I try not to do this often. Predicting a chart pattern doesn't always work out, but in this case we should be aware of the possibility of a bearish formation developing. I've marked the left shoulder and head. Today price rose. If it continues to rise tomorrow, this pattern could bust before it has actually developed.
If this is a head and shoulders, the minimum downside target would interestingly take price nearly to support at the March high. Typically you should see more volume on the development of the left shoulder than the right and so far that is the case.
I'm recuperating from my second vaccine, so I'll be somewhat brief again today.
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: Price did manage to break above overhead resistance at the late March high and held support at the 20-EMA. The PMO flattened but is still in decline.
The RSI is still positive.
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 is still unchanged since last Friday and is sitting in very overbought territory. The BPI which had ticked up yesterday, resumed its decline. The SCI continues to decline after its negative crossover its signal line yesterday.
Participation improved slightly, but what is becoming more apparent is the declining trend of %Stocks > 200-EMA.
Climax Analysis: This could be an upside exhaustion climax given the strong reading on New Highs and Net A-D. However, we didn't see confirmation on Net A-D Volume. The VIX has penetrated the lower Bollinger Band on the inverted scale for a third day in row, but given the tight Bollinger Bands, I'm not reading this as bullish.
Keep in mind: When the Bands squeeze it makes any penetration of the Bollinger Bands less useful since it is easy for them to punch through the upper Band one day and immediately puncture the bottom of the Band the next.
A Bollinger Band squeeze also signals that volatility is ahead. The Bands can't remain squeezed together forever and the only way to have them expand is on high volatility. I've never seen a VIX squeeze finish with a powerful thrust to the upside. High volatility is almost always bad.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
The STO-B didn't do much today but we did see the STO-V tick back into positive territory. At least now we have more that 50% of stocks with PMOs rising, but only 2% more. You can see the effect of the recent consolidation on these indicators which have mostly been flat and twitchy.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
On the bright side, both the ITBM and ITVM moved higher today. It's visible mainly in the thumbnail. Overall though, there is a declining trend still.
CONCLUSION: It appears we had a mild upside exhaustion climax which suggests we will see price move lower in the next day or two. That would set up the bearish head and shoulders pattern on the SPY. The negative crossover on the SCI is what concerns me most. The SCI negative crossovers nearly always come at market tops. There are far too many bearish characteristics on our charts, so continue to proceed with caution.
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Bitcoin indecision is clear. We had a bullish head and shoulders, but right after it executed, price fell below both the 20/50-EMAs. There are positive aspects to the chart given the new PMO BUY signal and positive RSI. Additionally price held above the 20/50-EMAs today.
Yields continue to fall. We'll be watching support at the April lows.
IT Trend Model: SELL as of 4/26/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar (UUP) failed at overhead resistance yet again. The RSI has turned down in negative territory and the PMO is beginning to move lower.
The next level of support is at $24.40.
IT Trend Model: BUY as of 5/3/2021
LT Trend Model: SELL as of 3/4/2021
GLD Daily Chart: The excellent continuation of yesterday's rally took price well above the 200-EMA. The level has been a problem for Gold since mid-April. The PMO has turned up above the signal line which is especially bullish and the RSI is positive.
The double-bottom appears to be executing now. The minimum upside target would be around $1850.
GOLD MINERS Golden and Silver Cross Indexes: The PMO narrowly avoided a crossover SELL signal. Gold's strong rally certainly helped Gold Miners. Participation is strong and while in some cases it is overbought, there is still more upside to be had. Overhead resistance is now being tested at the April top.
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 technically dropped below support at the March top, but it hasn't really affected the indicators. The RSI is positive and not overbought and the PMO is still above the signal (although it is flattening on the recent decline).
I'm still bullish on Crude Oil. If it loses the 20-EMA, I'll have to rethink that.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: Yields have hit support and could rebound again. The 50-EMA has held firm as overhead resistance. The PMO is rising and is suggesting we should see that breakout.
Yields are at a decision point. They are sitting on support. We know that if yields rebound here that TLT will begin to drop yet again. If we just follow the RSI and PMO on this chart, it does suggest a breakout is nearing.
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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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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