When I reviewed UNG during last Monday's DecisionPoint Show and in the DP Trading Room it had just broken out strongly with a big gap up that pushed price well above the 200-EMA. My concern was a possible island reversal, but the move looked bullish. Yesterday when we got the island reversal, price closed beneath the 200-EMA. That was our clue that the trade was going south.
Today it continued its decline, but it has found support on the 20-EMA. I wouldn't count on this support level to hold especially when we see the PMO topping and the RSI moving toward negative territory. A tight stop around $10.45 might be a good idea in case it doesn't hold support at the 20-EMA.
The bullish double-bottom pattern fulfilled its minimum upside target and now is null and void. You'll note that UNG was a "Diamond in the Rough" back on April 14th. At this point, the trade is up nearly 8% so it might be time to book that profit.
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
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: The market was down over 1.5% earlier today but it managed to right the ship somewhat by closing down about a quarter of a percent. This tells us that price hit the 50-EMA and then bounced higher which is positive.
The RSI remains negative and the PMO continues its plummet lower. However, I do note that the PMO is entering near-term oversold territory. The VIX punctured the lower Bollinger Band on the inverted scale and typically that leads to a rally the next day or two.
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.
GCI is holding Monday's 97% reading which is clearly overbought, but what's new? The BPI is still trending lower and fell back below its signal line today. It is mildly overbought. The SCI shows the continued deterioration of participation.
Of those 80% plus stocks with a "silver cross" (20-EMA above the 50-EMA), over 35% have lost support at their 20-EMA, meaning the 20-EMA is now moving lower. We still show about 12% of those 80% plus stocks have lost their 50-EMA, meaning they will lose their "silver cross" soon. Long-term participation remains overbought.
Climax Analysis: I read yesterday's climactic readings as a downside initiation climax. That seemed to be right on. We still have very high negative readings on Net A-D and Net A-D Volume. My sense is that we will see a selling exhaustion. The VIX supports this given it has punctured the lower Bollinger Band on the inverted scale.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
I believe the Swenlin Trading Oscillators are confirming a possible bounce tomorrow. They are rising and are now in positive territory. However, we can't get too excited, only 12% of the SPX stocks have rising momentum. Any bounce is likely to be short-lived.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP (barely) and the condition is OVERBOUGHT. The market bias is BULLISH.
As both the ITBM and ITVM decline, we are starting to see the bullish bias disintegrate. Just about one quarter of the SPX have PMOs above their signal lines (BUY signals). That reading is somewhat oversold.
CONCLUSION: While today was not a climax day, readings on short-term indicators are beginning to get oversold. The VIX punctured its lower band on the inverted scale and STOs are rising and now in positive territory. I see a likely bounce off the 50-EMA, but any upside movement should not be looked at as an entry into the market. Consider it an opportunity to sell into strength. The IT indicators are declining and are not oversold in most cases so the market isn't likely to march to new all-time highs.
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Yesterday, I retweeted the following from John Bollinger (creator of Bollinger Bands):
~43,000 is what we call a logical level for $BTCUSD. It is defined by the January peak and the March trough. Price action at logical levels can tell the smart trader/analyst who is paying attention a lot.
Well I guess we know the answer to that question. This is an emotional move. At the same time, support was found at the $30000 level. The RSI is now oversold, so $30,000 could be the reversal point. However, until I see the PMO at least decelerate its descent, $30,000 is still tenuous support.
Yields held support and have bounced. Overhead resistance is nearing, but we are still looking for yields to rise to at least test that resistance level.
IT Trend Model: SELL as of 4/26/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: UUP rallied today and it has us relooking at the potential of a breakout rally. With today's rally, the OBV has set up a positive divergence with price lows. The RSI is negative, but rising again. The PMO has decelerated and appears ready to turn back up. There is a falling wedge pattern which is bullish and suggests an upside resolution.
Support at the January/February lows held. We will really know the potential of this rally when resistance at the April low is tested. We also know that the 20-EMA has been a pivot point to the downside. There is more work to do, but the Dollar is looking a bit better than it has.
IT Trend Model: BUY as of 5/3/2021
LT Trend Model: SELL as of 3/4/2021
GLD Daily Chart: GLD popped out above the rising trend channel again, but today it closed within it. The RSI is overbought.
The 50-EMA is readying to cross above the 200-EMA. That would give us a LT Trend Model "Golden Cross" BUY signal. $GOLD's RSI is even more overbought than GLD's. It is very positive that Gold moved above resistance. However, we need to be ready for a pullback. If we're right about the Dollar, there is a good chance that Gold will be under pressure. It is positive, however, that the PMO is still rising and overhead resistance was overcome. Seeing the Dollar rally strongly and Gold do so as well, tells us that there are still a lot of buyers out there who want Gold.
GOLD MINERS Golden and Silver Cross Indexes: 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: The supply of Crude Oil is being tampered with regard to the end of some of the sanctions on Iran. More supply means lower Oil prices. However, today gap down still kept price above the rising trendline and the 50-EMA. Additionally there is a hammer candlestick and those generally come at reversal points. Unfortunately, the RSI has now moved into negative territory and the PMO had a crossover SELL signal today.
Big picture, we have a bearish rising wedge. Today's drop executed the pattern, but as I noted above price held above the 50-EMA. This seems like a climactic move with a 3%+ drop, I expect to see a reversal here, turning today's OHLC bar into a reverse island.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: Yesterday's comments still apply:
"The good news is that TLT rallied before it reached the minimum downside target of the triple-top. However, now it is struggling with resistance at the confirmation line. The 20-EMA is also there to beef up resistance. We expect yields to continue to rise and that will continue to put pressure on TLT."
"Given the RSI is negative and falling and the PMO is on a SELL signal beneath the zero line, I expect to see support at $132.50 to be tested soon."
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:
DecisionPoint Alert Chart List
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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