We have been keeping a close eye on treasury yields as they have been sliding lower. Today both the 10-year and 30-year yields closed below support. Technically, using intraday readings, yields are just barely hanging onto support at intraday lows. We now can make a case for a double-top pattern. The PMO had already been in decline, but now it is below the zero line. The 20-EMA is now even with the 50-EMA so we should see an IT Trend Model Neutral signal on $TYX soon.
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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: Despite closing lower today, a new intraday all-time high was logged. Price continues to be stymied by overhead resistance. The OEX generated a PMO crossover BUY signal, but the SPY as well as the Dow and NDX have not yet seen that positive crossover. Volume was well-below the annual average.
The RSI remains positive, but is beginning to decline. Of particular concern is the VIX which closed on its high for the day. Still, the VIX is above its EMA which suggests there is internal strength in the very short term that could possibly prevent at least a one-day deep decline.
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.
Both the SCI and BPI continued lower today. Given a new intraday all-time high has arrived, the negative divergences particularly concerning. The GCI remained at its same reading, keeping it in extremely overbought territory.
Participation continues to deteriorate with negative divergences persisting.
Climax Analysis: No climax today. There is a short-term negative divergence between price and New Highs. As noted earlier, the VIX suggests market participants are getting nervous.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
The STO-V has now hit negative territory and the STO-B continues to decline. The negative divergences are stark.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT. The market bias is BULLISH.
All of these indicators continued their decline and also display negative divergences. We also saw fewer Crossover BUY signals.
CONCLUSION: Negative divergences are now showing on nearly every indicator we have. One thing to keep in mind, most of our indicators, particularly participation indicators are "equally-weighted" whereas the index is "cap-weighted". This can cause negative divergences when larger cap stocks are holding up an index. Most of the FAANG+ stocks have PMO BUY signals and many are new BUY signals. We could certainly see the market move to new all-time highs if these leadership stocks continue to show strength. However, sustained rallies have almost universal participation, particularly amongst the smaller-cap stocks.
Overall, we are neutral to bearish given the now negative STO-V, negative divergences, overbought indicators and deteriorating participation. Be selective if opening new positions and consider using hard or trailing stops. If the market turns, it could be fast and furious given the VIX is rising.
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Bitcoin bounced off support with a nearly 12% rally. The PMO managed to hold onto its BUY signal on this reversal. However, the declining trend is still intact and overhead resistance is very close at the 20-EMA.
Long-term yields are breaking down below support. Bonds should get a big lift.
10-YEAR T-BOND YIELD
$TNX held intraday support, but given the rising trend was broken and the PMO has hit negative territory, we would expect to see them move much lower.
IT Trend Model: SELL as of 4/26/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar is very messy right now. It's hard to discern any kind of trend. The 20-EMA held as overhead resistance on UUP, but we do see a bullish engulfing candlestick that suggests we will see it rise tomorrow.
The RSI is still negative but rising. The PMO is on a BUY signal so we should get a breakout above the 20-EMA.
IT Trend Model: BUY as of 5/3/2021
LT Trend Model: BUY as of 5/24/2021
GLD Daily Chart: Gold was lower and that triggered a PMO SELL signal. However, the RSI is still positive and the 20-EMA is holding as support.
(Full Disclosure: I own GLD)
There is a bearish rounded top forming. A close below the 20-EMA could spell trouble, but the rising trend out of the March low is still holding up just fine. This seems a natural consolidation after a strong rally.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are about to test the rising trend out of the March low just like Gold. The negative crossover on the SCI and PMO SELL signal suggest a rally here isn't likely. Price closed on a penny off the low for the day. This also doesn't bode well.
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 pulled back today, but the short-term rising trend from the breakout above the 20-EMA wasn't compromised. The RSI is positive and not overbought and the PMO continues to rise out of oversold territory. Look for higher prices and more winners in the Energy sector.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: With yields breaking down it isn't surprising to see TLT finally breakout. Lots of good stuff on this chart. The RSI is positive and not overbought, we are nearing an IT Trend Model "Silver Cross" BUY signal. The PMO is rising and is now in positive territory.
Next area of overhead resistance is the 200-EMA.
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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