On Tuesday we had a rather narrow downside initiation climax -- narrow because it really only manifested on the Volume Ratio charts. Today there was another climax, which we will attribute to downside exhaustion. That doesn't mean that the decline is over, but a day or two of churn wouldn't be out of the question. Note the drop in New Highs, the "outside" the line Net A-D readings paired with very negative Net A-D Volume. Add to this, the VIX punctured the lower Bollinger Band on the inverted scale. We usually see a price rise of some sort afterward.
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: With today's decline, the PMO topped. The RSI was relieved of overbought conditions.
While we usually pay more attention to Total Volume, notice that the SPY volume was well-above its annual average. Typically we do see some upside relief after these spikes in negative volume on the SPY.
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.
Participation was already a problem, but today's decline made it worse. The SCI and BPI continue lower, and the GCI which has been unchanged for some time, declined.
We saw significant damage to %Stocks > 20/50-EMAs.
Climax Analysis: The one item that really didn't react the way we usually see on climax days was Total Volume. While it was elevated, but remains below its annual average. This is minor, we still view this as a downside initiation climax.
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 clearly confirmed that today was a climax day. DOWN/UP Volume Ratios were outside our 3.0 climax level.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is Neutral.
Not surprisingly, the STOs both declined with the STO-V hitting negative territory. We now have only 37% of SPX stocks with 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 had been rising since last month's low, but today's decline finally turned these indicators lower.
CONCLUSION: More than likely we saw a downside initiation climax today. While this usually precedes a day or two of rally, the bias in the market is neutral in the short and intermediate terms. We suspect that we will see some churn. The FAANG+ stocks didn't sustain that much damage. They are the barometer of the market and they aren't seeing much in the way of downside pressure yet. As we continue to write, these stocks are the key to propping the market up or taking it down. Stay cautious. Participation is still a big problem.
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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.
Longer-term yields are accelerating downward. This will help Bonds continue even higher.
10-YEAR T-BOND YIELD
After the March top a promising falling wedge formed; however, the May top was followed by ever-accelerating declining tops lines, and the bullish falling wedge resolved to the downside on Tuesday of this week. The rising trend line was also taken out, and the next support is at 12.00.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar's rising trend was compromised today, but price does remain above the 200-EMA and the RSI is positive.
Overall the one-year daily chart is bullish with the large bullish double-bottom dominating the chart. The PMO is trying to top, so we can't put too much weight on this pattern.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: BUY as of 5/21/2021
GLD Daily Chart: Gold finished lower despite the declining Dollar. However, we did see a higher high and support held.
GOLD Daily Chart: That higher high punctured the longer-term declining trendline and the PMO is rising. Both are encouraging.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners appeared to be recovering, but today's decline took out the meager participation we had begun to see. As I've noted earlier, we can't go "all in" on Gold Miners until we at least have a rising SCI. The PMO remained steady.
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 was up significantly today, but it didn't undo the damage it sustained over the past two days. Indeed, we have a lower high today. It is positive that price finished back above the 20-EMA, but the negative PMO could point to a possible test of the 50-EMA.
The RSI did remain positive so this is likely a natural pullback after a strong rally.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: TLT nearly closed above resistance today. The RSI is overbought, but the PMO is rising nicely.
Given yields are tumbling ever faster, we expect higher prices and a sustained overbought RSI.
Technical Analysis is a windsock, not a crystal ball.
--Carl & Erin Swenlin
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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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