Today I received an email alert that both XLI and XLV had positive PMO crossover BUY signals. Let's look at the DP "under the hood" sector charts.
XLI hasn't yet broken above the declining tops trendline. That trendline is the top of a bearish descending triangle. While there are a few pockets of strength, we need to see that breakout to build our confidence in this sector. Additionally while participation of stocks above their 20/50-EMAs has improved, we still have a declining SCI and a BPI that just topped below its signal line. This PMO BUY signal could go the way of the previous one at the beginning of this month--very little upside movement.
The XLV chart looks much more promising. First we have a breakout to new all-time highs. The RSI is positive and not overbought. The PMO is whipsawing back into the BUY signal. The SCI and BPI are rising and participation of stocks with price above their 20/50-EMAs is positive and not overbought. Notice also that relative strength is improving. It's time to look within Healthcare for promising trades.
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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: XLC is curling back up toward Improving. XLU is now moving toward Weakening.
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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: Trading was somewhat choppy intraday, but price finished slightly higher. The RSI is positive and momentum is attempting to shift higher. The short-term declining tops trend line was broken to the upside, but follow-through was a bit disappointing. Of course, yesterday's upside exhaustion climax did warn us that we could be in for some churn.
The IT rising trend channel is still intact, but nestled within is a bearish rising wedge. We may've escaped a breakdown this time around, but the pattern suggests this trend will be broken.
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 continues to decline despite higher prices. The BPI ticked up, but nothing to write home about. We did see the GCI drop a few tenths of a point. We may finally start to see long-term trend deterioration among the members of the SPX as they more stocks are finding their price below the 200-EMA.
Specifically, we can see that 86% of stocks have price above their 200-EMAs, that gives us a somewhat bearish bias in the long term. The GCI can only move lower if more stocks are below their 200-EMA as that will drag the 50-EMA into a "death cross" of the 200-EMA.
Climax Analysis: No climax today. I do note that VIX turned down below its EMA on the inverted scale today and that suggests internal weakness in the market.
Short-Term Market Indicators: The short-term market trend is UP and the condition is SOMEWHAT OVERSOLD.
I like the look of the STOs as far as moving out of oversold territory. However, I have heartburn that only half of the index has rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERSOLD.
While these indicators near-term oversold, they are stagnating and deteriorating. They did rise on the rally Tuesday, but they moved slightly lower today.
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.
Currently, the short-term bias is somewhat bearish given %stocks > 20-EMA is less than the SCI.
On an intermediate-term basis, the is somewhat bearish given %stocks > 50-EMA is less than the SCI.
The percentages are very close so the bias is neutral to bearish.
CONCLUSION: Yesterday's upside exhaustion climax manifested in churn today and will likely continue this tomorrow. The STOs are rising, but seeing the VIX turning down below its EMA and a declining SCI on three rally days tell us the market is still internally weak. Only half of the SPX have rising momentum. This is offering us an excellent opportunity to sell weaker positions on this short-term rally. There is no reason to keep "go nowhere" stocks/ETFs right now as it enhances your risk. I am carefully watching the PMO on my stocks for any sign of weakness. However, I am eyeing a few possible adds to my portfolio to replace my "go nowhere" stocks. Currently I am 30% exposed to the market.
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Bitcoin bounced off important support at 30,000, but it is again being stymied by the 20-EMA and the declining trend continues. While the RSI is improving based on yesterday's big rally and the PMO turned sharply higher. We need to see the declining trend overcome, a breakdown is still not out of the question.
Longer-term rates are continuing in their declining trend.
10-YEAR T-BOND YIELD
$TNX lost a basis point today but is hovering in the support zone between 1.1 and 1.3. The RSI remains negative and the PMO still hasn't turned up.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar may've closed up today, but that is one ugly breakdown from the bearish rising wedge. The PMO is acting toppy, but the RSI remains positive and the 20-EMA is still holding as support.
The large double-bottom is visible and until I see a breakdown below the 200-EMA, I still consider that bullish pattern intact. So UUP is short-term bearish, but intermediate-term bullish.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: BUY as of 5/21/2021
GLD Daily Chart: Gold rallied, but nothing overly impressive. The RSI is neutral and the PMO is rising, sort of. The rising wedge resolve downward as expected and price is still below key moving averages.
GOLD Daily Chart: We now have a short-term rounded top and a break of the short-term rising trend. I don't see anything to support higher prices in the short term. In the intermediate term, there is a rising trend.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are going nowhere as they attempt to hold on to support. The PMO is on a SELL signal and the RSI is negative. I don't much improvement in participation. We'll continue to wait it out.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Another rebound for Crude Oil today. Price has now gotten back above the 20-EMA and the RSI is reaching positive territory.
The PMO is decelerating but hasn't yet turned higher. Today's rally was encouraging.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: TLT is back above resistance. With yields still in a declining trend, we should expect Bonds to do well. The RSI is also positive.
The PMO looks "iffy", but as long as price holds support at the 20-EMA, I do expect them to challenge the intraday high on Tuesday.
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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