The Short-Term Trend Model is based on 5/20-EMA crossovers. We don't talk about these often, but I wanted to let you know that the SPX, which had triggered a ST Trend Model BUY signal just two days ago has now generated a Neutral signal as the 5-EMA crossed below the 20-EMA today. These can be an excellent way to determine the thrust. A whipsaw back down suggests we will see more downside.
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: The PMO has begun to accelerate lower on today's big decline. The VIX turned down below its signal line which usually means more volatility ahead and a weak market. There is very short-term support at $410, but I wouldn't count on it holding.
The RSI has dipped into negative territory. The 50-EMA seems a more likely area of support. $410 is awfully close.
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 at its same reading of 97 and avoided a negative crossover its signal line. The BPI reversed and had a positive crossover, but overall it is in a declining trend. The SCI continues to decline and is still overbought.
The stark detail under the surface of the SCI is that only 55% of stocks have price above their 20-EMA, this means that of the 84% with a "silver cross", almost a 1/3 of them are below their 20-EMAs. About 12% have price below their 50-EMAs. Although there is a solid 84% on a silver cross, the deterioration underneath the surface tells us the picture is not so bright.
Climax Analysis: We had a mild downside climax today with Net A-D readings being elevated. Carl and I talked about the climaxes over the past week and we both agree they are telling us that more volatility and churn are ahead. Technically I read this as a downside initiation climax. Most likely we will continue to see the market churn forward similar to activity after the February top.
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 volume ratios on the NYSE aren't confirming this as a major climax.
The SPY does seem to be confirming that this is a mild initiation climax.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
Readings remain neutral and technically rising. Given the paltry 21% of stocks with rising momentum and the continued deterioration of %Stocks above their 20-EMA, I'm not looking for higher prices here.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP (barely) and the condition is OVERBOUGHT. The market bias is BULLISH.
Both the ITBM and ITVM declined today. The ITBM remains in overbought territory. Note that we only have about 1/3rd of the SPX with PMOs that are above their signal lines.
CONCLUSION: Today we saw a mild downside initiation climax; however, with all of the recent climax days, Carl and I feel it is indicative of the high volatility in the market. High volatility is never good. It means big price swings that tend to move the market lower. We should expect churn--back and forth push and pull until the VIX settles down. We continue to see participation moving lower as more stocks lose support at their 20/50-EMAs and shed PMO crossover BUY signals. And, believe it or not, we still have plenty of overbought indicators out there. Basically we have choppy stormy waters ahead, so batten down the hatches and consider lightening your ship's load so you can move through the storm safely.
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Bitcoin is now sitting on important support at the January top and March trough. I retweeted the following today 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.
This is an important support level given it aligns almost perfectly with the 200-EMA. I could certainly see this as a pivot point for Bitcoin given the oversold RSI, but the PMO tells me there is more downside for Bitcoin. The next level of support is around 37,700.
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: UUP dropped considerably and lost support at the February low. The RSI is negative and the PMO is declining and neither are oversold yet.
The January low will be tested soon and likely will be left behind as the Dollar makes its way even lower.
IT Trend Model: BUY as of 5/3/2021
LT Trend Model: SELL as of 3/4/2021
GLD Daily Chart: With Dollar falling so heavily, I would've expected a better rally on Gold. As an owner of GLD, I'm not complaining. Price is pushing out of the top of the current rising trend channel and the RSI is overbought. The PMO isn't really overbought and is rising. More than likely we will see a bit of a pullback in Gold soon, but nothing too damaging based on the PMO rising.
Overhead resistance was reached today which also suggests a pullback or decline ahead.
GOLD MINERS Golden and Silver Cross Indexes: Although GDX closed lower today, it is holding support at the January high. The SCI is getting overbought and participation numbers are currently overbought. While this is a concern, we know that overbought conditions can persist. I would expect some more consolidation of yesterday's rally, especially since price was pushed out of the top of the rising trend channel. Miners still look bullish overall.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Yesterday's comments still apply:
"Resistance at the March top is wishy washy as price has been wobbling around it all month. We now have a PMO bottom above the signal line and a positive RSI. I'm expecting USO to breakout of this consolidation very soon."
Price remains in a rising trend channel and has hit the bottom of the channel as well as the 20-EMA. It's time for a rally.
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.
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