Take a tour of the FAANG+ stocks and you'll see that all of them had big rallies today. If it wasn't a 'big' rally, it was still higher prices. The Nasdaq 100 (NDX) is an excellent way to visualize the leadership of mega-cap stocks. While the SPX was up +0.43%, the NDX was up +1.12%. Notice that relative strength has been gaining momentum. Today, the NDX had a new PMO crossover BUY signal. It appears to be arriving a bit late given the RSI is already overbought. However, we know that the first two weeks of July the RSI stayed overbought. The result of those prior overbought RSI conditions? Mostly sideways consolidation.
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: There are clear 'losers' on the RRG. As nearly all of the sectors are diving southwest (the most bearish heading). XLK has regained leadership and XLC and XLRE aren't far behind. XLE and XLY are showing improvement.
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 appears Friday's upside initiation climax was right on. Admittedly we didn't have much faith in it, but it played out with a strong breakout from a bearish rising wedge. This will begin to morph the wedge into a rising trend channel.
I think a look at the 5-minute candlestick is in order. The rally was strong at the beginning of the day, but price flattened and then a sell-off began in earnest in the last hour of trading. This is why the candlestick on the chart above has a bearish 'wick'. Just remember that candlestick patterns are good for one day.
The RSI is positive and not overbought. The PMO is rising after its recent crossover BUY signal. The OBV is confirming the rally out of the July low given its rising bottoms.
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 GCI remained steady at 90%. The SCI did improve slightly, but given new all-time highs, we have to wonder where is the participation. Well, as noted in the opening, mega-cap stocks are pushing the index higher despite low participation numbers on the SCI.
Another indication that mega-caps are leading the way is that participation in all timeframes fell as new all-time highs were set.
Climax Analysis: No climax today, but we did see a nice expansion in New Highs. The VIX is comfortably above its EMA and has yet to puncture the upper Bollinger Band on the inverted scale which is positive for the market. Total volume fell once again--not what you want to see on a rally to new all-time highs. Given Labor Day weekend will be upon us, vacation trading could be in effect already. Still, price should follow volume. When it doesn't, we should be cautious.
Like candlesticks, climactic indicators are only going to give you a view into the next day or two of trading. Certainly cardinal lows and highs can begin when we get climaxes, but it isn't always the case. Just remember these readings are extremely short-term in nature. This is why we will sometimes see multiple climax days within a week.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
The STOs pulled back out of overbought territory. Looking at past history, pullbacks often precede market tops. Despite all-time highs, fewer stocks have rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM/ITVM continue to rise which bodes well for the intermediate-term rising trend. We did see a slight expansion in 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.
I would read market bias based on participation as mostly neutral. Unfortunately that isn't that helpful. We do see slightly more stocks above their 20/50-EMAs than "silver crosses" which is positive, but participation falling on new all-time highs concerns me.
CONCLUSION: A breakout from a bearish chart pattern is generally considered especially bullish and the VIX isn't overbought yet. It appears the upside initiation climax from Friday has played out. We could still see some follow-through on this rally. My biggest concern are the topping STOs and topping participation of stocks > 20/50-EMAs which suggests any follow-through will likely be limited. I'm currently 50% exposed to the market.
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Bitcoin did dip out of the bearish rising wedge, but it wasn't a decisive move. Currently it is holding onto support at the 20-EMA and April low. Given the PMO crossover SELL signal and negative OBV divergence, we would expect to see a breakdown or at best more consolidation above support.
Yields are moving mostly sideways since breaking out of their declining trend.
10-YEAR T-BOND YIELD
$TNX never was able to execute the bullish double-bottom pattern and now it appears to be setting up a short-term double-top after the failure at the 50-EMA. The chart was getting bullish last week with the breakout from the declining trend, but it has surrendered to resistance. The RSI is now negative and the PMO is trying to top.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar was unchanged today leaving it right on the rising bottoms trendline. The configuration of the RSI and PMO are somewhat bearish and given the loss of support at the 20-EMA, I would expect to see some downside this week.
I've been watching possible bullish chart patterns on the 1-year daily chart for UUP, but none of them seem to be panning out. There is a bearish pattern to consider now in the rising wedge.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GLD Daily Chart: GLD was down about a half percent, but remains above all three key moving averages. The RSI is positive and the PMO is gently rising which is bullish. Discounts are expanding meaning traders are more bearish. While the reading is near-term oversold, it isn't bearish enough to make sweeping conclusions regarding a continuation rally.
(Full disclosure: I own GLD)
GOLD Daily Chart: $GOLD is reaching toward the top of the July trading range. More than likely it will encounter strong resistance if it manages to make it there.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners rebounded on Friday, but took back much of the profit from the move. There are still 0% with their 20-EMA > 50-EMA as represented by the SCI. Participation has definitely improved but today's decline damaged intermediate to long-term readings. The PMO did see a crossover BUY signal today, but the RSI is still negative. If Gold halts its decline, Gold Miners will struggle. Metals and Mining as a whole don't look too bad.
Be sure and take a look at REMX, the Rare Earth Metals ETF. It pulled back a bit last week and is now poised to continue its meteoric rise.
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 rallied today and is headed back up to test the top of the symmetrical triangle. It did drop out of it, but gained back ground after bouncing off the 200-EMA. There is a new PMO crossover BUY signal and the RSI has reached positive territory and is not overbought.
On the one-year chart we can see that price broke out of a bullish falling wedge. Look for price to test the July highs.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: BUY as of 8/10/2021
TLT Daily Chart: TLT is stuck in neutral which is no surprise given yields are moving mostly sideways. Given price didn't need to test the bottom of the symmetrical triangle before turning up, there is a high likelihood we will see an upside breakout.
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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