After last Friday's upside exhaustion climax we were expecting to see lower prices and we got them. The 10-minute candlestick chart is enlightening as far as short-term support and resistance levels.
After trading on Friday, a bearish rising wedge had developed. It resolved downward on today open. However, we do have a cup shaped bottom now. The 10-minute RSI is positive and the 10-minute PMO is on a new BUY signal. While we could see prices rise tomorrow, there is very strong overhead resistance to contend with. It aligns with cardinal tops/bottoms as well as gap resistance. The cup suggests higher prices ahead, but with resistance so close, a rally will likely be short-lived.
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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: Price ultimately held above the 20-EMA which is positive, but the PMO continues lower. Total volume was higher on the decline than on Friday's rally, suggesting a bearish bias in the shorter term.
The RSI is still in positive territory, but price now sits in the middle of the rising trend channel. That like an indicator sitting in neutral territory, not that helpful. Based on the top of the rally being much lower than the previous top at all-time highs, the expectation would be a test of the bottom of the channel or at minimum a test of the 50-EMA.
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 continued lower alongside the SCI which continues to decline out of overbought territory. The BPI ticked higher today, but remains below its signal line. The GCI could see a negative crossover its signal line tomorrow.
The SCI is at 84.2%, meaning that many stocks have a 20-EMA > 50-EMA. If we dive down and look at participation, we see that only 63.2% have price above the 20-EMA. This means that of those 84.2% with Silver Crosses, 21% have declining 20-EMAs. 76.4% have price above the 50-EMA. This means that of the 84.2% on a Silver Cross, about 12% have lost support at their 50-EMA. While a healthy SCI is bullish, when you delve down you can see that at 12% to 21% are in jeopardy of losing their Silver Cross.
Climax Analysis: Today was not a climax day. The VIX remains beneath its EMA on the inverted scale which tells us there is internal weakness.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
The STOs may appear to be oversold, but history shows these readings can definitely get more negative. The STO-B continued to decline but we did see the STO-V rise slightly. Only about 1/3rd of the SPX have rising momentum. That will not support a rally, especially given those readings continue to move lower.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP (barely) and the condition is OVERBOUGHT. The market bias is BULLISH.
The ITBM and ITVM were mixed today as well with the ITBM moving lower and the ITVM moving slightly higher. Overall the readings can still be considered overbought. Until we see consensus on all of these indicators, I would read them as bearish.
CONCLUSION: After Friday's exhaustion climax we did see lower prices today. Indicators remain mixed which in my mind doesn't support a rally; however, mixed indicators also tell us a decline may not be forceful or deep. Price is in the middle of a rising trend channel, but that leaves us vulnerable to a decline to test the bottom of the channel. Given indicator conditions currently are neutral to overbought, we would lean toward lower prices moving forward this week.
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Bitcoin is at a "decision point" as price sits on strong support at the January top and the late February low. Additionally, this level of support aligns with the 200-EMA. This would be an excellent place for Bitcoin to begin rallying again, but in the big picture we have a rounded top. Bitcoin is likely losing value as more cryptocurrencies are competing for attention. However, that's beside the point. The RSI is oversold, but the PMO is continuing lower. Given the configuration of the PMO, I don't believe this support area will hold and if it fails, I don't see support until possibly 37,750, but strongest support doesn't arrive until 30,000.
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 has been very choppy but ultimately resistance is holding at the 20-EMA. The RSI is negative and the PMO continues to move lower and is not oversold. The declining tops on the OBV confirm the current declining trend. Support is arriving around $24.15.
IT Trend Model: BUY as of 5/3/2021
LT Trend Model: SELL as of 3/4/2021
GLD Daily Chart: The Dollar was only down -0.12% but $Gold was up +1.60%. This tells us that there were lots of buyers of Gold, its rally wasn't strictly due to the Dollar losing value. The RSI on both GLD and $Gold are overbought and seeing price hit the top of the rising trend channel does suggest a pullback ahead.
Overhead resistance is about to be reached. Another reason that we could see a pullback.
GOLD MINERS Golden and Silver Cross Indexes: GDX flourished with Gold rising and based on participation beneath the surface, I believe the rally could continue. Price broke above strong resistance like a hot knife through butter today. There is more upside likely as the PMO also bottomed above its signal line and is far from being overbought. The RSI is a problem as it is now overbought. Like Gold, we are likely to see a small pullback toward the breakout point on GDX. If so, that's a good looking entry.
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 rallied strongly. 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.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: 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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