We watch the VIX closely for various reasons. I am a big believer in following "sentiment" and the VIX is one of the best "mechanical" ways to measure it. Remember that sentiment is contrarian. If everyone is complacent, the VIX will give us very low readings. If investors are fearful, the VIX will give us higher readings. Given the sentiment is contrarian, we opt to invert the VIX so overbought is on top (complacent) and oversold is on the bottom (fearful).
Notice that when the VIX is below its EMA on the inverted scale, price is weak and/or volatile. Today the VIX turned down before crossing above its EMA. This is short-term bearish.
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: It isn't surprising to see the VIX readings skewing toward "fear" given the volatile and unruly trading of the past week and half. It was bullish to see a bounce off the 50-EMA and the bottom of the bearish rising wedge. Price is staying above the 20-EMA, but given the PMO top below the signal line and OBV declining tops confirming declining price tops, I'm not that optimistic. We had what appeared to be a buying initiation yesterday. While did see a higher low, but given that was the best we got after yesterday's pop, I wouldn't look for an explosive upside move.
The RSI is still positive, just barely. The rounded top in February suggests we will see a breakdown. The 50-EMA seems to be made of concrete, but the volatile trading and declining tops suggest it is cracking.
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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 GCI topped yesterday but was unchanged today. You can see that it takes time for it to begin to deteriorate. The SCI is still falling, but interestingly the BPI did give us a positive crossover. I wouldn't read to much into the BPI right now given the condition of the SCI and GCI.
The declining trend continues in participation numbers. The %Stocks above their 200-EMAs has remained fairly consistent between 80 and 90 since the October low. When this one breaks down, watch out below.
Climactic Market Indicators: I was somewhat surprised to see so many New Highs today. However, there were a couple of hours where the market rose nearly straight up. New Highs are logged when a stock, during the trading day, gets above its 52-week high. Those 28 stocks hit their 52-week high, but may not have finished there. In any case, New Highs are contracting. Total volume was even more anemic than yesterday.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
STOs declined but are sitting in neutral territory. The declining trend remains on the %Stocks indicators which is confirming the declining price tops.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The intermediate-term market bias is BULLISH.
You can see how all of these indicators are rounding down. Both the ITBM and ITVM remain in overbought territory despite turning down near all-time highs.
CONCLUSION: Price action has been choppy ever since the all-time high was reached. It appeared we had a buying initiation on tap after yesterday's positive climactic readings. That didn't materialize today. Instead, price opened much lower and eventually finished the day near its lows. Price getting closer to the apex of the current rising wedge. The VIX turned below its EMA on the inverted scale, the majority of indicators are moving lower. Yet, the BPI had a positive crossover. More than likely we are in for more volatility moving sideways. We need to see a breakdown from the wedge very soon. If price just "drifts" out of it on consolidation, the pattern will bust. If the pattern busts on a breakout higher that would be very bullish. A "drift" is almost like a neutral signal.
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Bitcoin bounced off the 50-EMA and support at the 42,000 level. Price is now above the 20-EMA and the PMO has begun to decelerate. The RSI turned up in near-term oversold territory. Looks like Bitcoin is ready to test its all-time high.
This chart is included so we can monitor rate inversions. In normal circumstances the longer money is borrowed the higher the interest rate that must be paid. When rates are inverted, the reverse is true.
We could be seeing a possible parabolic breakdown on yields. This implies a quick drop in rates could actually be ahead.
IT Trend Model: NEUTRAL as of 5/28/2020
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: Here's what I said yesterday about UUP's rally: "UUP has climbed above the 50-EMA again. This is usually where it fails." It is beginning to fail again. The PMO has already flattened and the RSI is headed back to negative territory after a very brief stay above net neutral (50).
However, as I noted yesterday, the one-year daily chart sports possible double-bottom formation. It's not double-bottom until we get a breakout above the confirmation line. That sits just below $24.75.
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IT Trend Model: NEUTRAL as of 1/14/2021
LT Trend Model: BUY as of 1/8/2019
GLD Daily Chart: Yesterday's comments still apply:
"The outlook for the Dollar is improving and that is bad news for Gold. On the 6-month candlestick chart, we can see that the 50-EMA is nearing a negative crossover the 200-EMA. That would be a "death cross". This is will happen soon unless Gold prices can get back above the 200-EMA. That's highly unlikely."
Full disclosure: I own GLD.
From yesterday: "The RSI is now in oversold territory, but the PMO after topping for a third time below its signal line is continuing lower. It's time for a reversal, but given the correlation to the Dollar is still inverse, a rising Dollar will push Gold lower. Carl and I also think that Bitcoin could be syphoning buyers. In any case, if Gold is going to rebound, this is the place to do it, along strong support at the March tops and April lows."
GOLD MINERS Golden and Silver Cross Indexes: I was pleasantly surprised to see the strong rally in GDX. It truly was a "now or never" point for GDX given support at the June low is the last signpost before a possible drop to $27.50. After a 3.4%+ rally, I would've expected to see more improvement in the technicals. The SCI is beginning to trend higher, but we still have a declining PMO and OBV and barely a heartbeat on the %Stocks > 20/50-EMAs. I'm not convinced yet.
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 had a new PMO SELL signal trigger on USO today. Volume is picking on this sell-off which suggests to me it is a selling exhaustion. The 20-EMA has been sturdy support on this rally. The RSI is still positive. I would still exercise caution on expanding any positions as the PMO does look pretty ugly on that overbought SELL signal. We may need to see a deeper support level tested, like the 50/200-EMAs
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: TLT is in an accelerated declining trend due to the parabolic move in interest rates and yields. As noted earlier, we could possibly be seeing a parabolic breakdown in yields based on the technicals. However, I have not heard even a whisper about rates dropping significantly near-term.
TLT is very oversold on the weekly chart. The PMO and RSI are oversold, but neither is changing direction. The next level of support lies close to $130.
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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