After reviewing the sector chart list, we found that three sectors closed on all-time highs to end the week. The breakouts on these sectors were impressive today and the technicals under the hood tell us more all-time highs could follow.
Materials (XLB) gapped up and broke out today, pushing it to a new all-time high. This sector looks good going into next week with a positive and not overbought RSI, a new PMO crossover BUY signal and increased participation in the short and intermediate terms. The BPI has turned up and currently 100% of XLB members have a 50-EMA > 200-EMA. That is obviously an extremely overbought reading, but it also attests to the foundational strength of the sector.
Industrials (XLI) pulled back this week, but surged higher to finish the week at all-time highs. The RSI is positive and not yet overbought. We have a whipsaw PMO BUY signal and solid participation given %Stocks > 20/50-EMAs. The BPI is back above its signal line. The readings are very overbought, but on the bright side, they also suggest internal strength.
Consumer Staples (XLP) has rallied strongly this month as the market has been toppy overall. The PMO is healthy and not overbought and the other indicators are rising. Negatives on the chart are an overbought RSI and a slight negative divergence on the OBV. That negative divergence could disappear with another positive close.
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
For the week:
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.
For the Week:
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 surged higher today but was unable to log new all-time highs. Today's rally did break the short-term declining trend and the PMO is now poised to give us a crossover BUY signal. The RSI is positive. If we do break to new all-time highs, the OBV is currently set up with a negative divergence unless we get enough positive volume to see it rise above the top at current all-time highs.
The rising wedge dominates the 1-year daily chart. Price can move higher and stay within the bearish wedge, but the expectation would be a follow-up decline and breakdown. Total volume was slightly above its annual average which is bullish on a rally.
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SPY Weekly Chart: The SPY closed the week by setting a new all-time high. The weekly PMO barely avoided a crossover SELL signal. The weekly RSI remains positive.
SPY Monthly Chart: The month hasn't closed out, but a quick peek at the monthly chart shows a bullish PMO and rising trends that are still intact in all timeframes.
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 finished the week at its all-time high since the data set began in 2017. The SCI accelerated higher; it is overbought. The BPI nearly gave us a positive crossover today. Overall these indicators are highly overbought.
Participation increased in all timeframes. The long-term %Stocks > 200-EMA is extremely overbought, yet rising. The short- and intermediate-term participation is healthy and rising, albeit overbought.
Climax Analysis: Net A-D Volume and Total Volume were not climactic today, but Net A-D and New Highs climaxed. The VIX is overbought on the inverted scale. This is likely an initiation climax given today's breakout from the short-term declining trend.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
STOs bottomed yesterday and continue to rise alongside price. They are in neutral territory, so they have room to rise higher before becoming overbought. %Stocks indicators have improved greatly. %Stocks > 20-EMA is overbought, %PMOs Rising is not.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
The ITBM turned up today in overbought territory. The ITVM took a pause. Only 50% of the SPX have PMO BUY signals, but that is rising.
CONCLUSION: The PMO narrowly missed a crossover BUY signal on the SPY today. The STOs are rising and positive. We even saw the ITBM turn back up. The bearish rising wedge and overbought intermediate-term and long-term indicators tell us that any upside price movement will most likely be very short in duration. However, given the breakout from the short-term declining trend and a likely upside initiation climax, we should prepare to take advantage of short-term strength going into next week, but as always proceed with caution. Those overbought conditions will eventually weigh too heavy.
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Bitcoin is trying to get back into the prior rising trend. It has bounced off the 50-EMA and that has typically been its launch point for a new rally. The RSI tipped back into positive territory, but the PMO is still in decline. You'll also notice price is in a declining trend channel. We never really got a breakdown from the intermediate-term rising wedge. Look for price to make its way to the top of the declining trend channel and then likely fail from there.
The steep rising trend on yields were broken this week. While the rise in yields has a parabolic shape, we don't expect a swift and deep breakdown. It appears a pause is in order.
MORTGAGE INTEREST RATES (30-Yr)
With long-term interest rates on the rise, we want to watch the 30-Year Fixed Mortgage Interest Rate. For the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount. (See table.) As mortgages are forced to shrink, real estate prices will have to fall, and many sellers will increasingly find that they are upside down with their mortgage. A Coldwell Banker survey found that one in five homeowners are planning to sell this year, and increased supply will tend to depress real estate prices as well.
IT Trend Model: BUY as of 3/5/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar has formed a short-term bearish rising wedge. Price is getting hung up on the 200-EMA. The PMO is still rising and the RSI is positive and not overbought suggesting a breakout and test of the top of the wedge is likely.
The double-bottom on the UUP 1-year daily chart looks very promising with price executing the pattern on the breakout above $24.70. The minimum upside target is around $25.30. As noted above a rising PMO and positive RSI suggest we will see a breakout above the 200-EMA.
UUP Weekly Chart: The weekly chart looks even more bullish with a PMO crossover BUY signal in oversold territory and newly positive RSI. Price broke out from a bullish falling wedge.
UUP Monthly Chart: The monthly chart isn't as bullish. The PMO is decelerating and the RSI is rising, but overhead resistance at the 10-month EMA is holding. However, given the bullish daily and weekly charts, these conditions should improve on the monthly chart.
IT Trend Model: NEUTRAL as of 1/13/2021
LT Trend Model: SELL as of 3/4/2019
GLD Daily Chart: Rather than breaking down, GLD is moving sideways out of the rising reverse flag formation. We consider this to be a more bullish outcome of the bearish reverse flag.
The RSI is still negative, but there is a PMO BUY signal in oversold territory. A rising Dollar doesn't always mean falling Gold prices, but a rising Dollar will put pressure on Gold.
GOLD Weekly Chart: The weekly PMO has now reached negative territory. The weekly RSI was already negative. The chart pattern is a bullish falling wedge. However, there is a negative 17/43-week EMA crossover.
GOLD Monthly Chart: You could make a case for a cup and handle on Gold's monthly chart, but the PMO is about to trigger an IT SELL signal. Notice also that there is a strong reverse correlation in effect with the Dollar. This tells us that a rising Dollar will hurt Gold more often than not.
GOLD MINERS Golden and Silver Cross Indexes: There is an intermediate-term bullish falling wedge on GDX. The PMO is turning up above its signal line and the RSI is headed to positive territory. The breakout last week above the 20/50-EMAs had suggested higher prices, but instead GDX pulled back. The picture is improving once again. Notice that price didn't have to move all the way down to support before bouncing. Additionally the indicators under the hood are improving again. Look for higher prices.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO broke down from the more accelerated rising trend line and returned to the longer-term line drawn from the October low. This correction could be sufficient for the up trend to be sustained.
Price bounced off support and is now tangled with the 20-EMA. The RSI is positive and while the PMO hasn't quite turned back up, this correction was constructive.
USO/$WTIC Weekly Chart: The weekly PMO is looking toppy, but given the decline of the past two weeks, that is expected. The RSI was able to clear overbought conditions on the weekly chart and technically the PMO is still rising. We can see that $WTIC had hit overhead resistance and pulled back.
$WTIC Monthly Chart: The monthly chart for $WTIC shows a breakout from the long-term declining trend. This is accompanied by a strongly rising monthly PMO and a positive RSI. We would look for higher prices.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: Yields cooled to start the week, but rebounded again. TLT had just reached its 20-EMA, but was immediately turned away. It is still holding support at the February low and the PMO is on a crossover BUY signal. Yields broke support so this could be a base forming on TLT.
The breakout from the bullish falling wedge occurred as expected, but the immediate pullback from the 20-EMA makes the PMO BUY signal suspect.
TLT Weekly Chart: Support was found this week. The weekly RSI is very oversold and rising which is positive. However, the weekly PMO is still quite bearish.
TLT Monthly Chart: The monthly PMO and RSI are very negative and do suggest support at the 2016 high will fail.
Technical Analysis is a windsock, not a crystal ball.
-- Carl & Erin Swenlin
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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