We've been watching Treasury Yields move lower and lower. Today the 10-Year Treasury Yield broke important support at the 50-EMA. We have not seen a close beneath the 50-EMA since last September. Now we have a second PMO top below the signal line on the daily chart. Notice that the RSI has moved quickly into negative territory as well. The chatter I've been hearing is that it is time to buy Bonds. This breakdown suggests the chatter is right.
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: Price stayed above the confirmation line of the short-term double-bottom so the pattern is still valid. The PMO has flattened again, carrying the same reading as yesterday. This narrowly avoided a top below the signal line. Total volume expanded, but is still below the annual average.
Given a top was put in today, we now have an official short-term negative divergence between price and the OBV. The RSI is still positive, but it is wavering as price pulled back.
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 below its signal line which is very bearish in the intermediate term. The BPI continues to trend lower. The GCI is stagnant at 97.2.
We still have rising bottoms on all these indicators which is positive.
Climax Analysis: No climax today, but the negative divergence between price and New Highs remains. The VIX is above its EMA on the inverted scale which is short-term bullish, but it did close on its high for the day.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
Both STOs did rise today, but neither is very enlightening, especially given they are in neutral territory. A little over one-third of the SPX has rising momentum. That isn't a good short-term number, particularly given it is declining and good get worse tomorrow.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT. The market bias is BULLISH.
Both the ITBM/ITVM moved lower. I do note that %Crossover BUY signals is oversold and did rise slightly today.
CONCLUSION: Negative divergences on today's top are a problem. The short term was looking very bullish, but the lack of follow-through today tells us that this short-term rally could already be in jeopardy. However, given that we do have a rising trend in participation and the STOs did technically rise today. The intermediate-term rising trend is still intact, but indicators are declining out of overbought territory. Consumer Discretionary (XLY) was the strongest sector today and Technology (XLK) rose again. Given in the short-term these aggressive sectors are rallying, the market may be able to eke out a challenge of all-time highs.
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Yesterday's comments still apply:
"Bitcoin continues to dominate market news. The PMO is turning up and the RSI is rising out of oversold territory. However, price really hasn't broken from the steep declining trend and overhead resistance will be difficult to overcome as the 200-EMA aligns with the January top and another resistance area arrives at the April low. More than likely we will see price volley between $30,000 and $42,000. I wouldn't look for much more yet."
Yields are headed down to test support at April lows. Given the look of the 10-Year chart from today's opening to the blog, we expect them to continue lower. The handle on the cup has dropped too low so I'm scuttling the pattern.
10-YEAR T-BOND YIELD
Key support at 50-EMA broken and two PMO tops below the signal line suggest lower yields.
IT Trend Model: SELL as of 4/26/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: Yesterday's comments still apply:
"UUP is in a bullish falling wedge and we have a positive OBV divergence. The PMO and RSI are not yet on board for a rally."
"If UUP is going to recover, it needs to do so now while it is on strong price support."
"If this support level is lost, we don't see strong support again until the 2018 low. Given more spending coming down from Congress, we doubt this level will hold."
IT Trend Model: BUY as of 5/3/2021
LT Trend Model: BUY as of 5/24/2021
GLD Daily Chart: GLD continues to rally at a brisk pace. The RSI is now getting very overbought. Gold is due for a pullback and the Dollar is due for a rebound. This rally needs to be digested, but other than the overbought RSI, I don't see negatives.
(Full Disclosure: I own GLD)
Gold is holding support at the late January highs. Notice that the discounts on PHYS have pared back considerably. This tells us that market participants are getting more bullish on Gold. Note that when we see low discounts or premiums, it generally marks a short-term top.
GOLD MINERS Golden and Silver Cross Indexes: Miners rallied, but they weren't able to maintain the rising trend as price drifted sideways. Strong support is being held and after this consolidation, I am expecting the rally to continue. The internals still look strong, albeit overbought in most cases.
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's chart is still mostly bullish with a rising PMO and a positive RSI. However, price isn't doing much and is about to hit overhead resistance.
From yesterday: "Part of the problem for USO is that Crude Oil ($WTIC) prices are stumbling at overhead resistance of the 2019 highs. We have more "touches" of this resistance line that strengthen it. The PMO is technically rising. Until $WTIC breaks out, USO will continue to move sideways."
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: With yields pulling back, TLT continues to rally. The RSI is positive and the PMO triggered a crossover BUY signal yesterday. Today it broke above the 50-EMA.
Price hasn't traded above the 50-EMA since the August top so this is a very bullish sign that Bonds are the new place to be.
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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