I was surprised to see that the Timber ETF (CUT) was in a decline given the prices at our local home improvement stores has skyrocketed; however, it is cooling. Note that today the 50-EMA was broken. CUT is on a PMO SELL signal and the RSI is right in the middle of negative territory. The OBV is confirming the decline and we can see that CUT has been underperforming the SPX since its top in May. However, the $LUMBER chart looks a bit different...
Lumber has been in free fall since topping in May. There is a new IT Trend Model Neutral signal as the 20-EMA crossed below the 50-EMA. Also, price isn't very close to the minimum downside target of the double-top. However, there are some bright spots here. First, price has now reached the 200-EMA and typically we see price reversals at that level. The RSI is now oversold and with today's rally, it is headed higher. Today's rally could mark a low. The PMO is getting oversold, but unfortunately it will take some time to turn it around given the 45%+ drop since the May top so we could be catching a possible reversal point early or it will just continue to the downside target. Counting on the 200-EMA support level would be a very aggressive trade. Keep an eye on this.
** UPCOMING 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 plan on dropping in Las Vegas, 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.
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 SPY finished almost unchanged. Clearly investors are watching intently to see what the FOMC has in store tomorrow. Investors are getting nervous, you can see this through rising VIX readings. While the VIX remains above its EMA on the inverted scale, if investors get spooked tomorrow, the VIX readings will begin to rise quickly and that is a dangerous set-up.
The RSI remains positive. The PMO is flat, but in the thumbnail above we can see it did actually have a positive crossover. Remember that when acceleration in a rising trend becomes steady, the PMO will flatten. I often refer to the PMO as representing your foot on the accelerator. When you put your foot down, the PMO rises. When you hold your foot steady, it will flatten. Finally, when you lift your foot off the accelerator, the PMO falls. Right now, the SPX's foot is holding steady on the accelerator as it rises ever so slowly into new all-time highs.
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 held steady, but both the BPI and SCI fell again today. The negative divergences continue to fire warning shots over the bow.
Participation continues to wane. The negative divergences began in early April. They were prescient regarding the May pullback.
Climax Analysis: No climax today. Total volume was very low, another indication that traders are nervous--not enough to sell off, but certainly enough to hold back exposure.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL to OVERSOLD.
The STOs both rose today which is positive for the market, but the negative divergences are not. Only 37% of stocks in the SPX have rising momentum. This tells us that the larger-cap names are likely keeping the index from correcting. We need to watch the FAANG+ stocks closely, when they stop performing, the market will too.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL. The market bias is BULLISH.
ITBM and ITVM continue to decline and we're seeing %PMO BUY signals topping well below the 50% level. More negative divergences for all of these indicators.
CONCLUSION: Quoting Carl:
"The market internals are not set to absorb bad news from the Fed tomorrow. Good news could overcome the negative setups, but bad news will likely set off some selling. That said, I don't expect bad or good news, per se, but Powell's words will be put under a microscope, and mountains could be made out of molehills."
Part of my conclusion yesterday still applies as well.
"When the larger-cap leaders begin to deteriorate, hold on tightly. Most of these big FAANG names are still on PMO BUY signals, but when they start to drop and the index begins to drop, people will bail quickly.
How to proceed? Consider shifting exposure to Utilities (There are some good ones in the Diamond Report), Real Estate or some Energy stocks/ETFs. Stops are also a good way to protect against a possible 'waterfall' decline, a trailing stop is especially useful on stocks that are quickly accelerating higher. Ultimately, paring back exposure is the best protection. Currently I am 70% exposed to the market, but I will begin rotating or paring that back to at least 50% in the coming week(s). Indicators tell us to beware, let's not ignore that advice."
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The 200-EMA continues to hold as overhead resistance. Even if Bitcoin can overcome that resistance level, a strong resistance zone will arrive between 42,000 and 47,500. The large rounded top suggests price won't even be able to hold support at 30,000. I'm not ready to call that collapse, but I will say that even with a rising PMO and positive (barely) RSI, I doubt we will see Bitcoin above 47,500 this summer.
Yields are rebounding after losing support. Technically, we would expect to see the decline continue after this snapback, but the Fed could change that landscape tomorrow.
10-YEAR T-BOND YIELD
$TNX bounced off support at 14.5, but overhead resistance is going to be tough to overcome.
IT Trend Model: SELL as of 4/26/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: We have a rounded bottom in the short term on the Dollar. This is the first time since early April that we've seen THREE consecutive days of trading above the 20-EMA. The RSI is positive and the PMO is on a BUY signal. I would expect to see the Dollar break through the 50-EMA soon.
Note all of the previously unsuccessful attempts by UUP to stay above the 20-EMA. A break above the 50-EMA will be good, but given the failures to hold above the 20-EMA, there is a good chance that will be where the Dollar pivots lower.
IT Trend Model: BUY as of 5/3/2021
LT Trend Model: BUY as of 5/24/2021
GLD Daily Chart: Yesterday's comments still apply:
"On the 6-month candlestick of GLD, there is a double-top and today's trading executing it to the downside. The minimum downside target would put price at around $170. This support level also aligns with the 200-EMA. I don't think the decline is over in Gold, but I do expect it to right the ship once it tests the 200-EMA."
(Full Disclosure: I own GLD)
"The RSI is now below net neutral (50). $Gold did manage to also hold support at the 50-EMA and it closed on the rising trendline. Given the PMO SELL signal, like GLD, I would look for a test of the 200-EMA."
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are holding support at the 50-EMA. While this would make a great reversal point, I don't see any participation or indicators that would support it. Participation is dropping quickly and none of those readings are oversold yet.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Yesterday's comments still apply:
"Since the end of May, USO has been in a steady rising trend channel. Nothing on the charts tell me this won't continue...although the RSI is beginning to hit overbought territory."
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: Yields have not recaptured support yet so TLT is holding just above its support level. The "Silver Cross" BUY signal, rising PMO and positive RSI suggest we will see a bounce off support here.
Should we get a rally off this support level, I would look for a test of the 200-EMA. We'll know much more after tomorrow's Fed meeting.
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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