We received notice in our email box that IJR had a ST Price Momentum Oscillator (PMO) crossover BUY signal. Given the market is acting a bit 'toppy', we definitely wanted to investigate. There are bullish characteristics on this chart, but we do question the inability of price to overcome the short-term declining trend. We do see that the Silver Cross Index (SCI) had a positive crossover its signal line and participation is improving. But is it really? We still have only about half of the index with price above their 20-EMA and even with the recent gain, only 45% with price above their 50-EMA. Also notice that relative performance against the SPX while no longer declining, is only keeping pace. If we see price get above the 20/50-EMAs and an IT Trend Model "Silver Cross" BUY signal, then we will be bullish.
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
For the week:
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.
For the Week:
RRG® Chart: This is the daily RRG of the 11 sectors in relation to the SPX. XLE is showing improvement, but is still underperforming the SPX by a mile based on its distance from the centerlines. XLV, XLC and XLF are traveling in the very bullish northeast direction and XLF is turning back toward Leading. XLRE has fallen out of favor and is weakening alongside XLK.
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: Price set new all-time highs this week but after forming a bearish shooting star candlestick, price fell back today. The RSI is still positive but is retreating. Total Volume rose and nearly reached its one-year average. Heavy volume on a decline is generally bearish.
The PMO has gone flat, but is still technically on a crossover BUY signal. With today's decline, a short-term negative divergence has set-up between price tops and OBV tops.
SPY Weekly Chart: The SPY is still on a weekly PMO SELL signal. The steep rising wedge dominates the weekly chart suggesting a breakdown of the intermediate-term rising trend.
SPY Monthly Chart: We are seeing a parabolic advance on the monthly chart. Parabolic price breakdowns are generally swift and very painful. The monthly RSI shows that price is very overbought in the long term. However, the monthly PMO is configured bullishly, albeit overbought.
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 Silver Cross saw a positive crossover this week, but the advance is very slow. The GCI remains very overbought and will likely stay that way until we see a correction. The stocks in the index, like the index itself, have 50-EMAs that very far away from their 200-EMAs.
Participation improved this week with more stocks above their 20/50/200-EMAs. While this is positive, we note that readings are already getting near-term overbought.
Climax Analysis: We didn't have any climax days this week. The VIX remained below its EMA all week on the inverted scale suggesting internal weakness.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
The STOs had a rocky week. They have stayed overbought all week and today began to decline suggesting more downside next week.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The IT indicators still look bullish. We saw marked improvement in %PMO crossover BUY signals at a somewhat respectable 62% to finish the week. These readings aren't yet overbought suggesting the IT rising trend should sustain awhile longer.
Bias Assessment: At this point the market bias in "neutral" in the short and intermediate terms given %Stock >20/50-EMAs are close to the SCI reading of 61%.
CONCLUSION: The market hit new all-time highs this week, but market participants did not change their nervousness given the VIX remains below its EMA on the inverted scale. While we didn't see a downside initiation climax, we did see overbought STOs declining today suggesting the market is ready to pullback toward the intermediate-term rising bottoms trendline. There isn't any real damage to intermediate-term indicators so at this point we expect that IT rising trend to hold. Earnings from mega-cap stocks were not well-received with only Alphabet (GOOGL) continuing its rising trend. Amazon (AMZN) nosedived today dropping more than 7.5%. When these growth stocks begin to falter, expect the market to follow suit.
Erin remains 40% exposed to the market. She was considering adding more positions this week, but the market is ready for a short-term pullback, so best to keep exposure steady.
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Bitcoin is tantalizingly close to an upside breakout from the trading channel it has been in for more than two months. The 20-EMA is nearing a positive crossover the 50-EMA which would give it an IT Trend Model "Silver Cross" BUY signal. The PMO has reached positive territory and is rising strongly, but the RSI is now in overbought territory. We suspect a breakout will occur.
Interest rates remain in an intermediate-term decline.
10-YEAR T-BOND YIELD
$TNX rebounded last week, but got stuck at the steep declining tops trendline. The PMO is flat and nearing a crossover BUY signal, but given the negative RSI and declining trend, we aren't looking for yields to rise.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar broke down from the bearish rising wedge this week, plunging to test the 50-EMA. It's holding given the rally today and the RSI is trying to get back into positive territory above net neutral (50). This could be an excellent area for a rebound, but the PMO is configured very negatively.
The large bullish double-bottom on the one-year chart is disintegrating with this week's decline.
UUP Weekly Chart: The weekly chart does have a positive weekly PMO and RSI, but seeing it turn down before testing overhead resistance suggests this pullback will begin in earnest.
UUP Monthly Chart: The monthly RSI is negative and the PMO is still technically in decline. The double-bottom does look more appetizing on the monthly chart, but we know it is falling apart in the shorter term.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: BUYas of 5/21/2021
GOLD Daily Chart: Gold rebounded this week as the Dollar struggled. Today's decline had price failing to overcome overhead resistance. However, price does remain above the 20/50-EMAs and the PMO is rising.
We may be in a new trading range that suggests Gold will decline and test the bottom of it.
GOLD Weekly Chart: The weekly chart is about as Neutral as can be. The RSI is neutral and the PMO is flat. We didn't see much follow-through on the breakout from the declining trend channel. Participants are getting less bullish which could bode well for Gold, but for now it may continue in the current holding pattern.
GOLD Monthly Chart: The monthly chart is mixed. The RSI is positive and you could make a case for a bullish cup and handle. However, the monthly PMO is on a crossover SELL signal. All signs point to Gold continuing sideways.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners improved greatly this week with a new PMO crossover BUY signal, an RSI that reached positive territory and a positive crossover on the SCI. Participation under the surface is also improving. Given over 66% of members have price above their 20-EMAs and only 10% currently have 20-EMAs > 50-EMAs, we have a strong short-term bullish bias. The next challenge will be a breakout above the 200-EMA.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Crude Oil continues to rally but is getting ready to hit overhead resistance. The PMO is nearing a crossover BUY signal and the RSI is positive suggesting a possible breakout ahead.
USO/$WTIC Weekly Chart: The pullback on USO coincided with $WTIC reaching strong overhead resistance at $77. The weekly PMO is topping and the RSI is overbought. If we do see the breakout on $WTIC, that should spur a rally in oil prices.
WTIC Monthly Chart: The monthly chart is very bullish with the exception of overhead resistance at $77-$78. Given the strong rise in the PMO and positive, not overbought RSI, the long-term picture is quite favorable for crude oil prices.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: Given long-term interest rates continue to fall, Bonds should continue to rise. It has been slow going and price is struggling to overcome overhead resistance at the early July top. Given today's PMO crossover SELL signal in overbought territory, we may have to wait a bit longer for a breakout.
The 50-EMA is making its way toward the 200-EMA so we could see a LT Trend Model "Golden Cross" BUY signal very soon.
TLT Weekly Chart: The weekly indicators certainly suggest overhead resistance will be overcome. The weekly RSI is positive, rising and not overbought. The weekly PMO is rising on an oversold crossover BUY signal. Resistance is still the biggest issue.
TLT Monthly Chart: The monthly chart is beginning to look a bit more bullish as the monthly RSI is positive and the monthly PMO is beginning to decelerate. Price did manage to breakout of its declining trend channel, but it is now pushing against the top of the longer-term rising trend channel.
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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