Today the Price Momentum Oscillator (PMO) crossed below its signal line on USO. This triggered a crossover SELL signal. Should we worry? While there are bearish characteristics to the USO daily chart, I am not looking for a major breakdown. This new SELL signal is bearish as well as the double-top pattern that has shaped up in the short term. However, the bullish bias on crude oil is strong based on the positive RSI and the large separation between the EMAs...not to mention the political pressure being leveled on fossil fuels.
Previous PMO crossover SELL signals have only resulted in consolidation or very small pullbacks. Price is holding just fine above support at the February high and at the 20-EMA. Even if USO drops below the confirmation line on the double-top, the minimum downside target would be above support at the early March low. Worst case here would be a drop to the 50-EMA or that early March support level.
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: Carl wrote an article today, "Keeping It Simple". He discussed the two negative divergences or "non-confirmations" of the rally to new all-time highs. The OBV shows that volume is not confirming the rally. Additionally, momentum didn't pick up enough to confirm the rally either.
The RSI is still positive and not overbought. Total volume came in a bit higher, but it is still beneath its annual average.
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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 continued higher and is attempting to negate the current negative divergence. In the short term, the BPI did manage to set a higher high which is bullish. The GCI did top today which has now set a long-term negative divergence. This is worrisome given we had a very similar negative divergence before the beginning of the bear market decline.
There was a slight increase in %Stocks > 20-EMA, but the %Stocks > 50/200-EMAs continued lower. All of these indicators remain overbought.
Climactic Market Indicators: It was not a climax day. Despite seeing more New Highs than yesterday, the negative divergence remains. The VIX is seeing even lower readings which tells us that market participants are very bullish. It has not reached the upper Bollinger Band on the inverted scale so we could see higher prices continue. When it reaches the upper Band, it will be the reversal signal.
Friday is quadruple witching so expect high volume. You'll note the pink "*" over prior quadruple witching days.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
The STOs are continuing lower, so while the VIX may suggest more upside, they are telling us to expect a top here. However, the bullish bias in the short term is very strong given the high readings on the STO-B.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The intermediate-term market bias is BULLISH.
The ITBM/ITVM continue to rise and have reached very overbought territory. The negative divergences remain. %PMO crossover BUY signals is at the same reading as yesterday. I would expect to see that number rise on a rally day.
CONCLUSION: The FOMC announcement of "no change" and a favorable forecast on GDP didn't hurt the market. However, as Carl wrote in his article today, there are mixed messages among analysts and among our indicators. However, our prime indicators, the PMO and OBV show negative divergences. Additionally, the STOs are falling--they nearly always turnover at short-term market tops. Of particular concern is the new negative divergence on the Golden Cross Index (GCI). Indicators are nearly all overbought. It is clear the current rising trend is in jeopardy. Proceed with caution.
** Don't forget! It is quadruple witching on Friday. Options expiration generally comes with heavy volume and little price movement.
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Bitcoin whipsawed back into a PMO BUY signal. The 20-EMA held as support. The RSI is positive, but the indecisive PMO suggests we will see sideways action. I am monitoring a possible bullish "cup and handle" pattern that has developed.
The rising trend remains on interest rates which will continue to put pressure on Bonds.
IT Trend Model: NEUTRAL as of 5/28/2020
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: UUP is holding above the 20-EMA but the RSI is nearing negative territory and the PMO has topped. $24.80 has become strong overhead resistance. I would expect that to continue to pose a problem. I don't see any evidence to support a breakout.
IT Trend Model: NEUTRAL as of 1/14/2021
LT Trend Model: SELL as of 3/4/2021
GLD Daily Chart: Gold is finding the 20-EMA to be stiff overhead resistance. We do have a new PMO crossover BUY signal on Gold--something we haven't seen in 2021. The RSI is still negative. The Dollar doesn't look that bullish right now and that should help Gold push toward a breakout.
Full disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: Miners closed above the 50-EMA for the first time since the top at the beginning of 2021. This rally is supported by good internals. The PMO has a crossover BUY signal and the RSI is now positive. For perspective, I haven't seen Gold Miners hit any of my bullish scan results, but this looks good. Next up is the 200-EMA around $35. I expect that to be tested and likely overcome.
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: We looked at the USO chart to begin this article, so I thought a peek at the $WTIC daily chart would be good. Notice that $WTIC triggered a PMO SELL signal to begin the week. It is already finding support at the February top. This doesn't negate the double-top that has formed, but we do still have a positive RSI. The 20-EMA has provided solid support since November so I would expect it to hold right now.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: Yields continue to rise and put pressure on Bonds. The six-month chart below doesn't even show a support level.
We have to use the weekly chart to find the next support levels. Currently price has reached a support zone between $130 and $135. There is a good chance this level will hold. Notice that yields have reached overhead resistance. They may finally ease up and give TLT the opportunity to reverse at $130. If yields breakout, then TLT will likely drop to the next support level at $120. Bonds are not a good investment right now.
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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