Today was officially a "climax" day, but where was the volume? Given the strong upside move today, we would expect to see higher Total Volume on the SPX. Clearly we did see a bump in SPY volume which can confirm this climax. It is preferred to see the confirmation with a Total SPX Volume spike on a climax.
The market stretched on Friday to close beneath the rising trendline that marks the bottom of a bearish rising wedge. The breakdown was not significant enough to confirm the downside resolution of the wedge and paired with 50-EMA support.
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.
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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 SPX bounced off the 50-EMA and has now moved the RSI back into positive territory. The PMO has also decelerated as the market begins to bottom again. Price stayed most of the day above the 20-EMA which is bullish.
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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 big news for me is that the GCI has topped. A reading of 91.2% is lower than our historic high of 91.4% (dataset goes back to 2017). Clearly today's reading is still extremely overbought. The BPI turned up but didn't have a positive crossover its signal line; instead it paused right on top of it. The SCI continues to decline telling us that more stocks are experiencing negative 20/50-EMA crossovers, essentially losing their IT Trend Model BUY signals.
Participation expanded somewhat, but the declining trends on %Stocks > 20/50-EMAs are still intact.
Climactic Market Indicators: Today was clearly a climax day. Net A-D and Net A-D Volume expanded on the positive side. New Highs were significant, albeit not as high as we saw last week. The VIX has now reached its EMA on the inverted scale. Typically when the VIX is below its EMA we are more vulnerable to decline versus rally. However, when we see a penetration of the lower Band and a move toward the EMA it marks a buying initiation. Carl and I believe that's what we've got lining up right now. That means we should see some upside follow-through on today's rally. My only issue is the lack of SPX volume. Speaking of volume....
NYSE up/down and down/up volume ratios can be also be used as climax detectors. We use the 9:1 ratio suggested by the late Dr. Martin Zweig in his book, Winning on Wall Street. These climaxes happen less frequently than those on the chart above, and they can be used to clarify a particular event.
...here are the Volume Ratios I alluded to earlier. We did see a spike on the NYSE UP/DOWN Ratio, but it didn't hit the climactic territory above 9.0.
However, the SPX UP/DOWN Ratio did hit a climactic reading above 9.0. This reading confirms our buying initiation climax. Typically this precedes a day or two of upside price movement.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
Not seeing much on our neutral Swenlin Trading Oscillators (STOs) today. Technically they did move higher which could confirm the buying initiation this week. Participation did expand, but both %Stocks indicators are in a declining trend which confirms the declining tops in the market.
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 and ITVM rose slightly today, but overall we can see a rounded top on both of them. The bullish bias is still very strong especially in the context of the SPX bounce off the 50-EMA.
CONCLUSION: The market has successfully tested the 50-EMA once again which has preserved the intermediate-term rising trend. Price is going to begin to be 'squeezed' in the apex of the bearish rising wedge. A decision point is arriving. For now given the likelihood that we have a buying initiation climax, price will likely continue higher to test the top of the wedge. If the VIX turns back down on the inverted scale and cannot push above its EMA, the buying initiation will be over. We should have a day or two more of rally or consolidation. I have my stops in place, as we continue to climb the "wall of worry".
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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.
IT Trend Model: NEUTRAL as of 5/28/2020
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: UUP has climbed above the 50-EMA again. This is usually where it fails. However, the technicals look pretty good. Given the PMO is still below zero, but the new crossover BUY signal gives this rally more oomph (technical term).
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: The outlook for the Dollar is improving and that is bad news for Gold. On the 6-month candlestick chart, we can 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.
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: GDX is challenging intermediate-term support around $30. The indicators are very oversold in all three timeframes. If we see a rebound due to oversold conditions, I will not go long. However, we could eke out a short-term gain. Let's not get ahead of ourselves. GDX is beat down. Currently GDX is on a LT Trend Model SELL signal. That gives it a bearish bias.
CRUDE OIL (USO)
IT Trend Model: BUY as of 10/20/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: The accelerated rising bottoms trend line was broken today, but the overall short-term trend hasn't been damaged. The PMO is turning lower, but the RSI is now positive and not overbought. Additionally, the 20-EMA has been the reversal point for USO since November. The intermediate-term trend remains intact so I'd look for a rebound off the 20-EMA again.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: TLT rebounded last Friday as yields pulled back heavily. Today we saw them rise again which is why we see Bonds lower today. The RSI is negative and has turned back down. The PMO which had been bottoming is turning back down.
The weekly chart tells us that strong support doesn't really arrive until $130. Although the weekly RSI and PMO are oversold, we still expect the $130 level to be tested.
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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