Today the Dow Jone Industrials ($INDU) triggered a new Price Momentum Oscillator (PMO) SELL signal. This arrives right after a breach of a bearish rising wedge. Despite what appeared as an upside initiation yesterday, the market slid lower. The RSI is still positive and we don't have a negative divergence with the OBV, but the market is beginning to look "toppy". $INDU is a great example given the rising wedge.
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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 was beginning to see a rising trend this morning, but after 1p ET, the bottom fell out. The 5-minute candlestick gives us a clear picture. On the bright side, we could be seeing a double-bottom, although price is already moving back down after forming the second low. The 5-minute PMO does look heartening, but with a negative RSI, I wouldn't be looking for a rally tomorrow.
Since breaking the rising trend, price has been moving mostly sideways. This has pushed the PMO downward. I note Total Volume is the highest we've seen since late March--not a good sign coming on a strong decline.
After tapping the top of the rising trend channel, price is starting to head lower. The 20-EMA is available as support, but if this decline gets going, $395 for the SPY is a strong possibility.
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 SCI topped today and the BPI continued lower after a negative crossover its signal line. The GCI is extremely overbought, but still rising higher.
Damage continues on the %Stocks > 20/50-EMAs; they are far from being considered oversold. The LT %Stocks > 200-EMA is extremely overbought, but not seeing damage yet.
Climax Analysis: We did see strong negative readings, but not really enough to proclaim today a climax. Yesterday's upside initiation climax failed, although things were looking good until after lunch today. The VIX reversed today and now is getting very close to touching the lower Bollinger Band on the inverse log scale. Typically when we see puncture of the lower Band, we see price rally.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
The STOs continue to be mixed and flat. This has my hackles rising. Additionally, we have only 42% of SPX stocks with rising momentum...and that number continues to fall.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
These indicators are also raising caution flags. They both are declining from overbought territory. We do have more than half of SPX stocks with BUY signals, but just barely.
CONCLUSION: The market was headed higher this morning but reversed quickly and painfully midday. The STOs are mixed and the IT indicators are all in decline. The biggest concern is the damage to participation, particularly the SCI. It might be a good idea to consider "selling into strength" if there is any left to be had. There are still some pockets of strength, Gold and Gold Miners for example.
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The bearish reverse flag executed with today's big decline. As I've noted previously, Bitcoin has a tendency to reverse off the 50-EMA. Since it did not, watch for a test of the 200-EMA before we see it rise again. Anyone know of an inverse Bitcoin ETF?
Long-term rates are now in a declining trend.
IT Trend Model: BUY as of 3/5/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: UUP had another unsuccessful attempt at a breakout. The RSI is rising, but it's still negative. And, now the PMO has dropped below the zero line. I'm looking for the decline to continue soon.
The next area of support is just above $24.40, but the strongest level of support doesn't arrive until $24.10.
IT Trend Model: NEUTRAL as of 1/13/2021
LT Trend Model: SELL as of 3/4/2021
GLD Daily Chart: Gold pulled back slightly today on the rise of the Dollar, but also saw more sellers given it dropped further than the Dollar went up. The RSI is positive and it is clear we are seeing investors getting more bullish on Gold as discounts are contracting.
The double-bottom has resolved to the upside as expected. The minimum upside target is around $1875. The 200-EMA stunted price yesterday and it is continuing to hold. Given the positive RSI and PMO, we expect that resistance to be overcome.
GOLD MINERS Golden and Silver Cross Indexes: I like GDX on today's pullback. It offers late-comers like myself another entry point. The indicators still look great. We did see participation drop slightly, but that keeps it out of overbought extremes. The SCI is rising strongly and isn't overbought. That is the indicator that tells me we have more upside left in Miners. Homework: Check out GDXJ's daily and weekly charts. Looking very bullish.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Today price attempted to break back out of the trading range, but failed. However, we do have a "hammer" candlestick which does point to higher prices. The RSI is still positive and the PMO looks unsure about keeping that SELL signal. We probably have more sideways price movement ahead.
The strongest area of support is at $39, but I expect the 50-EMA to hold as support.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELLas of 1/8/2021
TLT Daily Chart: Yesterday's comments still apply:
"With yields in a declining trend we would expect TLT to be faring better. Additionally, the PMO has been rising for weeks. The RSI is positive. However, price cannot break above the 50-EMA."
Given the indicators remain positive and yields are in a declining trend, we do expect to see price break above the 50-EMA.
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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