Greetings from Las Vegas! The market hit new all-time highs today so it isn't surprising to see the PMO wobble back into a crossover BUY signal. Price resolved to the upside from a bearish rising wedge. Typically a bullish resolution of a bearish chart pattern is especially bullish. The question is whether the market still has legs to keep this short-term rising trend afloat. While the RSI is positive, there are plenty of indicators telling us this isn't going to last much longer.
(Full Disclosure: I own GLD)
** ON VACATION - June 28th to July 9th **
It's that time of year again! Last year it was a road trip to Alabama and back, this year it is a road trip to Utah and back! We've made it to Las Vegas, next up: Zion, Spanish Fork, Bryce Canyon, back to the Grand Canyon, Bull Head City and finally back home.
I plan on writing, but all trading rooms will be postponed until I return home. Blog articles may be delayed depending on WIFI service and/or our travel for the day.
DP Alert subscribers: The DP Alert will be published daily at varying times while I'm traveling. I will try to keep as close to our regular schedule as possible. Rest assured, you will ALWAYS have the report prior to market open the next day.
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 one-year daily chart does show us that the intermediate-term rising trend channel is still intact, but price hasn't come close to testing the top of it. A decline of about 2.7% would get it close. That is a tame decline, but one that is likely on its way given the indicators.
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 BPI is turning up, but the important SCI is not. Only 65.8% of SPX stocks have a 20-EMA > 50-EMA. The GCI is holding steady. Almost 96% still have Golden Crosses (50-EMA > 200-EMA) which is highly overbought.
I noted above that about 66% of SPX have a 20-EMA above their 50-EMA. Of those stocks, only 48% have price above the 20-EMA, which means the 20-EMA is heading down toward the 50-EMA. Worse is 6% have price below their 50-EMA. This means that they will lose their "silver cross" soon. Participation is not where it should be given new all-time highs.
Climax Analysis: No climax today. Total volume is about normal for the past few months. In the very short term, we do have a VIX above its EMA on the inverted scale. Typically that means internal strength.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
Here is the big problem chart. We noted on Friday that the STOs had soared into overbought territory leaving us vulnerable to an overbought decline. This is exactly what we have today. Given they have turned down, we would expect lower prices very soon. Notice also that only 43% of SPX stocks have positive momentum! It seems clear that mega-cap stocks are holding this index up.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL. The market bias is NEUTRAL.
The ITBM and ITVM are rising without enthusiasm and remain in Neutral territory. When/if these indicators pick up some speed to the upside, then we can expect this intermediate-term rising trend to hold. Right now given they are neutral and barely rising, it suggests this strong rising trend could be lost.
CONCLUSION: It was a good news, bad news kind of day. The PMO flipped to a BUY signal, but the STOs turned down in overbought territory. The BPI is rising, but the SCI is falling. Our biggest concern right now is participation. When the mega-cap stocks turn, and they will, the destruction will begin. We could see the overall market continue a bit higher in the short-term as their charts aren't particularly bearish right now, but the market is on borrowed time unless the rest of the index begins to perform. If the market is hitting new all-time highs and these stocks can't turn it around now, it isn't likely they will. Storm "watch" is in effect!
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Bitcoin is again attempting to rally past the 20-EMA without success. However this rally has created a small bullish double-bottom. The minimum upside target would still be within the current trading zone. The new PMO BUY signal suggests we will see another test at 42,000. However, if price fails to overcome resistance at the 20-EMA, it is likely we will finally see that breakdown below 30,000. Until then expect more oscillation in the current trading range.
Long-term yields failed at overhead resistance once again.
10-YEAR T-BOND YIELD
The 10-year treasury yield is still holding the rising trend from the December/January low. Additionally it is managing to stay above support at the long tail from May. The PMO is beginning to turn up which does imply we will see a breakout from the bullish falling wedge.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The bounced off support at the March lows and has now broken the short-term declining trend. It appears to be a bullish pennant on a flagpole. The 200-EMA has been a problem for UUP, so I wouldn't get too excited.
I see a bullish cup and handle on the one-year daily chart. Additionally the RSI is positive and not overbought. The problem is the decelerating PMO that is ready to top. The 200-EMA is the line in the sand.
IT Trend Model: NEUTRAL as of 6/25/2021
LT Trend Model: BUY as of 5/24/2021
GLD Daily Chart: After triggering an IT Trend Model Neutral signal last week when the 20-EMA dropped below the 50-EMA, price continues to sit in a holding pattern above support. We are looking at a possible reverse island formation which would suggest a gap up to return above the 200-EMA. The PMO is decelerating a bit, but the RSI remains negative and isn't in a hurry to get to positive territory.
The $GOLD one-year chart doesn't look much better. Here we can see a bearish reverse flag with pennant. A pennant is similar to a symmetrical triangle. Those formations are continuation patterns, they all suggest Gold will lose current support. If the Dollar manages its breakout above the 200-EMA, Gold will likely lose support at 1765.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners did lose support. This industry group is very beat down. Notice none of the stocks have their price above the 20/50-EMAs and less than a quarter have price above their 200-EMAs! While these readings are oversold and suggest a reversal ahead, Gold's likely demise will push GDX even lower. If participation begins to improve, then we can start thinking about taking advantage of these beat down prices. Right now it's the "catching a falling knife" concept.
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 significantly today, but as you can see price hasn't hit the rising trendline. This decline was constructive; it pulled the RSI out of overbought territory. We could see this rising trendline tested tomorrow, but overall USO looks bullish.
Part of the problem could be that $WTIC is getting close to overhead resistance at the 2018 high. Notice also that the weekly RSI is overbought. However, the weekly PMO has whipsawed back into a BUY signal, which tells me that resistance will be broken.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: The drop in yields today helped TLT rally more than 1%. The RSI is positive, but the PMO is looking iffy as it flattens.
Overall the rising trend is intact and with the 20-year treasury yield failing to break back above resistance, long Bonds should continue higher.
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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