The SPY gapped down to begin the trading day and every time it reached gap resistance it held. The RSI on the 10-minute chart was mostly neutral on the day, but notice how the 10-min PMO has turned down. An ascending triangle formed which is bullish; however, instead of executing it, price is drifting out of it in after hours trading.
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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.
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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: The longer-term rising trend line has been broken, but horizontal support is holding at about $410. Total volume was elevated on today's decline.
While the RSI remains positive, it is headed toward negative territory. More concerning is the declining PMO on a SELL signal. The 20-EMA did not hold as support either.
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 remained firm at yesterday's 97.2 reading, but the SCI continued lower and the BPI topped beneath its signal line. These readings are still overbought.
More damage is being done to price. More SPX stocks are losing price support at their 20/50-EMAs. Long-term participation is beginning to trend lower and is very overbought.
Climax Analysis: New Highs contracted considerably and we actually had a New Low logged today. Net A-D readings are showing climactic downside readings. The VIX readings increased greatly. That pushed the VIX well-below the lower Bollinger Band on the inverted scale. Typically this comes right before a rally pop. However, given it is arriving on the first major expansion of the Bollinger Bands, there is a higher likelihood this decline is just the beginning.
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.
While the NYSE volume ratio doesn't quite confirm this downside initiation climax, the SPX readings are confirming.
As noted earlier, this appears to be a downside initiation to lower prices. I see this manifesting as it did in late February and late March.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is OVERBOUGHT.
The STOs moved lower which also suggests lower prices ahead. Notice that only 1/3rd 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.
Not surprisingly both the ITBM and ITVM fell today. The ITBM is still in highly overbought territory despite the decrease.
CONCLUSION: As much as I would like to view today's climax as an exhaustion climax, the other indicators and extreme move on the VIX suggest otherwise. More likely we are looking at a downside initiation climax and that suggests lower prices ahead. Overbought conditions on our indicators need to be relieved and a pullback or correction will help ease them out of overbought territory. I'm not ruling out a bounce off support tomorrow, but given lukewarm after hours trading and the topping 10-minute PMO, I wouldn't count on it.
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The volatile sideways price action has left the RSI in neutral and the PMO indecisive. The PMO is in a rising trend on a BUY signal, but it tipped over today and will likely see a crossover SELL signal soon.
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 (UUP) was down slightly. The PMO has topped below its signal line AND the zero line. The RSI is negative and not in oversold territory.
The next level of support doesn't arrive until $24.15 and $24.20.
IT Trend Model: BUY as of 5/3/2021
LT Trend Model: SELL as of 3/4/2021
GLD Daily Chart: Gold prices were down most of the day but GLD managed to close a few cents higher. The RSI is getting overbought and seeing gap filled from last week, I suspect Gold will fall a bit lower before it reverses higher.
The next area of overhead resistance arrives at $1875.
GOLD MINERS Golden and Silver Cross Indexes: GDX looks very similar to Gold, but it closed much higher. The biggest news is that the 50-EMA is nearing a positive crossover the 200-EMA which would trigger a Long-Term Trend Model "Golden Cross" BUY signal. The RSI is positive and the PMO looks great as it rises and is not overbought. The SCI which had a positive crossover yesterday is shooting higher. The GCI is also increasing quickly which suggests a strong foundation building. We do see overbought participation readings, but those conditions could persist like we saw last summer.
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 closed higher but isn't making much headway as far as rallying past resistance at the March high. Given the positive RSI and PMO that are both not overbought, the breakout should occur soon.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: Yields continue to pressure TLT. Price has now reached the confirmation line of the triple-top formation. The PMO has topped below the zero line and the RSI is negative and moving lower.
If the triple-top resolves downward as expected, the minimum downside target would align 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.
Helpful DecisionPoint Links:
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DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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