Certainly a positive day for the market. It appears that yesterday's climax was indeed an upside initiation climax. Today we have another climax. I'll talk about that later on.
Looking at the 10-minute candlestick chart you can see that strong overhead resistance was stout today. Despite the screaming rally this morning, it was stunted at the gap resistance from yesterday as well as all of the other "touches" of this resistance line. When price arrived for another test of this resistance level, it failed with a giant decline to finish trading today. The RSI is moving into negative territory below net neutral (50) and the PMO immediately topped on the end of day decline.
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: Given yesterday's upside initiation climax, it wasn't surprising to see support at the 50-EMA hold on the SPX. The PMO is decelerating, but certainly doesn't look bullish yet. The VIX was below its Bollinger Band on the inverted scale today, but finished within it.
Total Volume decreased markedly on today's rally. It is best to see high volume on big rally days. the RSI is rising, but remains below net neutral (50) in negative 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.
The GCI finally moved lower after holding its previous 97.2 reading since Monday. It is still above its signal line and very overbought. The SCI and BPI continued lower despite today's strong rally.
%Stocks > 20-EMA have bounced out of oversold territory, while the %Stocks > 50-EMA remains mildly oversold. The long-term %Stocks > 200-EMA did tick up but the takeaway is that it remains very overbought.
Climax Analysis: Today we had climactic readings on Net A-D. There was an elevated Net A-D Volume reading. New Highs were slim again today even on today's powerful rally. Since this is coming off a three day decline, it is likely an upside initiation climax. I wouldn't count on an extended rally from this, more than likely this will result in churn, not a new rally to all-time highs.
NYSE Up/Down and Down/Up volume ratios are also climax detectors. The 9:1 ratio suggested by the late Dr. Martin Zweig in his book, Winning on Wall Street, is especially significant, but we also look for spikes outside the normal range to clarify a particular event. We have an NYSE and S&P 500 version of the ratios, and normally they will only be published when there is a notable reading.
The NYSE volume ratios were somewhat elevated, but quite confirming the upside initiation climax.
The SPX volume ratios were elevated and in my mind confirms the weakness of this upside initiation climax.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
The STOs are now in negative territory but are not oversold. Near-term oversold but mostly I read them as neutral since they are sitting near zero. %PMOs rising is oversold. Even with today's increased reading, it could still be considered oversold.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP (barely) and the condition is OVERBOUGHT. The market bias is BULLISH.
All of the intermediate-term indicators are continuing their descent, but none are oversold.
CONCLUSION: Another day and another climax. Today is clearly an upside initiation climax given it is coming off a decline. However, we note that volume ratios aren't quite confirming this one and with the continued anemic reading of New Highs, I'm not looking for a rally to new all-time highs. Likely we are in for some churn. The long-term rising trend out of the bear market low is being tested and is in jeopardy. Continue to take advantage of selling into any strength presented and keep stops in play. With intermediate-term indicators falling and still overbought, this isn't likely to last.
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Bitcoin has landed on support at the April low. The new PMO SELL signal and the negative RSI that is not oversold, tell me this support level won't hold. More than likely we will see Bitcoin test the 200-EMA.
Yields held support and have bounced. Look for them to continue rising.
IT Trend Model: SELL as of 4/26/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar wasn't able to follow-through on yesterday's rally pop. Instead it fell and the RSI turned lower in negative territory. The PMO is flat. I expect the 20-EMA to hold as resistance, just like it did last time.
IT Trend Model: BUY as of 5/3/2021
LT Trend Model: SELL as of 3/4/2021
GLD Daily Chart: GLD was up today but maintained the this week's short-term declining trend. Support did hold. The PMO continues to rise and the RSI is positive. Gold may need to test the bottom of the rising trend channel.
Overhead resistance sits at $1875.
GOLD MINERS Golden and Silver Cross Indexes: GDX is following Gold. Despite the rally in the broad markets and Gold rising, Miners didn't take advantage. They were up slightly. The indicators are looking less bullish than they did last Monday. Participation is trailing off and now the SCI and PMO have topped.
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 bearish "shooting star" candlestick resolved downward as expected. USO is now testing the bottom of its rising trend channel. The PMO topped, but remains on its BUY signal. The RSI fell, but remains in positive territory. Fossil fuels are continuing to be under fire. Elon Musk decided to stop buying Bitcoin since the mining of coins uses a lot of coal and fossil fuels. However, being under fire is good. It means prices should rise. I believe we will see a bounce here.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: Yields fell slightly and TLT took advantage. It did really reverse the bearish chart. The RSI is negative and the PMO triggered a crossover SELL signal yesterday. Rising yields are a problem.
The resolution of the triple-top to downside suggests we won't see support until the March low. The minimum downside target of the chart pattern also aligns with the March low.
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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