Technology (XLK) finished slightly lower, but it was enough to push the PMO below its signal line. The NDX also returned to a PMO SELL signal today. Is Technology that bad? The picture is somewhat mixed. Price action does show a new double-top in the making and we can see that relative strength against the SPX is beginning to deteriorate. On the bright side, price is holding above its 20-EMA.
Overall, participation numbers aren't that bad. The SCI is still rising and the BPI also crossed above its signal line. While %Stocks > 20/50-EMAs is rising, it should be noted that fewer stocks have price > 50-EMA vs. the SCI. This tells us we could see damage to the SCI soon. I also note that while we have over 72% of stocks greater than their 20/50-EMAs, those readings are actually near-term overbought. Tread lightly with this sector moving forward.
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MAJOR MARKET INDEXES
The Russell 2000 (IWM) and the SP600 had stellar days. Although a look at the price chart for SP600 ETF (IJR) shows us that while there are few improvements to the SCI and a breakout on stocks > 20/50-EMAs, price is still stunted by the 20/50-EMAs and the declining trend remains.
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.
RRG® Chart: It should be noted that the ONLY sector that is traveling in the very bearish southwest direction is Technology. Healthcare is back into leading with a strong northeast heading.
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: After five days of rally, it isn't surprising to see some retracement. The RSI is still positive but the PMO is beginning to flatten out.
Total Volume was elevated and just a hair lower than yesterday. Still it is important to note that we've had two days of elevated volume on declining prices.
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 SCI is still pointed upward but it hasn't had a positive crossover its signal yet. The BPI on the other hand did have a positive crossover. There is still a declining trend on the BPI and we can see that the GCI is still trending slightly lower.
Participation continued lower which isn't surprising. The %Stocks > 20/50-EMAs are turning down in near-term overbought territory.
Climax Analysis: No climax today. Net A-D was lower, but Net A-D Volume was slightly higher. Basically the market is in "neutral". The VIX remains underneath its EMA on the inverted scale and has not punctured the lower Bollinger Band yet. This means there is still internal weakness within the market.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
The STOs continue lower suggesting price will do the same tomorrow. Positive momentum among the members of the SPX continues lower. This decline is coming in near-term overbought territory.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The IT indicators continued to move slightly higher and we are seeing more PMO BUY signals within the SPX, however that number is still very weak.
Bias Assessment:We've added this new section called "bias assessment". It occurred to me that one of the ways we can measure market bias is to compare the SCI to the percent of stocks above their 20/50-EMAs. When the percentages are lower than the SCI, the market bias is bearish and if they are higher, it is bullish. Any "mechanical" signal requires additional analysis to confirm the numbers.
Market bias is about as neutral as you can get with all percentages being practically equal to the SCI. As I mentioned earlier, the problem is that %Stocks > 20/50-EMAs is topping in near-term overbought territory.
CONCLUSION: The STOs continue lower and participation overall is falling from near-term overbought territory. These percentages were already too low to sustain a rally to new all-time highs and now they are getting worse. With the Fed punting the football, uncertainty still reigns and with uncertainty we usually see decline. The VIX tells us that traders are still nervous. I would expect to see the market in general continue to decline further. I still remain 40% exposed to the market with fairly tight stops on most of my positions.
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Price is now testing overhead resistance at the top of its trading channel. While the PMO looks good and has reached positive territory, the RSI is entering overbought territory. This is a prime spot for Bitcoin to turn back down or at least consolidate somewhat to get the RSI out of overbought territory. I suspect we might see a breakout here, but overhead resistance will likely hold at $42,500.
Longer-term rates are continuing in their declining trend.
10-YEAR T-BOND YIELD
$TNX's declining trends continue to get steeper. I noticed that we now have a declining trend channel. I had hoped to see a bullish falling wedge, but no. Price is testing the top of the channel. The PMO really wants to turn back up, but it hasn't yet and the RSI remains negative. I'm not expecting a breakout yet.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: We have giant bearish engulfing candlestick suggesting that UUP will not be able to hold support along the 200-EMA. Given that the RSI just entered negative territory and the PMO is on a SELL signal, I would look for a test of the 50-EMA.
The large bullish double-bottom is clearly in jeopardy. I'll keep it in mind, but it will certainly dissolve if price moves much lower.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: BUY as of 5/21/2021
GLD Daily Chart: GLD formed a bullish engulfing candle today, but price remains stymied by the 20/50/200-EMAs. On the bright side, support is holding and in the case of GLD, the PMO has turned up above its signal line and the RSI has entered positive territory above net neutral (50).
GOLD Daily Chart: The PMO on $Gold is still moving sideways. Discounts are retreating somewhat which tells us that investors are getting more bullish on Gold.
GOLD MINERS Golden and Silver Cross Indexes: I have had a few readers tell me that they are getting interested in Gold Miners. I have to agree, but I'm not yet ready to open my exposure to them more than I am already (and that position is very small). Why? Yes, today's rally was strong and yes participation of stocks > 20-EMA is expanding quickly. However, the SCI remains unchanged. I need to see more IT Trend Model BUY signals. I've been burned by jumping the gun, but this is beginning to look more interesting with today's new PMO crossover BUY signal.
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 is holding above the 20-EMA and it has a positive RSI. However, we don't have any positive momentum as the PMO is flat.
I expect to see USO to continue to hug the 20-EMA. If the PMO turns back up, I'll be more bullish. For now, I'm neutral on Crude Oil.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: Yesterday's comments still apply.
"TLT is riding a short-term rising trend. The intermediate-term rising trend is also safe." [A PMO SELL signal could appear tomorrow.]
"The RSI is still positive, but the PMO appears to be topping again in somewhat overbought territory. Yields are in a downtrend and while they rebounded somewhat, I'm not expecting the declining trend in yields to be broken near term. TLT would be a hold candidate, but not a buy until we see a decisive breakout above resistance."
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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