You'll notice on today's "Market Summary" that the S&P600 finished the day on top with a strong rally of +2.62%. As I clicked through the various indicator charts we have for the SP600 (Check out our DP ChartPacks on StockCharts.com), I noticed the bottoming of the Swenlin Trading Oscillators (STOs). These short-term indicators can be uncannily accurate on short-term lows. In the chart below I have marked cardinal price lows to give you an idea of what I mean by "uncanny".
Does this mean we will see a significant rally? Given the context of a very weak SP500 and Nasdaq along with the declining PMO, I don't think so.
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 market did close higher today, but the short-term declining trend was not broken. Price did find support at the January high and the 50-EMA. The RSI managed to avoid negative territory, but the PMO is still declining and on a SELL signal.
The bearish rising wedge continues to dominate the 1-year daily chart.
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 BPI continues lower after its recent negative crossover. The SCI and GCI moved higher. The GCI is back at its highest reading since we began this dataset in 2017. While the SCI has more room to push higher, the GCI is in extremely overbought territory.
Participation is improving in the short and intermediate terms with more stocks seeing price above their 20/50-EMAs. Long-term participation is extremely overbought as less than 8% of SPX stocks have price below their 200-EMAs.
Climax Analysis: We had a climax on Net A-D, but none of the other indicators are confirming. The VIX is still highly overbought and we saw a slight contraction in Total Volume on today's rally.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is OVERSOLD.
Like the STOs on the SP600, the STOs on the SPX have bottomed in near-term oversold territory.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
Readings are still quite high, so while we have a bullish bias in the intermediate term, these indicators are overbought and moving lower.
CONCLUSION: Today's rally turned our oversold STOs back up. This is positive for the short term, but as Carl noted yesterday, the IT indicators are still very bearish, overbought and declining. I would expect to see prices continue higher, but it will be short-lived. This could provide more opportunity to "sell into strength" in preparation for a likely intermediate-term decline.
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Bitcoin appears to be holding support at the 50-EMA after executing a bearish rising wedge on this latest decline. The PMO is still headed lower and showing no sign of deceleration. We would expect a test of the February low.
Yields moved higher today, but the rising trend has not been recaptured.
IT Trend Model: NEUTRAL as of 5/28/2020
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: Price popped briefly above the 200-EMA, but ultimately it held as overhead resistance today. The RSI is not overbought and the PMO has accelerated higher which is bullish. However, the Dollar has formed a short-term bearish rising wedge suggesting a reversal is nearing.
There is a bullish double-bottom on UUP. The minimum upside target is around $25.30 and that is quickly nearing.
IT Trend Model: NEUTRAL as of 1/13/2021
LT Trend Model: BUY as of 1/8/2019
GLD Daily Chart: The short-term rising trend has been compromised as price moves sideways and struggles with overhead resistance at the 20-EMA. The PMO is on a BUY signal, but the RSI remains negative.
GOLD Daily Chart: Discounts have been paring back. So while investors are bearish on Gold, they aren't at extremes in bearish. The Dollar appears to have a bit more upside ahead and that will mean lower prices for Gold.
GOLD MINERS Golden and Silver Cross Indexes: We now have a bullish falling wedge on the Gold Miners. The three indicators that point to an eventual breakout would be the SCI, BPI and GCI. They are moving cautiously higher even as participation hit oversold lows. The RSI is still negative and we do have a PMO top below the zero line suggesting to me that a pullback to support at the March lows is highly likely.
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 testing support at the early March price low and the 50-EMA. Price seems to be forming a head and shoulders top. The RSI turned back down and the PMO continues to fly lower. It isn't likely this support level will hold.
Notice that the 20-EMA held as overhead resistance on the last two rally attempts. Crude is due for a correction. Although this support level appears strong, beware of trying to catch a falling knife.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: As noted earlier, yields rose slightly today, putting pressure on Bonds. The RSI is negative and heading lower despite a PMO crossover BUY signal. This is a breakout from a falling wedge, but note that the 20-EMA is holding up as overhead resistance.
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.
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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