China has been in the news often as many of the Chinese companies are experiencing a crack down by the government on the "private" sector. We, of course know that there really isn't a "private" sector in China as the government controls all. This has been a wake-up call for many investors who were holding many of these China-based companies.
How damaging has the government been to the Chinese market? The global markets chart below (found in our DP Alert ChartList in the upper left-hand corner of our "Blogs and Links" page) shows the continued long-term rising trends on all markets with the exception of China (FXI).
If we look at the weekly chart for FXI, we can see a large head and shoulders pattern that formed this year. It resolved to the downside as expected back in May. The minimum downside target of the pattern would put FXI at support around $35.00, but I doubt it will stop there. In fact, FXI is only 22% away from its bear market low! The weekly RSI is attempting to turn back up in oversold territory, but the weekly PMO has plunged into negative territory. Many might consider this a possible reversal point, but the weekly PMO suggests otherwise. I wouldn't go bottom fishing here, the risk is still far too high to catch a tasty bottom fish here.
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
SECTORS
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 is still an outlier, so I included a close up view of the other ten sectors. Nothing really new here.
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: Today's candlestick bounced right off the 20-EMA for support. The SPY which had triggered a PMO SELL signal yesterday has whipsawed back into a crossover BUY signal.
While today's action was positive, we see that the bearish rising wedge is still in play.
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 is still configured positively as it rises out of oversold territory. However, we still question why this percentage is so low given the recent all-time highs. While this has a bullish 'look', we find it somewhat suspect given the strong negative divergence that is still dominating the chart.
Participation while improving is still anemic when you consider we've hit all-time highs. Additionally readings are in near-term overbought territory so we need to be careful here.
Climax Analysis: No climax today. New Highs contracted today and we are starting to see new 52-week lows appearing. Net A-D is positive, but Net A-D Volume continues to lag. Of particular interest is the VIX. Today it actually finished the day above its EMA on the inverted scale, but just barely as it spent most of its time below it. Nervousness and bearish sentiment is still a problem. It's interesting that during a period where new all-time highs were being set, investors weren't convinced as represented by the VIX's oscillation below its EMA.
Short-Term Market Indicators: The short-term market trend is NEUTRAL and the condition is NEUTRAL.
The STOs did rise today, but with price basically moving sideways, I wouldn't count on it to bring new all-time highs just yet. The indicators are still in declining trends. %PMO Rising is better given almost 70% of the SPX have rising PMOs, but that reading is also near-term overbought so we need to keep that in mind.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
IT indicators are looking fairly positive as they continue to trend higher. This suggests that the IT rising bottoms trendline should continue to holdup.
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.
We are seeing some signs of a bullish bias in the short and intermediate terms given the %Stocks > 20/50-EMAs are higher than the SCI reading.
CONCLUSION: Today's rebound was accompanied by rising STOs, but they are still trending lower. A bullish bias is beginning to appear in the short term which is encouraging. The SCI is improving, but it still holds a negative divergence with price. The IT indicators suggest that the rising trend should continue to hold. Overall, given the VIX's continued oscillation below its EMA, the market is still showing internal weakness. More than likely we will continue to see sideways chop. I'm not expecting a dastardly decline yet given indicators are improving, but their near-term overbought conditions leave me only cautiously optimistic.
I decided to expand my exposure from 40% to 50% today given that there are industry groups that are beginning to outperform. One of the stocks I added was yesterday's "Diamond of the Week" on the DecisionPoint show, Tesla (TSLA). Autos are picking up and TSLA is one of the strongest stocks in that group.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact support@decisionpoint.com for more information!
BITCOIN
As I expected, Bitcoin failed at overhead resistance. It is currently above its 200-EMA, but given the new PMO top and slide of the RSI, I would look for a failure at the 50-EMA.
INTEREST RATES
Longer-term rates are continuing in their declining trend.
10-YEAR T-BOND YIELD
The ten year treasury yield rose slightly today. It didn't make the picture any brighter for yields, except that support held. The steep declining trend is still in play, the RSI is negative and the PMO recently topped below its signal line in very negative territory. There is a high likelihood that this current level of support will not hold. The next solid support level is at 1.0.
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: Yesterday's comments still apply:
"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."
GOLD
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: BUY as of 5/21/2021
GLD Daily Chart: Gold is in a go nowhere environment. the chart is about as neutral as it gets. Price is holding above the 20-EMA and 200-EMAs (barely), but the 50-EMA did not hold. We're smack dab in the middle of a trading range. The PMO is technically rising, but is still below zero.
GOLD Daily Chart: We are beginning to see discounts pulling back which suggests investors are more bullish on Gold than previously. That could spur a rally, but overall I don't see much here.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners rallied today and closed above the 50-EMA. The next hurdle is the 200-EMA. Given the rising PMO on an oversold BUY signal and the RSI rebounding off net neutral (50), I'm cautiously optimistic. The SCI has been flat for a few days now, but participation has really improved and continues to improve. There is a bullish bias to this chart in the short and intermediate terms given the margin between the SCI and the %Stocks > 20/50-EMAs.
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 drop in Crude Oil continues. Today USO closed below the 50-EMA. The RSI is now in negative territory and the PMO top below the signal line looks ominous. I believe the short-term rising bottoms trendline will continue to hold; the problem is that it still requires a lot more downside to reach it.
The intermediate-term rising bottoms trendline has been breached with today's decline. Lower prices seem inevitable.
BONDS (TLT)
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: TLT continues to slowly trend higher which is no surprise given the pullback in yields. The RSI is positive and the PMO is about to whipsaw back to a crossover BUY signal.
A new LT Trend Model BUY signal is on tap and the yield chart still looks very negative. We may have seen yields hold support today, but as I noted in my comments on the 10-year treasure yield, it is highly likely that yields will break down further.
Technical Analysis is a windsock, not a crystal ball.
--Erin Swenlin
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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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