiation climax which would suggest lower prices or consolidation in the very short term (a few days).
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
The STOs look more negative with each passing day. We are seeing near-term oversold readings, but we have seen them move lower (ex. at the November low). %Stock indicators are deteriorating quickly. Only about 1/3 or SPX stocks have rising momentum. That will be difficult to turnaround and likely won't support a sustained rally.
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 are also continuing their decline. They are still very overbought which suggests the intermediate-term rising trend could be in jeopardy.
CONCLUSION: Now that we are seeing a short-term declining trend, contracting indicators are confirming it in the short and intermediate terms. Given the overbought VIX and the initiation climax on our ultra-short-term indicators, I would expect to see support at the 20-EMA crumble as we move forward this week. The rising wedge on the SPX also suggests a breakdown of the intermediate-term rising trend. As with yesterday, I am not interested in adding to my market exposure unless it is to shuffle positions further into defensive sectors like Real Estate (XLRE) and Utilities (XLU).
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The breakdown continues from the bearish rising wedge. The PMO is in decline, as is the RSI. A test of the 50-EMA seems imminent.
Yields have broken their rising trend. This suggests we will see them continue to dip lower. This will help Bond prices.
IT Trend Model: NEUTRAL as of 5/28/2020
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar has broken above resistance, but we've seen this before. The PMO and RSI are positive and suggest price will rally higher, but the 200-EMA is looming ahead as overhead resistance.
While the break above resistance at the September low is bullish, but I suspect the 200-EMA to be very difficult to get past.
IT Trend Model: NEUTRAL as of 1/14/2021
LT Trend Model: SELL as of 3/4/2021
GLD Daily Chart: The short-term rising trend is in jeopardy. Gold was unable to overcome resistance at the 20-EMA and it nearly closed below the rising bottoms trendline. Unfortunately, the expectation is a breakdown here given the bearish rising wedge.
The one-year chart displays the strength of overhead resistance at the November low. Not only does it align with the November low, it also aligns with the tops in April-June. The PMO is on a crossover BUY signal, but today's decline is already flattening it out. The RSI was turned away from net neutral (50) and is falling in negative territory. This could be it for the rally in Gold especially if the Dollar can hold today's breakout.
Full disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: The picture had brightened for Gold Miners as indicators were showing great improvement. Gold price must be weighing heavier than anticipated. The deterioration of participation tells me we had a fake out breakout. These indicators are now oversold. The PMO is still on a BUY signal but is struggling to reach positive territory. I would prepare for a move to test support at this month's low.
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 broke down heavily, but landed on support at the 50-EMA and the late February low. The PMO is declining quickly which is constructive as it has taken it out of overbought extremes. The RSI is now negative and moving lower. I would look for more downside with a test of the 200-EMA at a minimum.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: TLT rallied on the decline in long-term yields. The PMO is finally turning up and the RSI is making its way toward positive territory; however, the declining trend hasn't been broken. Resistance has been reached. The PMO did move into a BUY signal today. Given the break of the rising trend in yields, we should see a breakout here.
The intermediate-term declining trend was broken today.
It would seem that support will hold here. The weekly PMO is finally starting to show a bit of deceleration.
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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