The Utilities sector (XLU) has been seeing steady improvement and finally appears ready to break out of its declining trend channel. The PMO had already triggered a crossover BUY signal and now we have the RSI rising and not overbought. The OBV has been confirming the rally with rising bottoms, but there is a "reverse" divergence given the OBV is making new highs, but price is not. This tells us that despite a high influx of volume, price wasn't able to reach the prior highs. Still, the chart is very bullish. Notice the improvement in participation within the sector. You can even see some new outperformance against the SPX.
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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.
RRG Chart: XLV has now landed into the Weakening category. XLRE jumped into the Improving category. Technically speaking there are no sectors that are "Leading".
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 selling initiation from Tuesday finally played out today with a decline. Still, a -0.34% decline is far from being a sell-off. The 20-EMA has yet to be tested. Total volume was about average. We do expect volume to be a bit higher tomorrow with options expiration.
The PMO turned down today. The RSI is beginning to retreat, but remains in positive territory. The rising wedge is a problem especially given price did turn down after reaching the top of the pattern.
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 BPI and SCI moved lower again today while the GCI is holding steady at the overbought reading of over 95%. You know that the market is extended when so many stocks still have 50-EMAs > 200-EMAs. The run up from the bear market lows pushed price well above 50/200-EMAs so it will take some time for that reading to fall. A look at the SPX 50/200-EMAs gives you sense of how extended most of these stocks are as the 50-EMA is still firmly planted well above the 200-EMA.
Participation did decline slightly, but we didn't see much damage given the market was down today.
Climax Analysis: Today was not a climax day. New Highs are beginning to pare back and the VIX is staying below its EMA which suggests internal weakness.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
Interestingly, the STOs actually turned up today on the decline. These indicator reversals are generally prescient, but I'd say any rally we get from those readings won't likely be strong. More than likely this is signaling choppy trading ahead. There also wasn't much damage as far as 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.
All of our intermediate-term indicators pulled back today. We have strong negative divergences going into this current decline.
CONCLUSION: There is clear rotation into defensive sectors right now, hence the new "Silver Cross" BUY signal on XLU. Typically these stocks lead when the market is readying for a pullback or correction. Participation is staying steady for now and the STOs turned up today. While that is positive, I would remain cautious. If you're going to expand your exposure to the market, there are some defensive groups that are offering some opportunity. Just set the stop after you buy in case this new declining trend takes hold.
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The PMO is headed for a crossover SELL signal and the RSI turned down below net neutral (50). This tells us that Bitcoin has been trading in the bottom half of its trading range for some time. A PMO SELL signal below the zero line spells trouble for Bitcoin. I would prepare for 30,000 support to be broken.
The declining trend in long-term yields has not been broken.
10-YEAR T-BOND YIELD
$TNX was recovering, but today swooned. The 10-year yield is back below the 200-EMA and the long-term rising trend. Gap support is available to $TNX between 12.0 and 12.5. However, given the negative and not oversold RSI as well as the PMO top below the signal line and the zero line, that area may not hold up.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar is chopping around above the 200-EMA. The short-term rising trend was broken, but UUP has avoided a serious breakdown below the 20-EMA. Support would be available should it lose steam around $24.60. The flat PMO isn't telling us much but the positive RSI suggests the rally will resume, possibly with a less steep rising trend.
The large double-bottom pattern still looks good on the one-year daily chart, but price will need to test that confirmation line soon or the pattern will need be scuttled.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: BUY as of 5/21/2021
GLD Daily Chart: Gold inched slightly higher. I like this breakout from the short-term flag for GLD. We also see a positive RSI and a PMO crossover BUY signal. The next test will be resistance at the early May top.
GOLD Daily Chart: This looks a like a solid breakout now that price is staying above the 50-EMA. Discounts are elevated, but I'd like to see them expand even more to give us a sign that sentiment has gotten too bearish.
Full Disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners may be ready to breakout. There is a "death cross" on tap given the 50-EMA is nearing a negative crossover the 200-EMA. I'll be 'all in' on Gold Miners when we see a breakout and a move to close the June gap. It is looking good given the nearly positive RSI and new PMO crossover BUY signal. You can also see that "under the hood" participation is improving, especially in the short term. The BPI bothers me as it headed lower even as more stocks saw price vault the 20-EMAs.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Right after I annotated the rising trend channel, price dipped out of it. The RSI has now entered negative territory and the PMO looks especially bearish. We may finally see a correction on Crude Oil. There is a short-term double-top possibly forming.
At a minimum I would expect to see price pullback to the 50-EMA.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: Bonds had another stellar day as yields continued to drop. The PMO bottom above the signal line and positive RSI suggest we may finally see a breakout above overhead resistance.
Notice that price did not need to test the intermediate-term rising trendline and instead bounced off the 20-EMA. That's a bullish sign as well that we will finally get the breakout.
Technical Analysis is a windsock, not a crystal ball.
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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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