During today's DecisionPoint Show, Carl unveiled the current Silver Cross Index (SCI) chart. You may remember the spotlight on the Golden Cross Index (GCI) chart last week when it had a negative crossover. While the SCIs are currently rising, they have strong negative divergences given price is hitting new all-time highs. Note that SCI negative divergences have been the harbinger of a correction previously. This condition should not be ignored, especially given the negative divergences are clear on the small-caps, mid-caps and large-caps. If price is making new all-time highs, we should see the indicators do the same and they are not.
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.
Both XLV and XLY switched to IT Trend Model BUY signals today. Their charts are below. Both of these sectors display growth in participation and momentum.
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: New all-time highs were set today. This is what sets up the negative divergences that can be found on nearly all of the indicator charts. On this chart, we can see a negative divergence with the OBV. When price makes new highs, the indicators should too.
The PMO BUY signal is intact and the RSI remains in negative, not overbought territory. Total Volume improved slightly today, but it remains below 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.
As noted in the intro, the SCI has set up a nasty negative divergence with price. It continues to rise and technically could lose this divergence if it rises past its January high. That is highly doubtful. The GCI rose slightly. If the GCI tops before it reaches its prior high of 91.4 that would set up a negative divergence like we had right before the bear market crash. Rising indicators on positive crossovers is bullish, we just need to be aware that if they turn down, those negative divergences will be 'finalized'. Currently we don't have second tops on the indicators.
The participation indicators are rising and have not set up negative divergences. The biggest problem for them is that they are overbought. However, we can see that they can move much higher if necessary.
Climactic Market Indicators: We didn't have a climax day. New Highs were stagnant as price made new all-time highs which is an attention flag. The VIX is rising on the inverted scale. It has hit near-term overbought territory, but does have some more room before it reaches the upper Bollinger Band. We watch this because typically, when the VIX hits overbought territory or the upper Band, that usually marks a pivot point.
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 EXTREMELY OVERBOUGHT.
Currently we do have negative divergences on the STOs, particularly on the STO-V. They continue to rise and that does suggest we will see price continue higher, but given they are so overbought, we should prepare for a pullback. Both %Stocks indicators are near-term overbought.
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 from the last market top to all-time highs; however, in the longer term, we do see those negative divergences popping out. These indicators are very overbought, but they are rising which is bullish.
CONCLUSION: Price continues to make new all-time highs, but many of the indicators have not broken above their previous tops like price. This has set up negative divergences in most time frames. On the bright side, there are indicators that still have an opportunity to clear current negative divergences by setting higher highs. Additionally all of the indicators are rising, albeit overbought. The bullish bias remains and with those indicators rising, new all-time highs should continue. However, we must be vigilant and attentive given the current divergences and overbought conditions.
Don't forget! The FOMC meets this week and we should hear from them on Wednesday. Additionally, it is quadruple witching on Friday. Options expiration generally comes with heavy volume and little price movement.
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Bitcoin pulled back toward the 20-EMA after breaking to new all-time highs last week. India has said they will not allow crypto transactions and ownership. This certainly puts pressure on Bitcoin. The PMO has now turned down and is headed for a SELL signal. Additionally we now have a negative divergence with the OBV. The 20-EMA test seems inevitable.
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: The 20-EMA held as support and now price is pushing against the resistance zone. The double-bottom is still visible but given the last pullback took price back below the confirmation line. For now I'll keep it. It's a bullish pattern and the chart is still bullish given the positive RSI and rising PMO.
IT Trend Model: NEUTRAL as of 1/14/2021
LT Trend Model: SELL as of 3/4/2021
GLD Daily Chart: Gold has been rising after a successful test of support at the April-June lows. However overhead resistance is arriving at the 20-EMA and the November low. The RSI is negative, but rising. The PMO is rising in oversold territory. Discounts are high which suggests very bearish sentiment for Gold. Sentiment being contrarian, that is positive for Gold. We have been fooled before as the PMO has turned sideways are up continually as price made its way lower with brief rallies along the way. The Dollar is rallying again and that will gum up a rally in Gold. I'm bullish on Gold in the very short term, but I do believe it will get stuck at overhead resistance so upside potential is very small.
Full disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners have awakened and the technicals tell me this rally should stick. GDX broke out from a declining trend channel and has not only made it above the 20-EMA, it is holding above it. The 50-EMA is the next test. Given the new PMO BUY signal and newly positive RSI, I would look for Miners to at least reach the 200-EMA around $35.
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 is in the process of breaking below its most recent rising trend. It is due for a pullback to support at the February top. If it does pullback to that level, we will have an issue with a short-term double-top. The PMO is overbought. The RSI is still positive, so there is a high likelihood it will bounce--just be prepared for a test of the 20-EMA.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: The pennant on TLT resolved downward as expected given it is a "continuation" pattern. While this could be a reverse island setting up, I don't foresee a breakout from the steep declining trend it is currently in. The PMO turned down below its signal line which is especially bearish.
Using the weekly chart, $130 is the next strongest support area ahead. Of course with a weekly PMO that looks like that, it is hard to imagine it will stop there. The FOMC speaks on Wednesday. We don't expect a change rates, but it will be interesting to hear what they have to say about yields rising quickly.
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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