During today's "staff meeting", Carl and I discussed recent activity on the Volume Ratios. While we haven't had climactic readings on our Climax charts, we are seeing climactic activity on the NYSE Volume Ratio that should be considered. We have noted very low volume on this rally and it could be skewing the ratios somewhat, but nevertheless, they appear to be implying a possible buying exhaustion ahead.
The Up/Down ratio on the NYSE has had three days of climaxes. We didn't get confirmation of today's outside reading on the NYSE by the SPX Up/Down ratio, but we have seen climactic readings on the SPX Up/Down ratio on Friday and Monday. Our best guess is Friday was a buying initiation, while today's reading could be signaling a buying exhaustion on the horizon.
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: XLB and XLF have entered "Weakening" quadrant, while XLV has popped back in. XLP and XLU are "leading" but are headed the wrong direction. XLE continues further down into "Lagging" despite the rally of the past few trading days. XLK and XLC are both headed to "Leading" again.
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: A buying exhaustion here would make sense given price is now tapping on the top of the bearish rising wedge. Notice the low Total Volume on this rally. Additionally, SPY volume has been deteriorating everyday.
On the bullish side, there is a positive divergence with the OBV, a positive RSI and a PMO that is nearing a crossover BUY signal.
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 rally hasn't improved the SCI and GCI, both moved lower today.
Participation is slowly rising in all three timeframes. We are starting to see somewhat overbought readings in the short term as the %Stocks > 20-EMA is nearing previous near-term tops.
Climax Analysis: No climax today despite the NYSE Up/Down ratio's move above 3.0. Notice that New Highs did pullback today by almost half. The VIX also topped, though it remains above its EMA on the inverted scale.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
The STO-B hit positive territory. The STO-V is rising strongly. There was a very slight improvement on %Stocks with rising momentum. I would expect to see a higher reading than 55% given this rally to new all-time highs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The IT indicators finally moved up, but still only have half of the SPX with PMO crossover BUY signals. This should be higher.
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.
There is an ever so slight bullish bias given %Stocks > 20/50-EMAs have a higher percentage than the SCI, but it isn't anything I would 'bank' on moving forward.
CONCLUSION: We could be seeing a buying exhaustion lining up given the NYSE Up/Down Volume Ratio. We don't have confirmation on our other climactic indicators yet, so this is just a 'heads up' that something might be brewing. Given the market bias is in "neutral" and price has hit the top of the bearish rising wedge, the market is definitely vulnerable. There are 'pockets of strength' within Health Care, Communication Services and Technology that I am rotating toward. I am 50% exposed to the market with hard or trailing stops in place.
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The top of the wedge was not hit before Bitcoin moved back down to test support at $47,500. That is a bearish sign. The PMO is now falling and nearing a crossover SELL signal.
Yields are softening their declining trends.
10-YEAR T-BOND YIELD
$TNX bounced today and now is sitting above support at the early July low. It has also closed above the 20-EMA and has formed a tiny bullish double-bottom. The RSI hit net neutral (50). The PMO wants to rise, but it is in neutral as well. Strong overhead resistance is arriving quickly at the 50/200-EMAs as well as a test of the declining trend. Indicators aren't really giving us much in the way of clues.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar dropped slightly and is beginning to compromise the very short-term rising trend. While the RSI remains positive, the PMO has turned back down and is nearing a crossover SELL signal. More than likely we will see the rising bottoms trendline drawn from the June low tested before a rebound.
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 closed slightly lower on the day. The indicators look positive with the RSI above net neutral (50) and the PMO rising on a BUY signal. The 200-EMA is holding as strong resistance, but I expect to see the top of last month's trading range tested soon.
(Full disclosure: I own GLD)
GOLD Daily Chart: Discounts have risen and are about to test near-term oversold territory. This basically means that investors are getting very bearish on Gold. Given sentiment is contrarian, this is a good thing.
GOLD MINERS Golden and Silver Cross Indexes: Miners were mostly unchanged today. Yesterday's comments still apply:
"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 continued to rally strongly. It has now recaptured its prior rising trend after a constructive bounce off the 200-EMA. The PMO is now rising and the RSI has left negative territory. The next test is how it handles overhead resistance at the 50-EMA.
Today's rally pushed USO out of the declining trend channel. I would expect to see the rally digested at this point.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: BUY as of 8/10/2021
TLT Daily Chart: As the 20-year yield begins to turn back up, TLT is pulling back. We now have a PMO top below the signal line, but the RSI is still positive.
Price is in a large symmetrical triangle. These are continuation patterns and suggest an upside breakout. However, given current price action, we could see a pullback here to test the bottom of the pattern.
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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