It has long been our belief that gold should be doing a lot better, considering the reckless spending and borrowing that is currently in progress. We have also believed that billions of dollars being diverted into Bitcoin (and other cryptos) is the reason for gold's poor performance. In his recent The 10th Man newsletter Jared Dillion included a chart showing the relative strength of gold versus Bitcoin that offered hope that this detrimental trend may be about to reverse. Here is our version of that chart. Note the rounded bottom forming this year, the result of sudden crypto weakness versus relatively steady gold prices. No guarantees, but we think that the rounded bottom is more promising than the spike bottom we saw in 2017.
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
For the week:
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.
For the Week:
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: Options expiration was this week, and volatility was low, as expected. The double-bottom is still in play, price wasn't able to break above the confirmation line. The PMO continues to decline. The VIX remains below its EMA on the inverted scale which promises more volatility ahead.
The RSI is currently positive, but the OBV is not confirming the double-bottom yet and in fact, currently carries a negative divergence with price.
SPY Weekly Chart: This week the SPY nearly dropped below the IT rising trendline. The weekly PMO is nearing a negative crossover in extremely overbought territory.
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 SCI decelerated, but is still in decline. The GCI did move lower today, but it remains above its signal line for now. The BPI had another positive crossover its signal line, but it is in a declining trend, confirming the short-term declining trend.
Participation improved slightly, but remains in a declining trend for %Stocks > 20/50-EMAs, confirming the short-term decline. We saw some improvement on %Stocks > 200-EMA, but the reading is overbought.
Climax Analysis: No climax today. We did see a slight expansion in New Highs. Total volume was light. As noted earlier, the VIX remains below its EMA on the inverted scale implying internal weakness.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is SOMEWHAT OVERSOLD.
The STOs started the week rising somewhat, but are declining once again. The readings could be considered somewhat oversold, but we've seen them move much lower. Note that during October's volatile trading, the STOs were configured similarly. This indicates that #1 these readings aren't that oversold and #2 that more short-term decline is likely.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT. The market bias is SOMEWHAT BULLISH.
The ITBM/ITVM declined this week but still remains somewhat overbought. Clearly the bullish bias is being damaged in the intermediate term. %PMO Crossover BUY Signals is oversold, but they continue lower.
CONCLUSION: While there are short-term bullish characteristics, like a bullish double-bottom and some oversold indicators, we are still concerned with the deterioration of the bullish bias in the intermediate term. Additionally, participation is weak and still weakening. There is a high likelihood we will see higher prices next week in the short term, but the foundation is cracking in the intermediate term as many indicators are overbought and in declining trends. Be available to babysit your open positions or set stops for protection should the double-bottom fail.
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Bitcoin has been in decline since mid-April, and this week some major selling took place. Intraday on Wednesday, Bitcoin was down nearly -55% from its April top. The rounded top formed over the last several months looks like a major top. Reported on Fox Business: The IRS disclosed Thursday "businesses that receive crypto assets with fair market value of more than $10,000" will need to be reported. We can be sure more regulation of crypto is on the way, and that will not be favorable to crypto prices moving higher. Is crypto becoming a crypt?
Yields formed a cup and appear to be setting up a handle. The cup and handle pattern is bullish and suggests an upside breakout above March highs.
MORTGAGE INTEREST RATES (30-Yr)
We want to watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount. (See table.) As mortgages are forced to shrink, real estate prices will have to fall, and many sellers will increasingly find that they are upside down with their mortgage.
The 30-year mortgage formed another bottom right on the rising trend line.
IT Trend Model: SELL as of 4/26/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar is attempting to rally, but overall the declining trend is intact. The bullish falling wedge and positive OBV divergence do suggest UUP will breakout. The PMO is still falling and the RSI is negative so the ground is not fertile yet.
Price support does suggest a bounce here.
UUP Weekly Chart: The weekly chart does not look favorable with exception that price is now sitting on support and could rally here as the daily chart suggests. However, the weekly PMO has topped well-below the zero line and should trigger a crossover SELL signal soon. The weekly RSI is also negative.
IT Trend Model: BUY as of 5/3/2021
LT Trend Model: BUY as of 5/21/2021
GOLD Daily Chart: We are declaring an LT Trend Model BUY signal as of today. The 50EMA is just a hair away from crossing up through the 200EMA. Technically, we should wait for the actual crossover to change the signal, but price is well above the moving averages, and the crossover should happen Monday. Might as well anticipate it.
It is obvious that the rising trend for gold from the March low is accelerating. That combined with this week's breakout could result in some snapback or consolidation soon.
GOLD Weekly Chart: A breakout and a solid weekly PMO bottom and crossover BUY signal are most encouraging.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners rising trend lines are getting steeper. Steep rising trendlines are difficult to maintain. The RSI is positive and not overbought. The PMO is rising and not overbought. However, participation is very overbought. The configuration of the BPI and SCI is positive as they continue rising. The GCI has flattened but isn't overbought either. While overbought conditions can persist (July is a great example), we should be careful here.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Crude Oil pulled back this week to the 50-EMA and bounced. There is a rising wedge in the short-term which does suggest a breakdown ahead. However, with today's rally, the RSI is back in positive territory and the PMO is decelerating its descent. The 20-EMA is the next test.
USO/$WTIC Weekly Chart: $WTIC has hit overhead resistance and is struggling. Given the bearish rising wedge on the daily chart, we could see the breakdown it portends.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: TLT is beginning to rally as yields form the handle on the bullish cup and handle pattern. It is good to see price close above the 20-EMA and the rising PMO and RSI. However, that bullish pattern on yields does suggest any rally we see won't likely stick around long.
TLT Weekly Chart: The weekly chart is improving as the weekly PMO is flattening and price is sitting on important support. However, the RSI is still negative and we know yields will likely rally soon which will put pressure on TLT.
Technical Analysis is a windsock, not a crystal ball.
-- Carl Swenlin
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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