For the last month or so the 10-Year Yield has been consolidating the steady move up from the August low. This week it broke out of a falling wedge formation, which also looks a lot like a bullish flag/pennant. We're not going to try to project the upside potential, but the outlook is bullish. It is reported that the big tech stocks have a negative correlation with interest rates, so rising rates will likely hold big tech back.
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.
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MAJOR MARKET INDEXES
For the week:
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.
For the Week:
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: Yesterday's rally pop to new all-time highs looked like an upside exhaustion climax. Today's decline confirmed it. Total volume contracted but was still on the high side for April. A negative OBV divergence was locked in with today's decline.
Amazingly the PMO just managed to avoid a crossover SELL signal, but it will likely trigger next week unless we see price rally strongly. The RSI is still positive and no longer overbought.
SPY Weekly Chart: The rising trend on the weekly chart is very steep, but so far it is holding up. Price could drop to about $405 and still be able to maintain this rising trend. The weekly PMO is rising but beginning to decelerate.
SPY Monthly Chart: We have a parabolic advance on the monthly chart. Parabolic patterns generally resolve with a swift decline toward the last base--in this case, near $260 to $280 for the SPY. The monthly PMO is rising strongly, but has reached extremely overbought territory.
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.
This indicators stalled and remain in extremely overbought territory.
The %Stocks > 20/50-EMAs pulled back this month setting up negative divergences in the short and intermediate terms.
Climax Analysis: Not a climax day, but we note that readings were elevated to the downside on Net A-D and Net A-D Volume. The VIX is being tightly squeezed by the Bollinger Bands on the inverted scale. A squeeze is relieved by very high volatility. When the market sees high volatility, it comes in the form of a strong decline.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
The Swenlin Trading Oscillators (STOs) were somewhat directionless this week. Given flat price movement, this makes sense. They are finishing the week moving lower which is bearish. Our odds of trading success are smaller given only 39% of the SPX has rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
These indicators have been peaking this week. Like the STOs, the ITBM/ITVM are finishing the week moving lower. Currently less than half of the SPX have PMO BUY signals. That number continues to trend lower, suggesting a basket of stocks are driving the market higher while the majority are struggling.
SEASONALITY CHANGE: We have just enjoyed one of the best 6-month periods of favorable seasonality, perhaps that ever was. Tomorrow begins a 6-month period of UNfavorable seasonality. We don't buy and sell based upon seasonality, but we keep it in mind as one part of the decision-making process.
CONCLUSION: Market indicators were mixed this week, but our primary indicators are finishing the week moving lower. Negative divergences are visible on nearly every indicator presented. Participation continues to dwindle. The VIX squeeze also concerns us. We will be going into next week on alert for a pullback. It's a good time to update the stop levels in your portfolio.
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It appears we have a reverse head and shoulders developing on Bitcoin. The PMO just left negative territory and the RSI has now moved into positive territory.
Overall long-term treasury yields have broken their declining trends.
MORTGAGE INTEREST RATES (30-Yr)
We want to watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount. (See table.) As mortgages are forced to shrink, real estate prices will have to fall, and many sellers will increasingly find that they are upside down with their mortgage.
This week the rate ticked up to 2.98% from 2.97%.
IT Trend Model: SELL as of 4/26/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: Big rally for the Dollar today. It has brought price up to test the 20-EMA and March bottoms. The PMO has already turned up. This area of resistance, comprising of the March bottoms, 20-EMA and 50-EMA will likely be difficult for UUP to overcome. However, this is the best the Dollar has looked in some time.
It was a near perfect bounce off support. Not only are the 20/50-EMAs posing resistance, we can see that there is also overhead resistance at the February top.
UUP Weekly Chart: The weekly PMO is falling and the RSI is negative. UUP did break out from the bullish falling wedge, but it failed quickly at the 50-EMA. $24.10 is the next level of support should price reverse here.
UUP Monthly Chart: The monthly PMO and RSI are ugly. They suggest we will see a test of $24.
IT Trend Model: NEUTRAL as of 1/13/2021
LT Trend Model: SELL as of 3/4/2021
GOLD Daily Chart: GLD still hasn't had a "silver cross" of the 20/50-EMAs. If price cannot stay above the 50-EMA, that IT Trend Model "silver cross" BUY signal won't come. The PMO is now topping, but the RSI is still in positive territory. A spike in discounts suggests investors are getting more bearish. That can be positive when they hit extremes. We don't have extremes.
We are at an important area of support at the May/June highs and November low. If this fails, look for a drop to $1725 - $1750.
GOLD Weekly Chart: Gold is in a declining trend channel on the weekly chart. The RSI is negative and falling. However, the weekly PMO is attempting to bottom.
GOLD Monthly Chart: The long-term picture is not bright even though the monthly RSI has turned up in positive territory. The monthly PMO just triggered a crossover SELL signal.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners fell out of bed this week despite strong underlying technicals. After topping, participation slid with most of them losing support at their 20/50/200-EMAs. A negative crossover on the SCI and a declining GCI suggest there's more downside for Gold Miners to absorb.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: The Energy sector (XLE) was the leading sector this week as Crude Oil began to rally off the 20-EMA. We saw price break above the mid-April highs, but after reaching resistance at the March top, price crashed back to the 20-EMA. The PMO is still above its signal line and the RSI is positive. There's a high likelihood we'll see price hold onto the 20-EMA.
USO/$WTIC Weekly Chart: The weekly chart is bullish. The weekly PMO is rising, albeit overbought, and the RSI is positive. Additionally it just had a positive 17/43-week crossover.
USO Monthly Chart: The monthly PMO continues to rise out of deeply oversold territory on a crossover BUY signal. The monthly RSI is negative, but rising. All signs point to higher gas and oil prices as the Biden Administration continues a full court press on limiting the use of fossil fuels.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: With long-term yields breaking out of declining trends, today's rally isn't likely to last. Price was stuck beneath the 20-EMA and the PMO continues to turn over.
A PMO top beneath the zero line is especially bearish.
TLT Weekly Chart: The weekly PMO is the inverse of the daily PMO above. The weekly PMO is beginning to curl back up. However, we can see that the RSI, which had been moving higher out of oversold territory, turned down. We could be looking at a bearish reverse flag.
TLT Monthly Chart: The monthly PMO is in a near vertical drop and the RSI is negative. Strong support is nearing at $130, but given the bearishness of all the TLT charts, it isn't likely to hold.
Technical Analysis is a windsock, not a crystal ball.
-- Carl & Erin Swenlin
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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