The Technology sector (XLK) has been a bellwether for the market so seeing any kind of damage to this chart is significant to the market's trend. Carl and I have both written about the lack of participation in this sector and its bearish bias given there are fewer stocks with their price above their 50-EMA than the percentage of stocks with a 20-EMA > 50-EMA. That tells us that those "silver crosses" are in danger of falling further. Now we have a crossover SELL signal on the PMO.
Adding insult to injury is the new PMO crossover SELL signal on the Healthcare sector (XLV). The bias is mostly neutral right now given their are about the same number of stocks with their price above the 50-EMA as there are "silver crosses". This sector used to be considered "defensive", but over the COVID crisis it became an area that was aggressively traded in the volatile Biotech industry. A weak market could see XLV run sideways, but we should understand that momentum is a problem given this new SELL signal.
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.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
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: XLRE has moved into "Leading" and now XLF and XLI have a northeast heading. Looking at the XLK and XLV charts, it shouldn't surprise us to see those sectors with a weak southwest 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: We were not surprised to see the market rise today given yesterday's selling exhaustion, but it was a bit surprising to see the voracity of today's rally. A bit more impressive than the "dead cat" bounce we expected. A bounce off the 50-EMA has preserved the short-term rising trend.
Total volume was elevated and above the annual average. The VIX penetrated the lower Bollinger Band on the inverted scale yesterday and today; however, today the VIX closed within the Bands which suggests we could see some follow-through.
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 GCI fell slightly. Given we had a rally of +1.43%, we should see improvement on the SCI and BPI...we did not.
Of the 56.6% of stocks on "silver crosses", about 5% are in jeopardy of losing those signals given the %stocks above the 50-EMA is only 51.8%. So while we saw improvement in participation, it wasn't enough to counter the bearish bias.
Climax Analysis: It's pretty clear on the chart that today was an upside climax. Given this climax is arriving after a declining trend (which is still there), we would classify this as an upside initiation climax or buying initiation.
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 confirm this with the Up/Down ratios being elevated past the 9.0 level.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
The STOs are oversold and are now rising which is favorable for the market and we do see that rising momentum stocks increased from 15% to 40% on today's rally. Still that is less than half of the index.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL. The market bias is SOMEWHAT OVERSOLD.
The IT indicators continue lower but are now beginning to reach oversold levels. Certainly we've seen lower readings, but since the bear market finish, the ITVM is oversold and the ITVM is nearing near-term oversold territory. Today's bounce did preserve the intermediate-term rising trend.
CONCLUSION: We find ourselves with an upside initiation climax that suggests we could see some follow-through on today's rally. However, participation continues to be a problem and leaves us with a bearish bias to contend with. If we do see follow-through on this rally, it isn't likely to last. Best case would be consolidation and price continuing to hug the rising trendlines. Remember that climaxes help us to see what the next day or two will bring. It doesn't tell us a major reversal is taking place. We remain cautious and still consider this a "dead cat" bounce. I've pared back my market exposure to just 35% and my stops are very tight. I need to see the bearish bias and participation steadily improving before I increase my market exposure.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact email@example.com for more information!
Bitcoin is now trading below 30,000. It hasn't quite fallen below the June low, but we should expect to see some serious damage ahead given the PMO is pointed down and the RSI has been negative for over a month.
The declining trend in long-term yields continues.
10-YEAR T-BOND YIELD
While gap support didn't hold, we do see some possible support now at the mid-February trough. $TNX bounced right off that level. The RSI is beginning to rise out of oversold territory, but the PMO still tells us not to expect a major recovery. It is still vulnerable to a breakdown below 1.1%.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar broke out above the July tops and is now headed to test resistance at the March high.
The resistance level also happens to be the confirmation line for a longer-term bullish double-bottom. The RSI is positive and the PMO is rising after bottoming above the signal line. Look for a successful test of that confirmation line.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: BUY as of 5/21/2021
GLD Daily Chart: With the Dollar putting pressure on Gold, it really hasn't been able to do much. Support at the EMAs is barely holding. The big problem is the bearish rising wedge that is beginning to resolve downward as expected. The RSI is not helpful as it has been staying neutral along the 50 level.
While the PMO is still on a BUY signal, it is beneath the zero line. Discounts continue to expand, but we haven't hit extreme levels yet. More than likely we will see a test of the rising trendline drawn from the late March low to the June low.
Full Disclosure: I own GLD.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners were up today but they are still flirting with a breakdown at the November low and the short-term lows from June and July. The PMO is falling and we didn't see any significant improvement in participation.
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 may have closed higher, but like Gold it isn't holding its rising trend. Today USO set a lower low and the intraday high did even come close to yesterday's intraday high.
Price is still holding above the support zone between the March highs and the May highs. However the negative RSI and falling PMO suggest we will get a breakdown or at best consolidation along that support zone.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: We have a textbook bearish engulfing candle today on TLT which tells us we will likely see TLT fall further. On the bright side this has taken the RSI out of overbought territory.
The PMO is still rising, but seeing price falter at overhead resistance and a bearish engulfing candle, it may take a bit longer for a breakout.
Technical Analysis is a windsock, not a crystal ball.
(c) Copyright 2021 DecisionPoint.com
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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.