It was hard to determine what to lead with in today's DP Alert. A few highlights: Sell-Off, PMO Signals lost, XLE new IT Trend Model Neutral Signal, Gold Miners (GDX) new LT Trend Model SELL signal and today's Downside Exhaustion Climax.
I decided to open with our four Scoreboard indexes which all lost their PMO BUY signals today. Additionally, the Dow had a negative 5/20-EMA crossover that triggered a ST Trend Model Neutral signal. Momentum was already declining so today's sell-off pushed all of them into PMO crossover SELL signals.
The Dow chart is the most bearish. The intermediate-term rising trendline was broken in mid-June and it has now broken below the short-term rising trend drawn from the March low. I annotated a triple-top with the confirmation line at the May/June lows. It isn't "textbook" but it does suggest we will see a breakdown.
The NDX lost its short-term rising trend and is now headed toward support at the April tops. The RSI is still positive, but barely.
The OEX just barely managed to close above the short-term rising bottoms trendline. Strong support could align at the March top and intermediate-term rising trendline. The RSI is now in negative territory.
I'll talk more about the SPX later, but you can see it has lost the intermediate-term rising bottoms trendline, closing just beneath it.
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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.
You'll note that XLE triggered an IT Trend Model Neutral signal. This was generated as the 20-EMA crossed below the 50-EMA while the 50-EMA was above the 200-EMA. Had it been below the 200-EMA, it would've been a SELL signal. Support is available at the January high. However, the remarkable part of this chart is that 0% of the stocks in XLE have price above their 20- or 50-EMAs.
RRG Chart: XLC is moving further into Lagging. Defensive sectors XLU, XLP and XLRE in particular are heading toward the Leading category. XLB, XLF and XLI are turning back toward Lagging.
CLICK HERE for an animated version of the RRG chart.
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 short-term rising bottoms trendline held. We do have an alignment of four levels of support; specifically, at the May top, 50-EMA, rising bottoms trendline and the June lows. The now negative RSI is problematic, but we can see that for the past five months this has been reversal territory for it.
Total volume spiked today and the VIX dropped well-below the lower Bollinger Band.
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 remained steady. The SCI and BPI accelerated their decline today. We still have over half of the stocks in the SPX with a "silver cross", but....
...we only have about 29% with price > 20-EMA and only 38% with price > 50-EMA. That is a strong bearish bias. Almost 10% of those "silver cross" stocks are about to lose their IT "Silver Cross" BUY signals. More than a quarter of those silver cross stocks have price below the 20-EMA! There is also a long-term bearish bias. About 15% of the stocks on a "Golden Cross" BUY signal are below their 200-EMA.
Climax Analysis: Today we had very climactic readings across the board. New Highs pared back sharply. Net A-D numbers moved well into climax territory on the downside. Total volume was higher and the VIX moved well outside of its lower Bollinger Band. This can be considered a downside exhaustion climax, meaning selling was exhausted today.
NYSE Up/Down and Down/Up volume ratios are also climax detectors. The 9:1 ratio suggested by the late Dr. Martin Zweig in his book Winning on Wall Street, is especially significant, but we also look for spikes outside the normal range to clarify a particular event. We have an NYSE and S&P 500 version of the ratios, and normally they will only be published when there is a notable reading.
The Volume Ratios confirm what our ST Climax chart is already telling us; there is a downside exhaustion climax. Typically we will see a bounce after a downside exhaustion climax.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
The STOs moved into oversold territory quickly today. This would also indicate a possible exhaustion. And, holy smokes, only 15% of the SPX have rising momentum!?
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL. The market bias is NEUTRAL.
IT indicators moved lower as expected. We do see near-term oversold readings on the ITVM. Looking at %PMO BUY signals, the reading is very low, but we've seen much lower.
CONCLUSION: The market dove lower today and triggered four new PMO SELL signals on our Scoreboard indexes. We see a downside exhaustion climax and it is confirmed by oversold STOs and volume ratios. Think "dead cat" bounce. There is a high likelihood that stocks will rebound, but more than likely we are at best looking at churn in the week ahead. Any bounce tomorrow will not likely see follow-through. It is time to limit exposure until we at least see positive momentum. Right now the market bias is very bearish.
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We've been looking for a test of 30,000 and it appears we will see that. Given the RSI has been negative since June and the PMO is on a SELL signal below the zero line, the 30,000 level isn't likely to hold. A breakdown could mean an accelerated move to the downside.
The declining trend in long-term yields continues.
10-YEAR T-BOND YIELD
I had thought that we'd see solid support at 12.0, but today's gap down below that level dashed those hopes. I don't see solid support until we hit 10.0.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar was up slightly and is testing overhead resistance at the previous July highs. The chart is very bullish with a positive and not overbought RSI and a PMO bottom above the signal line.
The large double-bottom pattern is looking promising.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: BUY as of 5/21/2021
GLD Daily Chart: Gold was also up slightly but it is struggling with staying above the 20/200-EMAs. The RSI is slightly positive and the PMO is rising on a BUY signal. Discounts are expanding.
GOLD Daily Chart: This is the chart that bothers me most about Gold. We have a clear bearish rising wedge and price closed below it.
Full Disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners lost important support. The PMO turned down and is on a SELL signal. Most important, a LT Trend Model SELL signal was triggered as the 50-EMA crossed below the 200-EMA. Participation is sickly. They did look promising last week as participation began to rise, but the indicators turned south very quickly.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: The double-top executed with gusto today as price gapped down and nearly hit the minimum downside target. With OPEC tweaking production levels, investors began to bail quickly. This is one reason why the Energy sector (XLE) found itself with a new IT Trend Model Neutral signal today. Support so far is holding at the March/May tops and the getting oversold. However, that PMO does look ominous.
The intermediate-term trend was busted with today's drop. Remember that it is a "minimum" downside target. I suspect price will have to test the 200-EMA.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: Bonds broke out as yields tumbled lower. The PMO may appear overbought, but the 'normal' range for TLT is between -2 and +2.
The only problem I see is the overbought RSI. The 20-year yield is now nearing support, so we could see it rebound, but right now it doesn't look ready to put on the brakes.
Technical Analysis is a windsock, not a crystal ball.
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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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