We are starting to see a strong bullish bias on the Energy (XLE) sector chart. Today XLE saw a PMO Crossover BUY signal. If you look 'under the hood' at the sector, there are still some problems. In fact, we can see that price hasn't overcome resistance at the 50-EMA or at the May lows. Currently not one of the stocks in this sector has a 20-EMA > 50-EMA given the 0% reading on the Silver Cross Index (SCI). However, there is a strong bullish bias given the improvement in participation of stocks with price above their 20/50-EMAs. This could be a 'sleeper' sector this week.
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
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.
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: Another day, another new all-time high. As exciting as that sounds, we can see that price isn't really making that much headway. The SPY is nearing yet another PMO crossover, but I've begun to ignore them given how flat the PMO is. We still see a slight negative divergence on the OBV.
The VIX remains above its EMA on the inverted scale which is positive and the RSI continues to stay in positive territory.
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 has turned up in near-term oversold territory which is bullish. However, the GCI continues to decline as more stocks are seeing "death crosses".
The negative divergences are still in play, but with participation continuing to improve underneath the surface that could clean itself up. In the shorter term, we are seeing higher highs.
Climax Analysis: We had a whiff of a climax today as the SPX Volume Ratio chart had a reading above our threshold of 3.0.
However, we didn't get confirmation on the NYSE Volume Ratio chart.
Additionally, when we look at our climax chart, we didn't see any outside readings on Net A-D and Net A-D Volume. This could suggest an exhaustion, but given the steady sideways market action, I wouldn't count on it.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
The STOs finally popped. This nearly erased the negative divergences. Momentum is steadily increasing among SPX stocks and participation is also improving. The problem ahead is that the STOs are already getting overbought.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT.
The IT indicators are improving steadily, but the negative divergences in this timeframe are still prominent. We also aren't seeing much improvement as far as PMO Crossover BUY signals.
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 bullish bias is now there in the short and intermediate terms. It appears that we will continue to see the SCI moving higher.
CONCLUSION: The STOs look very positive and despite a possible exhaustion climax, we are seeing marked improvement in participation. The SCI has bottomed in oversold territory and is continuing to rise. IT indicators are also on the rise. There is a clear bullish bias right now, but until we lose some of those negative divergences we should still stay fairly cautious. I pared back my exposure to 50%.
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Yesterday's comments still apply:
"Bitcoin reached the top of the rising wedge and resistance at $47500 and pulled back slightly. The RSI is overbought and suggests we could see a pullback at least back to support at $42500. The PMO is still rising and in fact, has a positive divergence with price lows. Support should hold, but it is time for more downside."
Yields are breaking from their declining trends. A rising yield environment is going to tear down Bonds quickly.
10-YEAR T-BOND YIELD
$TNX fell slightly but did set a higher high. The 50-EMA and the declining tops trendline are ahead as possible resistance, so we could see them back off or consolidate sideways. However, momentum is picking up so we expect that declining trend to be broken.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar pulled back today and appears headed back down to test the 20-EMA. The PMO really took a hit on this decline so I expect to see the Dollar pullback a bit more in the short term.
Longer term, you can see a bullish cup with handle pattern. That would suggest the Dollar will overcome resistance at the March top and push much higher. This is likely a digestion of the strong rally that began last week.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GLD Daily Chart: Gold rebounded but is up against overhead resistance. While this could be a bottom, sentiment isn't really bearish enough.
(Full disclosure: I own GLD)
GOLD Daily Chart: The one-year chart for $GOLD also displays the rally to overhead resistance. On the bright side the RSI is rising out of oversold territory and the PMO has decelerated. Overall, I expect to see Gold struggle at this area of overhead resistance.
GOLD MINERS Golden and Silver Cross Indexes: Miners came very close to testing support at the low for the year. Given Gold's rally, GDX likely profited. However, the 'under the hood' indicators don't look positive and the PMO is on a new crossover SELL signal. Overhead resistance will likely pose a problem for Miners just like it will for Gold.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: The Energy sector was boosted by today's 1.3% rise in crude oil prices. The 20-EMA is ahead as overhead resistance and the RSI is still negative.
However, looking at the deceleration of the PMO and the bounce off the rising bottoms trendline as well as support at the May tops, we should see some follow through.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: BUY as of 8/10/2021
TLT Daily Chart: TLT held onto its "Golden Cross" and set up a bullish doji candlestick as price tested the 50/200-EMAs. Yields are looking very bullish right now so we suspect this LT BUY signal was late to the party. The PMO is still pointed firmly to the downside and the RSI is negative. We could see a small bounce here, but it likely will be of the "dead cat" variety.
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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