The Dollar (UUP) has been in decline all month so it doesn't surprise us to see a new Intermediate-Term Trend Model SELL signal. A "SELL" signal is triggered when the 20-EMA crosses below the 50-EMA while the 50-EMA is below the 200-EMA. If this crossover had occurred above the 200-EMA, it would have been a "Neutral" signal.
Given the 50-EMA is so far below the 200-EMA, there is a strong bearish bias on UUP. The RSI is negative and not oversold, the PMO is also negative and not oversold. Price is getting close to support around $24.40. That price level hits the early December low and also is at gap support from late February. We've also drawn a rising bottoms trendline. These colliding areas of support could cushion this fall and set up a pivot point.
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.
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: Since hitting an all-time high, the market has begun to consolidate. You could make a case for a bull flag. The PMO is turning up above its signal line which is bullish. The OBV has declining tops for now. Total volume was thin on today's rally and overhead resistance held tight.
The RSI is positive as it sits above net neutral (50). The rising trend channel is intact. The concern is typically after tapping the top of the channel, it heads lower.
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 had a positive crossover its signal line on Friday. Readings on the SCI and GCI are mostly flat. All three indicators are overbought. In particular the SCI and BPI are extremely overbought.
Participation is currently confirming this short-term rally.
Climax Analysis: No climaxes today, although we did see New Highs expand. The VIX is sitting on its EMA causing the Bollinger Bands to squeeze. We use the VIX as a sentiment indicator so we invert it.
When the VIX penetrates the lower Band it suggests a rally to follow and when it penetrates the upper Band it suggests a decline ahead. Unfortunately, when the Bands squeeze it makes those penetrations less useful since it is easy for them to punch through the upper Band one day and immediately puncture the bottom of the Band the next.
A Bollinger Band squeeze also signals that volatility is ahead. The Bands can't remain squeezed together and the only way to have them expand is on high volatility. I've never seen a VIX squeeze finish with a powerful thrust to the upside. High volatility is nearly always bad.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
The STOs have now both turned higher. That suggests higher prices. 82%+ stocks are holding support above their 20-EMA. However, momentum continues to be a problem with only about half of stocks having positive momentum. Additionally, that number decreased on a positive finish.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
Both of these indicators turned back up on Friday and they continue to rise. No improvement on %Crossover BUY signals.
CONCLUSION: The market is in a trading zone or period of consolidation after the steep rally to new all-time highs. As crazy as it seems, our indicators are suggesting higher prices ahead. In terms of momentum, we are seeing only 52% with rising momentum and/or PMO BUY signals. For now I am trusting my rising indicators, but many are extremely overbought. We are in a bull market, so overbought conditions should be considered "thin ice". They don't necessarily mean near-term disaster, but they do not provide a strong foundation for a longer-term rally continuation. Bottom line is we expect higher prices, but extremely overbought conditions have put us on "thin ice" so tread carefully.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact firstname.lastname@example.org for more information!
Bitcoin was on the ropes Friday, but today rallied strongly in defiance of the negative RSI and PMO. The 20/50-EMAs are now acting as overhead resistance. Given the negative indicators, I still am bearish on Bitcoin. I would expect a test of support at 42500.
Long-term rates are now in a declining trend.
IT Trend Model: SELL as of 4/26/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: We looked at the six-month candlestick of UUP to begin today's Alert, below is the one-year bar chart. We had a double-bottom. It managed to resolve upward, but never quite reached its minimum upside target of $25.30. While support is nearing, today's IT Trend Model SELL signal tells us to expect a test of $24.20.
IT Trend Model: NEUTRAL as of 1/13/2021
LT Trend Model: SELL as of 3/4/2021
GLD Daily Chart: Gold is holding its rising trend but isn't making much headway. The RSI is positive and the PMO is rising and has moved past the zero line. The 20-EMA is nearing a positive crossover the 50-EMA. That would generate an IT Trend Model "Silver Cross" BUY signal.
The double-bottom has resolved to the upside as expected. The minimum upside target is around $1875. The 200-EMA continues to hold as overhead resistance.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are digesting the rally, but continue to hold the rising trend. Participation is trailing off somewhat, but we still have nearly 3/4 of the Gold Miners holding above the 20/50-EMAs. The PMO, BPI, SCI, RSI and GCI are all trending higher so I expect Miners to continue to rally.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Not much going on with Crude Oil. The RSI is positive, but the PMO is still on a SELL signal. I would expect more sideways movement.
The strongest area of support is at $39, but at this point it is managing to stay above short-term support at the late March tops.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELLas of 1/8/2021
TLT Daily Chart: Longer-term yields are in decline which should offer TLT an opportunity to finally breakout above the 50-EMA. The RSI is positive and while the PMO is not above the zero line, it is going to arrive there shortly. I'm expecting a breakout very soon.
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 is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.