The bottom fell out of the market and therefore we saw new ST Trend Model Neutral signals develop on our index charts. The SPX and OEX triggered these signals when the 5-EMA dropped below the 20-EMA. They are "Neutral" signals because this crossover occurred above the 50-EMA.
The Dow Industrials managed to avoid this ST Trend Model Neutral signal, but it will trigger tomorrow unless price can get back above the 20-EMA--not a likely scenario.
The NDX has been on a ST Trend Model Neutral signal since May 5th. Notice that support didn't hold at either the 20-EMA or the 50-EMA. This suggests that a test of the 200-EMA is up next with support available at about 12500.
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.
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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 market tumbled today and closed below the 50-EMA, obliterating support at $410. The next level of support is around $395.
Total Volume was slightly below average, but still elevated. The RSI is now in negative and not oversold territory. The PMO continues to retreat toward the zero line. The 50-EMA has held as support since November with a brief foray beneath it at the beginning of March.
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 Monday's 97.2 reading. Both the BPI and SCI continue to move lower and are unfortunately still overbought.
Price support at the 20/50-EMAs fell heavily. The %Stocks > 20-EMA has now entered oversold territory, but the %Stocks > 50-EMA aren't quite there yet.
Climax Analysis: Readings were even more climactic today than yesterday. The VIX reading rose considerably so on the inverted scale it has again punctured the lower Bollinger Band. This usually leads to an upside reversal. However, I'm not banking on that. This does appear to be an exhaustion climax. We saw a similar climax at the beginning of September and while the market did rebound, it ultimately moved much lower.
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 NYSE volume ratios are confirming this climax. While many times we see a rebound from these climaxes, I would look toward the late February and late March climaxes. They show that more downside is on the table.
We saw a similar reaction on the SPX volume ratios. Again, the late February and March climaxes did not result in higher prices, at least not right away.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
The STOs moved much lower and consequently out of overbought territory. They in neutral, but we have seen this area act as oversold territory since late March. I believe they need to move lower and likely will continue to. When they reverse, that will be our signal that the coast is mostly clear. The %Stocks with PMOs Rising is now oversold, but %Stocks > 20-EMA still could move lower.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP (barely) and the condition is OVERBOUGHT. The market bias is BULLISH.
These indicators continue lower, but both the ITBM and ITVM are NOT oversold and neither are the %Stocks with PMO BUY signals.
CONCLUSION: Today's downside climax is likely a downside exhaustion climax. The short-term indicators are getting oversold and today's big move on the VIX could suggest bearish sentiment is too high in the short term. That's where the exhaustion comes in. Don't get too excited, while we could see a rally pop from this, the still overbought IT indicators tell me that there is more downside to endure. This could present us with a short-term opportunity to sell into strength. Otherwise, make sure your stops are set and consider sitting on the sidelines until volatility settles down.
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A PMO crossover SELL signal was triggered today and the RSI is now back in negative territory. While price could find support at the late March low, today's deep decline suggests we will see a decline to at least the April low.
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: Strangely the Dollar surged higher today. This brought price back above the rising trendline. The PMO has flattened, but the RSI is still negative. Given the high volume on this pop, we could be looking at an initiation to higher prices. However, I expect this rally to fail at overhead resistance at the 20-EMA.
This is likely going to be a repeat of the late April rally that failed at the 20-EMA.
IT Trend Model: BUY as of 5/3/2021
LT Trend Model: SELL as of 3/4/2021
GLD Daily Chart: GLD was certainly hurt by the surge in the Dollar, but the candlestick doesn't look that bad given it is still holding above $170.
The discounts pared back considerably meaning that market participants are feeling more bullish about Gold. The RSI remains positive and is no longer overbought. The PMO wasn't really damaged as it continues to rise despite today's decline. In all honesty, we know that the Dollar was up +0.74%. In a perfect world there is an inverse relationship that would suggest Gold would fall -0.74%. Instead today it was down -0.72%. This tells me there was not a large group of sellers, the decline was mostly due to the Dollar's rally.
GOLD MINERS Golden and Silver Cross Indexes: GDX took it on the chin. Not only was Gold down, but the market in general was down. This pulled GDX lower. Today GDX triggered a LT Trend Model "Golden Cross" BUY signal as the 50-EMA made its way above the 200-EMA. We could see further decline to the bottom of the rising trend channel, but there hasn't been major damage done to participation in this industry group. Note the big increase in the GCI. I like Gold Miners moving forward but Gold needs to rally because the market isn't likely going to help.
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 saw a tiny breakout for USO, but there is now a "shooting star" candlestick. That suggests tomorrow prices will move lower. Other than that, the chart looks good with a positive RSI and rising PMO.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: Today the confirmation line was broken on the triple top formation.
The RSI is negative and the PMO triggered a new crossover SELL signal today. Rising yields are a problem. The minimum downside target of the chart pattern aligns 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:
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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