The Communication Services Sector (XLC) has been rallying for about a week, moving toward new all-time highs. Today, XLC successfully broke out to new all-time highs alongside a brand new PMO crossover BUY signal. The OBV set a new high with price which prevented a negative divergence. The RSI is positive and not quite overbought. Participation indicators are clearly improving and not overbought, with the exception of the GCI which is sitting at 100%. Look for stocks in the Mobile Telecom and Entertainment industry groups which are not overbought and reversing.
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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 market continues to digest the forceful rally that began a week ago. Currently there is a sharp negative divergence with the OBV tops declining and price tops rising. This condition could be cleared, but it will require quite a bit of new volume to get there.
Speaking of volume, it contracted again today suggesting less enthusiasm. The RSI had just about entered overbought territory above 70, but trading the past two days slowed it, prevented overbought readings.
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.
Yesterday's comments still apply:
"All of these indicators look healthy as they continue to rise and have no negative divergences. The GCI is extremely overbought, while the SCI and BPI are overbought, but not extremely so. This can support more upside."
The market rallied today, but we lost participation as indicators contracted in overbought territory.
Climax Analysis: No climax today. However, the VIX did penetrate the upper Bollinger Band on the inverted scale. We have seen one since August of 2020. These penetrations generally lead to a decline in the next few days. It doesn't mean an intermediate-term decline is necessarily ahead, check out August.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
The STO-B is being indecisive as it has flattened out and today decided to tick lower. The best news would be that it still has room to move higher with price. The STO-V is still rising. I don't like the current negative divergences on the STOs and %Stocks PMO Rising. We need to see stocks picking up momentum, not losing it.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
I like seeing rising ITBM/ITVM readings sitting alongside a PMO BUY signal. The ITBM is overbought, but the ITVM is still mostly neutral. The ITVM is still holding a negative divergence. %Crossover BUY signals has the same reading as yesterday and holds a negative divergence.
CONCLUSION: It shouldn't surprise us to see price in a holding pattern. The rally overheated the market and it needed a cooling off period...so far so good. It also shouldn't surprise us to see some of the participation indicators declining given trading today and yesterday. However, we do need to be mindful of the negative divergences even if some of the indicators are only mildly overbought. Prepare for more consolidation or a small decline given that the overbought VIX penetrated the upper Bollinger Band today.
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Bitcoin has found resistance at 60,000 and now it is back below the 20-EMA. The PMO has topped below its signal line and continues to fall. It is not oversold. Price is in a wide bearish rising wedge. At this point we have a top well-below the all-time high. Price was unable to reach the top of the wedge before turning lower. That suggests the next test of the bottom of the wedge will fail.
We could be looking at a double-top for long-term yields. Today yields remained above the confirmation line.
IT Trend Model: BUY as of 3/5/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The not surprisingly found support today at the November low and 20-EMA. This was positive for the RSI which managed to avoid negative territory. However, the PMO is very near a crossover SELL signal. I expect a test of the 50-EMA.
IT Trend Model: NEUTRAL as of 1/13/2021
LT Trend Model: SELL as of 3/4/2021
GLD Daily Chart: Gold fell slightly but remains above support at the 20-EMA. Despite the decline, the RSI was able to stay in positive territory above net neutral (50). Discounts remain high which tells us there is highly bearish sentiment on Gold. Sentiment being contrarian, this supports higher Gold prices.
The developing double-bottom pattern hasn't been triggered yet. We need to see a breakout above last month's high. The PMO and RSI look good on $GOLD, suggesting we will get a breakout in Gold.
GOLD MINERS Golden and Silver Cross Indexes: After the strong rally to execute the bullish falling wedge, price took a break today. I now see a possible double-bottom pattern in the short term with a minimum upside target just above $38. The RSI remains positive and the PMO has nearly reached positive territory. I'm not surprised to see price hang up on the 200-EMA and the confirmation line of the bullish double-bottom. It's a strong area of overhead resistance. Today's decline damaged participation slightly, but not enough to turn me bearish on Miners.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Yesterday's comments still apply:
"USO rallied today, but didn't really make any headway as far as breaking above overhead resistance at the 20-EMA. The RSI is still negative and the PMO is in decline.
There is a complex head and shoulders pattern visible. Price is sitting on the neckline. The minimum downside target is around $35. While we expect a breakdown, we aren't convinced that price will venture that low."
IT Trend Model: NEUTRALas of 8/27/2020
LT Trend Model: SELLas of 1/8/2021
TLT Daily Chart: Yesterday's comments still apply:
"TLT continues to push against the 20-EMA. The resolution of the falling wedge was unimpressive; however, with a possible double-top on yields, we may finally see a breakout. Overall I would avoid investing here until we see yields actually breakdown.
The rising PMO on a BUY signal does suggest we will get that breakout, but it is still buried well below the zero line and with the EMAs configured negatively with lots of margin between them, we can't get that bullish."
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.
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