Yesterday I wrote about the bullish breakout out on Crude Oil (USO) from a bearish rising wedge. As noted yesterday, we find that bullish resolutions to bearish patterns are particularly bullish. Yesterday the Real Estate sector (XLRE) broke out of a bearish rising wedge as well. The chart is set up nicely, but there are a few issues here that we should consider.
The new PMO crossover BUY signal and rising OBV are confirming this breakout, but overbought conditions are now in play. While these conditions can persist (look at April), we do need to consider trailing stops or hard stops to preserve any gains made.
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.
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.
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: The market finished near the open which has given us a bullish doji candlestick. Price is currently range bound between all-time highs and the confirmation line of the short-term double-bottom. The PMO has not turned down, but it is flat and staying at its same reading.
The RSI is also flat, but sitting in positive territory above net neutral (50). Total volume was slightly lower than yesterday and remains well below the annual average.
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 is continuing lower after yesterday's negative crossover the signal line. The BPI and SCI both fell slightly. The BPI is still in a rising trend which is positive.
The rising trend in participation in the short and intermediate terms is beginning to deteriorate.
Climax Analysis: No climax today. The VIX is staying above its EMA on the inverted scale which is positive.
Short-Term Market Indicators: The short-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT.
I liked seeing that the STOs rose on today's price action. This could signal a rally to all-time highs in imminent. However, we did see %Stocks with rising momentum drop slightly.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT. The market bias is BULLISH.
Intermediate-term indicators look healthy and not overbought. More stocks are beginning to see PMO crossover BUY signals and both the ITBM/ITVM are rising.
CONCLUSION: Price is bounded in a slim trading range. Given intermediate-term indicators are strengthening, we should see new all-time highs. The STOs are also signaling higher prices; however, we are seeing deterioration in short-term participation which suggests consolidation versus a steep rally. Price isn't currently overbought based on the RSI, but we do have overbought readings on the SCI and GCI that need to be cleared. This tempers our bullish outlook in both the short and intermediate terms.
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I pointed out a symmetrical triangle in yesterday's Alert. It is a continuation pattern which tells us to expect a breakdown. However, Carl pointed out that it looks more like a pennant on a bearish reverse flag. I agree. This gives us a minimum downside target of 5,000 which would take it back toward the original basing pattern. I don't think Bitcoin will fall that far, but this does tell us to expect a break below 30,000. On the flip side, the PMO is nearing a crossover BUY signal and the RSI is rising out of oversold territory so an upside breakout is not out of the question, but, I wouldn't expect price to get above the January top anytime soon given the bearish chart patterns.
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 fell, but support at the 50-EMA is reinforced by the longer-term rising trend.
IT Trend Model: SELL as of 4/26/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: I'll likely be moving the declining trend line to encompass the two breakouts, but I want to wait to see if price fails again. Today's candlestick isn't an official top. In any case we will still have a bullish falling wedge. The PMO has nearly triggered a crossover BUY signal so the wedge may resolve to the upside soon.
Given the importance of the strength of this support level, we should see a breakout above the 20-EMA soon.
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 or at least a "drift" sideways that will compromise the rising trend.
(Full Disclosure: I own GLD)
Overhead resistance won't arrive until $1965 or so. However, if the Dollar is able to bounce off its support level, that will put pressure on Gold prices. The PMO is looking "toppy".
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"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
USO Daily Chart: Crude Oil looks very bullish. The best part? The RSI is far from being overbought and the PMO is on a crossover BUY signal that was triggered in oversold territory. The OBV does need to rise higher or we could end up with a negative divergence when it tops.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: Yesterday's comments still apply:
"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.
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