Does anyone remember the 80's alternative band Heaven 17? They had a song called "Living on the Ceiling" which reminded me of current market action. The market has been trapped in a trading channel the last two weeks pushing against the ceiling, but unable to penetrate it. We had yet another failed attempt to close at new all-time highs today. Additionally, we didn't see a new intraday high.
Our Price Momentum Oscillator (PMO) continues to top, but has managed to avoid a crossover SELL signal. Declining tops on the OBV is generally a bad sign. The squeeze is on for the VIX, but I'll address this later.
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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.
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: I don't know if you were aware, but StockCharts.com has charts for after hours trading. You'll have to look up what membership level you need, but I am thrilled they have added it. The SPY shows that the rising trend set today is holding up, but all-time highs are out of reach tonight.
The RSI is still positive and not overbought anymore. Notice price is no longer up against the top of the rising trend channel.
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 was unchanged, but both the BPI and SCI declined today. The declines weren't particularly damaging and certainly did not relieve these extremely overbought indicators.
We saw some damage to participation here too, but as above, extremely overbought conditions remain.
Climax Analysis: No climaxes today. The VIX is feeling the squeeze as it sits right on its EMA on the inverted log-scale.
As I noted yesterday,
"When the Bands squeeze it makes any penetration of the Bollinger Bands 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 are rising nicely and that would support a breakout to new all-time highs soon. However, I question how this will be sustainable given only half of the SPY has rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
The ITBM/ITVM rose very slightly today. Again, momentum is an issue given only half of SPY members have a PMO that is above its signal line on a BUY signal.
CONCLUSION: My primary indicators for determining probable direction of the market are the Swenlin Trading Oscillators (STOs) and to a lesser degree, the ITBM/ITVM. They are rising and telling us to expect new all-time highs, yet the market isn't responding. Now we have more deterioration in participation, only half of the index has rising momentum. So while my primary indicators are suggesting higher prices, my participation indicators are not confirming this. I suspect we have more sideways action ahead.
Don't forget the Fed will offer comments regarding today's meeting tomorrow. There is no reason to believe that they will change their stance, but sometimes innocuous remarks can blow things up. We don't expect anything untoward, but be aware of this pending event.
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Bitcoin is trading above its 50-EMA at last check. Yesterday's strong upward thrust saw follow-through today. However, the 20-EMA hasn't been broken. I was looking for a deeper decline, but the PMO is already curling and the RSI is nearly positive.
Long-term rates are beginning to break their declining trends.
IT Trend Model: SELL as of 4/26/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar is in a holding pattern. No improvement on RSI or PMO. While we could see price stall out here at $24.40, yesterday's IT Trend Model SELL signal tells me it's not done declining.
If $24.40 doesn't hold up, $24.20 will be the next stop.
IT Trend Model: NEUTRAL as of 1/13/2021
LT Trend Model: SELL as of 3/4/2021
GLD Daily Chart: Gold is barely hanging onto its rising trend. Despite positive indicators and a falling Dollar, Gold is simply underperforming. Given we have a bearish rising wedge pattern, we are less optimistic Gold will continue rising. Additionally we saw a spike in discounts, meaning that participants are getting more bearish again.
Right now price is squeezed between the 50/200-EMAs. This could be a matter of price taking its time to push through strong resistance at the 200-EMA. The PMO and RSI are positive so at this point I don't expect a huge breakdown.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners broke down today. Gold itself was down only slightly so this is very bearish. The rising trend has been broken. I still am bullish on Gold Miners (full disclosure I own GDXJ) as long as price holds above the 50-EMA. I must admit the underlying participation was seriously damaged today. The SCI topped and members with price above their 20/50/200-EMAs was pared back significantly. The PMO is holding onto a BUY signal and the RSI is still positive which is why I am cautiously optimistic.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Oil rallied strongly and has nearly recaptured its PMO BUY signal. The RSI remains positive.
Look for Crude Oil to break above $44.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: TLT was hit today, but price is holding above the 20-EMA and the PMO is still rising. Unfortunately, the RSI has dipped into negative territory below net neutral (50) and their is another bearish problem...
...with yields breaking their declining trend, TLT broke its rising trend and has activated a bearish rising wedge.
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 Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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