The Energy Sector (XLE) has been a big winner out of the April trough, but after hitting its high earlier this month it has begun to falter. There is now a textbook bearish double-top on the price chart. You'll note that XLE was the only loser today and so far this week it is down almost 2.7%. The PMO has now topped and is headed for a crossover SELL signal, the first sell signal since the top in mid-March. While the indicators under the hood look healthy enough to prevent a breakdown, they are deteriorating. Combining this with the falling RSI and PMO tells us not to look for a reversal.
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: After yesterday's exhaustion climax, we did see a healthy market reversal off the 50-EMA. Price is now back above the 20-EMA and we now have a short-term bullish double-bottom. The minimum upside target would take price to new all-time highs.
The PMO is still declining, but I do like that the RSI is beginning to rise in positive territory. Total volume was not that impressive given the strong rally today.
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 continues to decline, but the GCI actually ticked slightly higher. In both cases, these indicators are highly overbought. The BPI ticked higher today and managed a positive crossover its signal line, but overall it is in a declining trend.
We saw some definite improvement in ST and IT participation, but like the BPI, these indicators are all trending lower. Long term, %Stocks > 200-EMA is very overbought.
Climax Analysis: No climax today, but I do note that the VIX is rising on the inverted scale and typically after a lower Bollinger Band puncture we will see prices rise in the short term.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
Both of the Swenlin Trading Oscillators declined on today's rally which tells me the double-bottom is suspect. While we could see an upside continuation, these indicators could be telling us that it won't last. We do have rising bottoms on %Stocks indicators and the readings themselves are still somewhat oversold.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT. The market bias is BULLISH.
Today's bounce kept price on its intermediate term rising trendline. All of these intermediate-term indicators are in decline. The ITBM/ITVM are still somewhat overbought. The %PMO Crossover BUY signals is still declining, but the readings are now oversold.
CONCLUSION: We have mixed messages on our indicators, but I see it this way. Short-term indicators and Total Volume aren't confirming today's rally. However, we do see improvement in participation and there is a short-term bullish double-bottom. Tomorrow is options expiration. Typically, options expiration is accompanied by high volume and little price movement; however, we could see a bump in price on a possible short squeeze. Intermediate term is still suspect given declining indicators. I still see this as an opportunity to sell into strength. My exposure is is 50% right now and could be lower by the end of the day tomorrow.
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Bitcoin is rebounding, but it is still having trouble getting back above the 200-EMA. Until I see it back above the 200-EMA, I remain bearish on Bitcoin. The RSI is rising out of oversold territory, but momentum is still firmly to the downside.
Yields held support and have bounced. The recent pullback/consolidation could be forming the handle on a bullish cup and handle pattern.
IT Trend Model: SELL as of 4/26/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: UUP's rally fizzled out very quickly and before price reached overhead resistance at the 20-EMA. It also failed to test the top of the bullish falling wedge. The RSI remains negative and the PMO is still falling.
Support is readily available and the falling wedge does suggest we'll get a bounce here.
IT Trend Model: BUY as of 5/3/2021
LT Trend Model: SELL as of 3/4/2021
GLD Daily Chart: GLD continues to perform well, but it is getting overbought based on the RSI. The PMO is beginning to get overbought as well. Should we see a reversal on GLD, support at $173 should hold given the strong bullish bias Gold has now.
(Full Disclosure: I own GLD)
$GOLD held above support again and we can see that the 50-EMA should cross above the 200-EMA very soon. That will give us a new LT Trend Model BUY signal. I remain bullish on Gold.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"GDX had gotten overbought and seeing price push past the top of the rising trend channel alongside an overbought RSI told us to expect a pullback. Participation is very overbought still, but the PMO, GCI and BPI look healthy and not overbought. I expect Miners to continue higher, but this pullback was definitely needed."
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: We have a bearish rising wedge that suggests support at the 50-EMA will not hold. You saw the XLE chart that began today's Alert. Given the PMO SELL signal and negative RSI I expect a breakdown here.
Support is available here at not only the 50-EMA but the late March tops and mid-April low. While there is a good chance we will see a reversal here, I wouldn't hold out much hope given the negative indicators.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: We now have a short-term double-bottom on Bonds. However, the upside target would only take price to overhead resistance at the April/May highs.
Yields are falling, but remember it appears to be a bullish cup and handle which suggests yields will be rising again soon. The RSI and PMO are improving, but upside potential isn't great.
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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