We have been watching Volume Ratios on the NYSE this week and for a few days they have been suggesting we would see a buying exhaustion. Our climactic indicator set was not confirming those climaxes, but today, they are all telling us there was a downside initiation climax--translation, this is likely the beginning of the decline.
Note on the 5-minute candlestick that there was an effort midday to bring price back into the green after a big drop in the morning. However, it failed and price stayed in a declining trend the rest of the day. On bright spot is that price held the low set in the morning. However, given the negative configuration of the RSI and tops on the PMO, support seems tenuous at best. The PMO failed to see positive territory all day.
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: XLB, XLU and XLF have plunged into the "Weakening" quadrant and are continuing to travel in the bearish southwest direction. Four sectors are showing excellent relative strength as they travel in the bullish northeast heading: XLRE, XLC, XLV and 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: It wasn't entirely surprising to see price pullback today after tapping the top of the bearish rising wedge.
While the RSI is positive, the PMO topped below its signal line, aborting what looked like an imminent crossover BUY signal. Total Volume is still not backing our climax indicators as it retreated once again today.
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.
On Monday (8/9) Carl discussed the concept of a "stealth correction" during the DecisionPoint show. You can watch it HERE.
The SCI and GCI not surprisingly moved lower.
Participation in all timeframes saw damage. Clear short-term negative divergences can be piled onto the intermediate-term negative divergences that we've already been talking about.
Climax Analysis: Technically Net A-D was below the 300 level, but the jump to the downside certainly qualifies as a climactic reading. New Highs pulled back and the VIX is now below its EMA on the inverted scale.
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.
To confirm climaxes, we turn to the Volume Ratio charts. Both the NYSE and SPX Down/Up Volume Ratios are confirming today as a downside climax.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
The STOs rose today, but they are in overbought territory and will likely follow price down soon. Only 43% of the SPX members have positive momentum. Not an oversold percentage.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
I don't usually include the thumbnails, but I wanted to point out the negative divergence within given IT indicators topped today. %PMO Crossover BUY signals topped below its signal line.
Bias Assessment: We've added this new section called "bias assessment". It occurred to us 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.
The bias is neutral to bearish based on the lower participation numbers as compared to the SCI. The GCI continues to move lower and could see even more damage moving forward as more stocks dip below their 200-EMAs.
CONCLUSION: Today we had a confirmed downside initiation climax. While STOs may still be rising, all others fell today. STOs are overbought so seeing them get even more overbought supports the thesis of a selling initiation in the works. Tighten stops and make sure you are in sectors and industry groups that are still showing relative strength. Remember XLK, XLC and XLV are still showing relative strength, but as I said, make sure the group your in is outperforming. I am 50% exposed to the market.
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 firstname.lastname@example.org for more information!
Bitcoin is about to execute the bearish rising wedge. At this time it is holding above support at the April low and 20-EMA. Additionally the RSI is currently positive. The PMO triggered a crossover SELL signal and although the RSI is positive it is traveling lower.
Yields have begun to rebound.
10-YEAR T-BOND YIELD
$TNX broke the declining trend that began at the May top. In addition, they rose above the 50-EMA. The RSI is now positive and we have a PMO bottom above the signal line. All of this points to higher rates.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The bearish engulfing candle from yesterday didn't play out with a decline today. In fact, price stayed above the 20-EMA the entire day. Currently the rising trend out of the June low is intact, but it forms the bottom of a bearish rising wedge. The PMO and RSI do look bullish so we could see another go at overhead resistance.
There are bullish patterns on the one-year chart depending on how you look at it. The large bullish double-bottom pattern and bullish cup with handle pattern dominate the chart.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GLD Daily Chart: GLD closed higher and above the 20-EMA, however the chart still has a bearish bias. Price has not yet recaptured the rising trend drawn from the March low and it remains below the July trading range. The PMO may look good, but the RSI could see negative territory very soon.
(Full disclosure: I own GLD)
GOLD Daily Chart: $GOLD is back in the July trading channel and today closed on the rising bottoms trendline. Discounts are paring back which means investors are getting slightly more bullish on Gold. The problem for Gold is a bullish Dollar chart.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners continue lower after failing to overcome the 20-EMA for a second time this month. The PMO turned up, but the RSI remains negative and participation is still lacking. The SCI is still holding a 0.00 reading. We may have a bullish falling wedge, but price failed twice to test the top of it. I don't believe these stocks are ripe, but when they are, there will be lots of upside potential.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 8/18/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO dropped after a strong rally this week. The rising trend is still being preserved and price closed above the 20-EMA. The PMO suggests we will see higher prices, although the RSI doesn't seem so sure.
The breakout from the large bullish falling wedge also suggests higher priced ahead for Crude Oil.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: BUY as of 8/10/2021
TLT Daily Chart: TLT may have closed higher, but the very short-term declining trend is still there. Additionally price was unable to get back above the 20-EMA. The RSI did manage to get back into positive territory but the PMO still looks very negative.
Price is sitting within a symmetrical triangle and those are continuation patterns meaning we should see an upside breakout. However, with the PMO top below the signal line and yields looking bullish, I would expect another test of the 200-EMA and the bottom of the triangle.
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.