Whether it's Monty Python's Black Plague "Bring out yer dead!" skit or Austin Powers conclave of evil "trap door", I'm reminded of both when I saw the chart of Crude Oil (USO) and particularly Energy (XLE) today. They appeared dead or dying but both yelled, "I'm not dead yet!"...but what is participation telling us?
Below is our sector chart for Energy (XLE). You'll find this and the other sector charts in our Sector ChartList on our "Blogs and Links" page in the upper lefthand corner. On Friday Carl annotated a bullish falling wedge. Price has now bounced from the bottom of it and more importantly off support at the January top. Today price traded and closed above the 200-EMA. The PMO ticked back up. The RSI remains negative, but it is on its way toward net neutral (50).
At issue is the 0% SCI reading, but we can see participation is beginning to improve slightly. It will likely take awhile before the SCI moves higher as most of the members look like XLE, traveling well-below both the 20/50-EMAs. However, we have 18% of energy stocks back above their 20-EMA and 9% above their 50-EMA. Still paltry numbers, but improving nonetheless. If we see XLE breakout from this wedge, this sector could really take flight.
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.
RRG® Chart: XLP is now back in the "Leading" quadrant and XLV has taken a 180 and is moving strongly toward "Leading".
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 is rebounding nicely. Price bottomed before testing either the 50-EMA or the rising bottoms trendline drawn from the May low. This is particularly bullish. We must temper that enthusiasm somewhat given we now have a shorter-term bearish rising wedge.
Total Volume on Friday was an issue given options expiration and the strong rally. We saw follow-through on that rally today, but again volume was unimpressive. Note also the SPY Volume trending lower as price makes new all-time highs. Very bullish is the positive divergence on the OBV.
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.
Despite the rallies of the past three days, the SCI is still in decline and narrowly avoided a negative crossover its signal line. The GCI remains steady.
Participation certainly improved as far as %Stocks > 20/50/200-EMAs, but the negative divergences in the longer-term are still a problem.
Climax Analysis: No climax today. The VIX is now back above its EMA on the inverted scale which is positive. It's rising trend out of oversold territory does suggest further upside. What appeared to be a possible upside exhaustion climax on Friday wasn't confirmed by Total Volume and Wednesday's downside climax appears to have been a selling exhaustion, not an initiation to lower prices. Now we look for an upside exhaustion or downside initiation climax.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is SOMEWHAT OVERSOLD.
The STOs rebounded Friday and continued to rise today which is another indication higher prices will follow. I would like to see more stocks with rising momentum but I guess I'll settle for 50%.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Despite the rebound, IT indicators are still pulling back. The ITBM/ITVM are in decline and we are still seeing fewer stocks with PMO crossover BUY signals. The bias in the intermediate term is bearish.
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 beginning to return, particularly when you look at %Stocks > 50-EMA. With participation rising with price, it is clear that the investors are still bullish.
CONCLUSION: Wednesday's downside climax turned out to be a selling exhaustion. Friday's strongly positive Net A-D and expansion of New Highs suggests we had a whiff of a buying initiation. Given rising STOs and the bullish bias of lower VIX readings, as well as improved participation, the short term looks pretty good. I still have reservations in the intermediate term given the declining ITBM/ITVM and seeing fewer SPX stocks on PMO BUY signals. I suspect we will see more follow-through on this rally in the next day or two. Take advantage by raising stops or setting trailing stops. The market won't go up forever and IT indicators should keep you erring on the side of caution. I am 35% exposed to the market.
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Bitcoin is continuing to rally but has formed a bearish rising wedge. Still, I would expect to see the top of this wedge tested before a breakdown.
Yields are pulling back after their recent breakout.
10-YEAR T-BOND YIELD
$TNX was lower on the day. The 10-year yield is now wedged between support at 1.2 and resistance at the 20-EMA. The declining trend is still very much intact and the RSI is in negative territory. The PMO is mostly flag. I expect more sideways movement.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar pulled back today with UUP gapping down. The RSI is positive still and notice that the short-term rising trend (red rising bottoms trendline) is still intact. Additionally, it is holding above the 20-EMA. Short term, it may not be that bullish, but there are plenty of support levels with the EMAs and intermediate-term rising trend (blue). I'm not ready to give up my bullish stance on the Dollar just yet.
The one-year chart still sports two very bullish chart patterns--a large double-bottom and cup with handle. This seems a natural pullback after an unsuccessful test of overhead resistance.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GLD Daily Chart: Gold rallied and found itself back in the prior July trading range. The RSI is now positive and the PMO is on a crossover BUY signal. We could have a very short-term bull flag that has just executed. The upside target of the flag would put GLD around $176.
(Full disclosure: I own GLD)
GOLD Daily Chart: $GOLD closed above the 200-EMA. Discounts are paring back which tells us that investors are more bullish on Gold. If the Dollar breaks out above overhead resistance that will put pressure on Gold, but given the bullish chart, I think Gold will rise anyway.
GOLD MINERS Golden and Silver Cross Indexes: Miners rebounded strongly today off annual lows. This looks very promising especially given the bullish falling wedge. Participation is looking slightly better. At issue is overhead resistance nearing at the 20-EMA and then at the November low. Just be careful. We've been fooled before at the previous August low and the end of July rally.
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 was up over 5.5% today. Even still, overhead resistance was not overcome. Additionally the short-term rising trend hasn't been recaptured. The picture is definitely brightening given the rising RSI and PMO bottoming in oversold territory.
The double-top executed last week with the drop below the confirmation line, but today's rally pushed price back above that confirmation line. The pattern could be scuttled, but the declining trend from the July top hasn't been broken so I will give it a bit more time.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: BUY as of 8/10/2021
TLT Daily Chart: TLT still looks bullish given the positive RSI and nearing PMO crossover BUY signal. Price is in a symmetrical triangle. That is a continuation pattern and suggests an upside breakout ahead.
Technical Analysis is a windsock, not a crystal ball.
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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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