The SPY was just enjoying a new PMO crossover BUY signal, but with two days of decline it has whipsawed back into a SELL signal. The chart is no longer that favorable. Today we have a bearish engulfing candlestick that suggests more downside.
I was already having heartburn over the VIX. We were setting new all-time highs yet the VIX readings were still elevated. They aren't elevated enough to bring the VIX below its lower Bollinger Band on our inverted scale. That would change the short-term outlook given we usually see a short-term bottom after a downside puncture. For now the SPY looks very weak in the short term and the VIX is confirming this.
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: XLE has reached the Improving quadrant. XLC and XLV are traveling with a bullish northeast heading, alongside XLB and XLP. XLRE is looking weakest as it has moved into the Weakening category.
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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: To add insult to injury, the bearish rising wedge is suggesting a breakdown below the 50-EMA.
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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.
The SCI put on the brakes today and is in danger of a negative crossover its signal line. While these current readings are considered near-term oversold, they are already deteriorating and could move even lower.
Participation has also been damaged based on Friday's and today's decline.
Climax Analysis: No climax today. There was an expansion in New Highs, but remember this accounts for any stock that during the day made a New High. Many stocks rallied strongly on the open, but retreated by the end of the day.
Short-Term Market Indicators: The short-term market trend is NEUTRAL and the condition is NEUTRAL.
Short-term indicators don't spell disaster at this time given they are in neutral territory. However, all of these indicators are in decline which suggests more downside ahead in the short term.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
IT indicators technically rose again today, but the ITBM was nearly unchanged. We could see these indicators turn back down soon which might mean we will finally see a breakdown of this IT rising trend. I'm not going to jump the gun on calling for that since the indicators are still on the rise.
Bias Assessment: We've added this new section called "bias assessment". It occurred to me 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.
What was a somewhat bullish bias at the last all-time highs is disintegrating. Both %Stocks > 20/50-EMAs now have reading below the SCI, albeit a thin margin. Notice that the %Stocks indicators are turning lower in near-term overbought territory. The bias is shifting toward the bears.
CONCLUSION: The market looks toppy and given today's bearish engulfing candlestick, I'm expecting lower prices again to tomorrow. The STOs are in agreement with that hypothesis as both are retreating quickly and have already entered neutral territory. The IT picture is less bearish and even has a hint of bullishness given IT indicators haven't really topped. Given market participants are still edgy, we expect today's decline follow-through with lower prices. There are certainly strong areas of the market, it's just getting harder to find them given quick sector rotation. I opted not to increase my exposure and remain at 40%.
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Bitcoin recovered quickly but as I wrote last week, I didn't expect to see overhead resistance broken at $42,500. Indeed price tested that level and shot back down. The picture isn't all that gloomy given the IT Trend Model "Silver Cross" BUY signal which was generated when the 20-EMA crossed above the 50-EMA. The RSI is positive and the PMO is on a crossover BUY signal. The PMO is topping now and the RSI is declining rapidly as well. At this point Bitcoin is holding above 200-EMA support, but I am looking for more decline.
Longer-term rates are continuing in their declining trend.
10-YEAR T-BOND YIELD
The ten year treasury yield plummeted today, closing out the day at its lowest reading since February. Support has held near here, but the RSI is negative and the PMO turned down below its signal line which is particularly bearish.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar is clinging to support at the 50-EMA. I suspect it won't hold given the negative RSI in decline and the PMO declining after an overbought crossover SELL signal.
If you want to be a bull here, you could point to a possible cup and handle, but given the failure of the large double-bottom, I don't think this is the case. I reserve the right to change my mind should price rally off the 50-EMA with strength.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: BUY as of 5/21/2021
GLD Daily Chart: Given I'm still bearish on the Dollar it would make sense that I would be bullish on Gold. I was very bullish at the end of last week, but the picture is now suggesting either a test of the bottom of the current trading channel or consolidation along these EMAs. The RSI is neutral and the PMO continue to rise after a BUY signal. All is not lost, it has just shifted gears into neutral.
GOLD Daily Chart: If price can remain above the 20/50-EMAs, we should see a new IT Trend Model "Silver Cross" BUY signal. Unfortunately with the EMAs "braiding", I wouldn't get overly excited if we see that. I'm not looking for Gold to collapse, more than likely it will continue within its current trading channel.
GOLD MINERS Golden and Silver Cross Indexes: Last Thursday I rang the bell on Gold Miner recovery plays. While participation is still favorable, with Gold in a holding pattern, we may see Gold Miners react similarly. I will feel a lot better about my position in Gold Miners if GDX can overcome resistance at the 200-EMA. Until then I expect mostly sideways trading.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: In dramatic fashion, Crude Oil dropped sharply. Support at the 20-EMA has been lost. Given the PMO top below the signal line, it may be time to test the short-term rising bottoms trendline.
It is already testing the intermediate-term rising bottoms trendline so any decline will compromise it.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: The price chart doesn't look all that negative. Price has formed a short-term rising bottoms trendline that doesn't look in jeopardy. The RSI is still positive and the PMO has reversed directions, readying itself to whipsaw back into a crossover BUY signal.
Support at the January trough and February top was held all day, but we've seen breakouts fail when price finally reaches above resistance. Yields are continuing in the declining trend, but they are reaching support levels. We will know much more tomorrow when see how yields react to reaching support.
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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