During today's DecisionPoint Show Carl brought this chart to discuss the two ways it can be viewed, one bearish and one bullish. The chart below shows the "Silver Cross" Index for the SPX, Nasdaq and NYSE. The SCI tells us how many stocks have their 20-EMA > 50-EMA. We have been discussing the bearish negative divergences. Price is making new all-time highs, yet fewer and fewer stocks are able to maintain their "silver crosses". However, we have to look at these readings as possibly "oversold". They are all hitting readings that are in oversold territory. Both of us subscribe to the bearish outlook, mainly for the reasons above. Notice that successful "oversold" readings generally occur at price lows, not all-time highs.
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.
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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.
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: After Friday's upside initiation climax we were expecting higher prices today. The RSI is nearing overbought territory, but the PMO is still rising and is not overbought.
A rising trend channel dominates the one-year daily chart. I notice that price has not been able to get close to the top of this trend channel since mid-April. Each time it rises to new all-time highs, it pauses or declines. This is what forms a new bearish rising wedge. Price is attempting to break out of it already, but it is still notable.
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.
Not much change in participation. The BPI rose, but the SCI and GCI were mostly unchanged. Another rally day and no real improvement in these indicators.
We do see that of the 64% with 20-EMA > 50-EMA above, we slightly more stocks with price > 20/50-EMAs on the participation chart below. This is good. For awhile we have seen less stocks > 20/50-EMA in comparison to the Silver Cross Index reading.
Climax Analysis: No climax today, but Friday's certainly played out as expected with today's rally. New Highs expanded and the VIX closed above its EMA on the inverted scale which does suggest internal strength. The upper Bollinger Band hasn't been punctured yet either. We could see another day or two of rally.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
These indicators continue lower. Now that the upside initiation climax has likely resolved with today's rally, these indicators tell me to expect a decline or at best sideways movement. Yet we are seeing more stocks with positive momentum and that could continue to prop up the market.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL. The market bias is NEUTRAL.
These indicators are flat. They moved lower last week and began moving higher with Friday's rally. The negative divergences are the biggest concern. Only about half of the SPX have PMO crossover BUY signals. This reading is not oversold, it is neutral. We should be seeing much more than half of this index on BUY signals given we are again making new all-time highs.
CONCLUSION: Friday's upside initiation climax resulted in higher prices as expected. We did see some improvement in participation--specifically there is now a percentage of stocks that do not have "silver crosses" yet their price is above their 20/50-EMAs. They are on their way toward silver crosses because the EMAs follow price. However, we still should be cautious given the STOs are moving lower and negative divergences still pepper most of our indicator charts. Currently I am 50% exposed to the market.
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Last week's comments still apply:
"It seems less and less likely that Bitcoin is going to enter a rally that will ultimately challenge all-time highs. It's not impossible, but it is persisting in the two-month trading range, and for the last three weeks it can't even rally to the top of the range. This hints at a breakdown, not a rally."
Yields are rebounding, but they have not broken their declining trends.
10-YEAR T-BOND YIELD
The 10-year yield bounced right off gap support and managed to crawl back above the 200-EMA. $TNX needs to recapture the longer-term rising trend or break prior declining trends before we get too bullish on this bounce.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar lost its short-term rising trend last week. Today it held onto support at the 200-EMA. The RSI is still positive and while the PMO has flattened, it hasn't had a negative crossover. The chart has gotten less bullish, but it isn't particularly bearish yet.
I haven't given up on the large double-bottom pattern yet, but if price loses support at the 20-EMA, the Dollar will be in trouble.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: BUY as of 5/21/2021
GLD Daily Chart: Gold is holding steady above the prior trading range, but is unable to break above the 50-EMA. Given the PMO is nearing a crossover BUY signal and the RSI is considering moving positive, I'm cautiously optimistic about a Gold breakout.
GOLD Daily Chart: Discounts are expanding, but haven't gotten high enough to look for a reversal based on sentiment, it does add to my optimism that Gold will breakout again.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are getting so close to being ripe for the picking. If Gold can breakout, we can start scoping out possible candidates in this industry group. Readings are very oversold, but I'm not seeing enough improvement in participation. If the SCI turns back up, that will convince me we are nearing a possible reversal for GDX.
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 declined last week, taking the RSI out of overbought territory. The PMO generated a crossover SELL signal just before the big down day on Wednesday. The PMO has flattened and price is back above the 20-EMA.
While price hasn't recaptured the short-term rising trend, it remained comfortably above the longer-term rising trend. We will likely see more consolidation above the 20-EMA given the RSI never entered negative territory on this pullback.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: This could be setting up a bullish reverse island, but TLT failed at overhead resistance last week and today we have a bearish engulfing candlestick. The PMO is also falling. More than likely we will see a continuation of this breakdown to the 20-EMA, not a bullish island reversal.
Yields of course drive the price of TLT. With long-term yields reversing, a test of the 20-EMA makes sense.
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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