The SPY soared to new all-time highs. While the bullishness of the SPY will become apparent as I analyze it in today's report, I have some heartburn regarding the small-caps. They were up today +0.43%, but the SPY was up a full percentage point more at +1.44%. Market rallies are best sustained when there is broad participation among large-, mid- and small-caps.
The Swenlin Trading Oscillator chart for the SP600 is a bit worrisome. First, they are not close to their previous all-time highs. The PMO is flat and not rising strongly. The SPY has been on a PMO BUY crossover BUY signal for some time. Price is struggling to recapture the intermediate-term rising trend. Most concerning are declines in both the STO-B and STO-V. Notice how these indicators react and cardinal market tops.
While the overall market is rising and mostly healthy, small-caps are lagging.
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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: Price has now broken out above the bearish rising wedge. The pattern can be scuttled for now. Usually a bullish resolution to a bearish pattern is especially bullish. Notice that the previous negative divergence with the OBV has cleared.
Given the forceful rally today, I would've expected to see more total volume. It could possibly be related to the holiday weekend. The RSI is positive but is getting dangerously close to overbought conditions.
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.
As far as the SPX members, participation is increasing and the negative divergences have mostly cleared. The readings are still overbought with the GCI in overbought extremes as it is at its highest reading since we started tracking it in 2017. Overall this chart is confirming the new all-time highs.
No negative divergences visible. Readings are very overbought, but you'll note that these indicators can remain overbought for an extended period of time. Just look at mid-November to mid-January.
Climax Analysis: We saw climax on both New Highs and Net A-D. As we've noticed with nearly all of our volume indicators, Net A-D volume is still anemic. The VIX is very overbought on the inverted scale, although in a strong bull market rally, we've seen even lower VIX readings. Talking to Carl today on the DecisionPoint Show, he sees this as a likely upside exhaustion climax. As I pointed out, though, an exhaustion doesn't always resolve with a heavy decline. It can be relieved with consolidation and froth.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL to OVERBOUGHT.
I was very surprised to see the STO-B decline today. It wasn't by much and Carl noted he wasn't too concerned about it. We still have a negative divergence on %PMOs Rising, but they are expanding and are not overbought.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
The ITVM finally switched directions and is now rising alongside the ITBM. We didn't see a big expansion of %PMO Crossover BUY Signals and currently they hold a negative divergence. I still like that it is rising and it is not overbought.
CONCLUSION: A strong jobs report spurred the market to another fresh all-time high. Most of our indicators are confirming these highs. However, we are worried about the upside exhaustion climax today as well as the STO-B's move lower. Overbought conditions remain, but in all cases (except the GCI), we've seen higher readings in strong bull markets so they all can accommodate more upside. Given the exhaustion climax, we could see a cooling period for the market as it is overheated. There is a strong bullish bias on a strong rising trend so we expect higher prices, but be prepared for a period of consolidation or a small decline to digest this nearly vertical rally.
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Bitcoin has found resistance at 60,000. The PMO is beginning to flatten and turn lower. Price is in a wide bearish rising wedge. At this point we have a top well-below the all-time high. Price was unable (so far) to reach the top of the wedge before turning lower. That suggests the next test of the bottom of the wedge will fail. However, it is holding support at the 20-EMA and the RSI is positive. Overall the chart is neutral to bearish.
We could be looking at a double-top for long-term yields. However, 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: It appeared we had a bullish resolution to a bearish rising wedge which I read as very bullish. However, the breakout did not hold and today we nearly executed the wedge with a breakdown. The PMO has topped. Support is arriving soon at the 20-EMA. I'm not ready to get completely bearish. If that area of support doesn't hold, then we should expect a sizable breakdown.
Given that the minimum upside target of the double-bottom pattern did not reach its minimum upside target, this likely is the beginning of a decline to the 50-EMA.
IT Trend Model: NEUTRAL as of 1/13/2021
LT Trend Model: SELLas of 3/4/2021
GLD Daily Chart: If they Dollar continues lower as I expect it to, this will put the wind at Gold's back. I would be very bullish on Gold if it would get above the 20-EMA and move the RSI into positive territory. This looks like a double-bottom in the making with a confirmation line at $164. Discounts are move higher suggesting bearish sentiment is still alive and well on Gold. Given that sentiment is contrarian, seeing very high discounts is bullish for Gold.
GOLD Daily Chart: Overhead resistance is just above the confirmation line for the double-bottom pattern at the November low.
GOLD MINERS Golden and Silver Cross Indexes: Okay, I'm calling it. I'm bullish on Gold Miners as they are beginning to breakout of a bullish falling wedge. With this breakout, price moved above the 50-EMA. The PMO has bottomed above its signal line which is especially bullish. All of the other indicators show improvement and are not really overbought.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO continues to flounder, but is holding above support. Consolidation has moved the PMO and RSI out of overbought territory. However, they are both still declining, suggesting a breakdown ahead.
We have a complex head and shoulders pattern. 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: 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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