The market hit fresh all-time highs today which isn't completely surprising given the very positive Swenlin Trading Oscillators over the past week. However, not only the STOs, but many of our other indicators are now showing negative divergences with these all-time highs.
The PMO is still rising and is not overbought and the RSI is positive. However, you'll note that the OBV did not get to a higher high. That forms a negative divergence. Total volume increased but is still below the annual average.
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: The bearish rising wedge remains. Today's all-time highs tapped the top of the wedge which does leave us wondering if price is ready to fall back and test the bottom. Given the last bottom didn't need to test the rising trendline (only tested the 50-EMA), I suspect we could still see higher highs and remain inside the wedge.
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 participation indicators are rising and all are overbought. These indicators are fortunately not showing any negative divergences with price.
The short-term %Stocks > 20-EMA indicator is sporting a negative divergence while the intermediate- and long-term %Stocks > 50/200-EMAs are free from negative divergences.
Climax Analysis: No climaxes today. We saw a slight contraction of New Highs on today's rally and negative readings on Net A-D and Net A-D Volume. The VIX is overbought confirming the bullish bias in the short term.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL to OVERBOUGHT.
Negative divergences are all over the ST market indicators chart. The good news is that the STOs themselves are still rising and haven't reached overbought extremes. I'd like to see short-term momentum improve as only half of the SPX has rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
The ITBM and ITVM continue to travel in different directions with the volume indicator declining and the breadth indicator rising. This is an unusual situation so I don't want to make any sweeping conclusions except to say that volume isn't confirming this rally to new all-time highs. In any case, there are negative divergences on all of these indicators.
CONCLUSION: The STOs continue to rise and are not overbought, suggesting higher prices. However, they show negative divergences and those divergences are coming alongside a decline in %Stocks with rising momentum and %Stocks > 20-EMA. Yet the bullish bias hasn't let up as the VIX readings are still overbought on the inverted scale and have moved below 20. Given the breakout to new all-time highs joined by a bullish bias and rising STOs, I expect the rally to continue...but stay alert given all those negative divergences!
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Yesterday's comments still apply:
"Bitcoin broke out from its declining trend channel and is making its way up to the top of the bearish rising wedge. Given the PMO is turning up and there is a positive RSI, I would expect it to at least test all-time highs, if not vault them."
IT Trend Model: BUY as of 3/5/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: UUP pulled back slightly but has formed a hammer candlestick which is bullish. The PMO is rising and the RSI is positive. I suspect this rising wedge is disintegrating which is positive for the Dollar.
It appears this rally will fulfill the upside target of the bullish double-bottom. Remember that pattern targets are minimum upside targets. We should see a test of overhead resistance at $25.40.
IT Trend Model: NEUTRAL as of 1/13/2021
LT Trend Model: SELLas of 3/4/2021
GLD Daily Chart: Gold rallied strongly and without the help of a sinking Dollar. The RSI has popped up and the PMO has bottomed above its signal line.
GOLD Daily Chart: This bounce came exactly when it had to, right along support at the April/May/June lows from last year. While this rally was impressive, I'll need to see follow-through. The 20-EMA is nearing as overhead resistance. That resistance has been Gold's foil since the crash at the beginning of this year.
GOLD MINERS Golden and Silver Cross Indexes: Miners likely enjoyed a rally today partly due to the pop in Gold prices. While we are seeing some improvement on the indicators, the SCI is still declining and had a negative cross below its signal line. The PMO did give us a BUY signal again, but with the negative RSI and the 20-EMA nearing as resistance, I would consider waiting on opening positions here.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO is floundering, though keeping above support at the 50-EMA and the February/March lows. Given the declining PMO and negative RSI, I wouldn't expect a rally in Crude yet. More likely those lows will need to be tested first.
My concern is a possible complex head and shoulders pattern developing. If it is what I think it is, we should prepare ourselves for a possible breakdown below the 200-EMA.
IT Trend Model: NEUTRALas of 8/27/2020
LT Trend Model: SELLas of 1/8/2021
TLT Daily Chart: TLT had just broken out of a bullish falling wedge, only to be turned away at the 20-EMA. Support has now been lost again at the February low. The PMO is positive, but the RSI remains firmly below net neutral (50). Yields broke down below support last week, but they have quickly recaptured that level. There is still a rising trend in yields, it just isn't as steep. That will continue to put pressure on Bonds.
We would expect to see TLT test support at this month's low.
Technical Analysis is a windsock, not a crystal ball.
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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