The NDX had triggered a new IT Trend Model Neutral signal yesterday. I didn't discuss it yesterday because I did expect it to disappear. Still, the SPX logged new all-time highs and we can see that the NDX is far from that. However, the chart is improving. The PMO has turned back up and the RSI moved into positive territory today.
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: Today the SPY logged new all-time highs. However, there are issues. Volume continues to decline on this rally. Another volume issue would be the negative divergence on the OBV. With price logging new highs, we need to see volume to back it. We don't have a second OBV top yet, but I would consider this a negative divergence anyway. Price follows volume which suggests we will see a reversal.
However, we can't completely discount the breakout from the short-term declining trend. The RSI is positive and the PMO is very close to a crossover BUY signal. You can see what happened the last time the SPY hit new all-time highs and what was happening to volume. Just be aware that price should follow volume and it's not.
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Start Time : Mar 8, 2021 09:00 AM
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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 had a positive crossover today and the BPI continues to rise after its positive crossover. The GCI has not moved lower, but it hasn't risen either. Both the SCI and BPI are not particularly overbought and rising. This is confirming the current rally.
Short-term participation is now overbought, but could rise higher before reaching overbought extremes. The intermediate-term %Stocks > 50-EMA didn't set a new high with the market. Again, we don't have a second top to confirm this negative divergence. The long-term participation is overbought, but we have seen higher readings.
Climactic Market Indicators: We didn't have a climax day. I do note that New Highs are increasing, but there is still a negative divergence present. The VIX is rising and above its EMA on the inverted scale. When the VIX punctures the upper Bollinger Band that would signal the end of the uptrend. For now it looks bullish.
Short-Term Market Indicators: The short-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT.
The STOs are rising strongly and do suggest more upside ahead. They are getting overbought, particularly the STO-B. Notice that on new all-time highs, we have negative divergences on these indicators. %Stocks indicators are showing higher readings than we had at the last all-time high, so we don't have negative divergences there.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The intermediate-term market bias is BULLISH.
More negative divergences are currently in place. Again, if they rise past their highs at the last market top, those negative divergences will be negated. We do not have a negative divergence on %PMO Crossover BUY signals.
CONCLUSION: The SPY logged new all-time highs today, but that has presented negative divergences. Most of those won't be "final" until we get a second top, but it is important to know they current exist. The negative divergence that worries me most is the divergence between Total Volume and the rising trend. However, the indicators are all rising to confirm the current rising trend. Going by the STOs (which I place heavy trust in), they are rising and not at overbought extremes yet. We'll keep track of the current negative divergences to see if they stick. In the meantime, I would look for higher prices in the short term.
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Bitcoin is at an all-time high. Given the new PMO BUY signal, I would expect a breakout. Just keep an eye on the RSI which is nearing overbought territory. Of course looking back, Bitcoin seems to be able to hold overbought RSI conditions for quite awhile.
The rising trend remains on interest rates, although they have started to move sideways.
IT Trend Model: NEUTRAL as of 5/28/2020
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: I didn't expect to see a big breakdown on the Dollar given the bullish double-bottom. It isn't over for the Dollar as support is arriving at the 20-EMA. However, the PMO top looks rather ominous especially coming alongside an RSI that is about to reach negative territory.
IT Trend Model: NEUTRAL as of 1/14/2021
LT Trend Model: SELL as of 3/4/2021
GLD Daily Chart: The decline in the Dollar has helped Gold bounce off important support. The PMO has begun to rise slightly, but the RSI is flattening in negative territory. Given the Dollar lost almost 1/2 a percent, we should have seen the reverse correlation play out with a 1/2 percent rise in Gold. Sentiment is bearish based on the discounts, but it doesn't appear bearish enough to call for a longer-term rally. Overhead resistance is nearing at the 20-EMA and the November low. I would expect that to be tested, but not successfully.
Full disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: I still don't completely trust the Miners. We saw a very tiny breakout from the declining trend and the PMO did log a new crossover BUY signal. The internals are definitely improving, but we've been fooled with these same conditions on the past few rallies. Show me a strong BPI and a solid crossover on the SCI and I'll get on board.
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: Yesterday's comments still apply:
"USO has immediately found support at the February high. The PMO has bottomed above its signal line and the RSI is positive and not overbought. We could still see a pullback to the rising bottoms trendline, but the bounce off support suggests that may not be necessary."
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: We now have a pennant on TLT on a very long flag pole. This is a continuation pattern so we should expect lower prices and a breakdown from the pennant. Given the PMO top below the signal line and the negative RSI, that seems a reasonable expectation.
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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