USO broke out of a bearish falling wedge today. When we see a bullish breakout from a bearish pattern we consider it especially bullish. We had already seen a PMO crossover BUY signal so we did get an early message that Crude Oil was nearing a breakout. I'll discuss this further in the section on Crude Oil as a big reason USO rallied was due to $WTIC finally breaking above strong resistance.
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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 just missed hitting all-time highs today. The minimum upside target of the short-term double-bottom is around $432. This tells us we should see those all-time highs very soon. The PMO remains flat and Total Volume was well below the annual average. The holiday weekend could be part of the reason we had low volume today and last Friday.
The RSI is still rising in positive territory and is not overbought. Price remains squarely in the middle of the long-term rising trend channel.
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.
It is hard to distinguish, but the SCI did top below its signal line today. The big news on this chart is that Golden Cross Index dropped below its signal line. The BPI continues to rise with price.
Participation faltered today, but remains in a rising trend in the short and intermediate terms.
Climax Analysis: No climax today, but we did see a large pop in New Highs. The VIX dropped before hitting the upper Bollinger Band on the inverted scale. A topping VIX is bearish in the short term.
Short-Term Market Indicators: The short-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT.
Both STOs dropped today which does suggest lower prices ahead; however, %Stocks with Rising PMOs is continuing higher and is not overbought. Still, less than half of the SPX stocks have rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT. The market bias is BULLISH.
The intermediate term is beginning to look a lot more bullish. Both the ITBM/ITVM are rising and are not overbought. Additionally, we had a recent positive crossover the signal line on %PMO BUY signals.
CONCLUSION: Interesting to see deterioration among our short-term indicators but improvement on the intermediate-term indicators. The negative crossover on the GCI below its signal line is very troubling for the longer-term picture. The high reading on the GCI has helped create a strong foundation for the SPY so seeing cracks in that foundation is concerning. Given price hit overhead resistance at all-time highs and pulled back, we may see some sloppy trading in the short term on the SPY, but IT indicators do suggest that we will continue to hold the rising trend out of the bear market low... for now.
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The short-term rising trend is intact, but this looks like a symmetrical triangle pattern. Those patterns are continuation pattern, meaning Bitcoin would move lower. The RSI is negative, but the PMO does appear to be turning higher. We will know more when we get the breakout from the triangle.
Long-Term yields are bouncing off support at the April lows. The cup and likely handle do suggest yields will continue rising.
10-YEAR T-BOND YIELD
The 10-year yield bounced strongly. At this point we are watching the longer-term rising trend. The PMO is trying to turn back up, so we expect $TNX to rise toward May tops.
IT Trend Model: SELL as of 4/26/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: It appears that Friday's move was an exhaustion of the very short rally. This is a bullish falling wedge so the expectation would have been a continuation of that move.
The PMO is nearing a crossover BUY signal, but the RSI remains negative. This is a very important support level.
You can see that this support is touched by the late 2017 high and the August 2018 lows. The weekly chart is showing a negative weekly PMO crossover in the making so despite a bullish formation on the daily chart, we would expect this support level to be broken.
IT Trend Model: BUY as of 5/3/2021
LT Trend Model: BUY as of 5/24/2021
GLD Daily Chart: Gold has formed a bearish rising wedge. The RSI is very overbought. Despite the rising PMO, I expect to see a breakdown here. Of course, if I'm right about the demise of the Dollar, Gold could just continue moving higher along this rising trendline.
(Full Disclosure: I own GLD)
More than likely this bearish rising wedge will be compromised by a consolidation along the $1875 level.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are due for a breakout, but the chart is starting to deteriorate ever so slightly. On the positive side we have an RSI that is not overbought and positive, and rising trends on the BPI and GCI. Of concern right now would be the nearing PMO crossover SELL signal and the very overbought readings on the majority of the indicators. If price breaks out above $40, the picture will become much brighter, but until then, these overbought indicators are a real concern.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
$WTIC Daily Chart: Here is the $WTIC daily chart. You can see that price pushed up against overhead resistance throughout May. Unlike USO, there is a bullish ascending triangle pattern and today's rally executed the pattern. Given the positive and not overbought RSI, along with last week's new PMO crossover BUY signal, we expect to see Oil prices continue higher.
Here is a better look at the bearish rising wedge on USO. As noted in the opening, this breakout is very bullish.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: Yields appear to be headed higher in the near term and that is pressuring TLT. It appeared TLT would finally breakout. We hadn't seen price above the 50-EMA in months. However, it immediately failed and was unable to test overhead resistance. For now, the 20-EMA is holding as support and the RSI is positive. The PMO is also technically rising, but we don't expect to see TLT get above overhead resistance at the April/May tops.
This is a good picture of how the 50-EMA has been a problem since TLT began its decline last August.
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:
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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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