Today on the DecisionPoint Show Carl brought up the chart on Apple (AAPL) to discuss a recent comment from Jonathan Hoenig of the Capitalist Pig Hedge Fund on Fox Business news last week. At the time, he went out on a limb and said that he was shorting Apple. We admire his courage to take this contrarian position given most consider Apple to be teflon. We admittedly have the benefit of hindsight, but was Apple really that bearish?
Possibly, but the technicals appeared fairly healthy. Price was forming a symmetrical triangle which formed the "flag" on the end of a flagpole. A symmetrical triangle is a continuation pattern which in and of itself is bullish. Put that triangle on a flagpole and it becomes more bullish.
We are getting confirmation of today's price breakout given the PMO has turned back up and the RSI is positive. The OBV is hit and miss. We are seeing good volume coming in on today's breakout, but notice that the OBV is barely challenging its previous tops and is well-below the January top while price is not. That is a clear negative divergence. However, there are bullish relative strength lines at the bottom of the chart that show Apple had been underperforming, but it is now breaking that declining trend.
The weekly chart is mostly favorable. The weekly PMO is on a crossover BUY signal that occurred in oversold territory. The weekly OBV doesn't have a negative divergence, in fact the rising bottoms are confirming the rally. Problems? The RSI is overbought, but as we can see it has been more overbought. The price pattern isn't good as it shows an intermediate-term bearish rising wedge.
Conclusion: Apple is in a bullish configuration and should see more upside given the execution of the bull flag with today's breakout. The weekly chart confirms positive momentum and volume. Just be careful if it gets too overbought.
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.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
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: XLI is headed back up to "Leading". XLV is fading fast. XLP, XLB and XLU are still safely holding in the "Leading" quadrant. With defensive sectors beginning to lead the market, we should be on the lookout for a pullback or correction (typically).
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: Crazy day of trading with the market. I woke up to find the market was down about 0.68%. However, as I proceeded through my Monday trading room (sign up here) at Noon ET, the market was steadily improving and continued to through the end of the day. Afghanistan was dominating the weekend news circuit and many investors go nervous to begin the day. As Tom Bowley of Earningsbeats.com says, the first hour of trading is "amateur hour". Typically big money makers wait it out. If that thesis is true, individual investors opened nervous, but big money decided that Afghanistan need not bother them.
Today's candle is a bullish engulfing candlestick which suggests we will see higher prices tomorrow. Notice the action on the VIX. This morning it was dipping below its EMA on the inverted scale, but by the afternoon the market calmed. Total volume was elevated from last Friday, but mostly puny.
The rising wedge is still a problem on the one-year daily chart, but today's rally nearly pushed price up and out of it. If we do see a bullish resolution to this bearish pattern, that would be very positive.
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 SCI is rising out of oversold territory which is bullish. What isn't bullish is its negative divergence with price. The GCI didn't move much, but it is still slowly trending lower.
Given the rally the market has enjoyed, we would expect to see participation gaining, not holding. The negative divergences are still present as well.
Climax Analysis: We did see an expansion of New Highs, but Net A-D readings were not climactic. While Total Volume increased, it is well below its one-year moving average. Volume ratios also did not reveal a climax.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
The STOs moved up slightly, but they are now overbought and still have a negative divergences with price tops.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The IT indicators continue to rise and suggest the intermediate-term rising trendline should remain intact for now. However, negative divergences are persisting on today's climb to new all-time highs. Less than 2/3rds of the SPX are on PMO Crossover BUY signals. Given the steady rise in the market, that number should be higher. In any case, the reading is somewhat overbought.
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 in the short term is dwindling. With about the same amount of stocks having price above their 20-EMA as stocks with a "Silver Cross", there isn't much room for improvement.
CONCLUSION: The market made an excellent recovery to end the day up nearly 0.25% on a day it started 0.68% down. Indicators are rising, but negative divergences remain and in some cases indicators are overbought. We are seeing strength in defensive sectors like Utilities, Staples and Industrials. Historically when money begins moving into defensive sectors, the market is due for a decline. Today's turnaround did show us that the bears do not hold the reins, so I am cautiously optimistic. I will be shuffling my positions tomorrow so my exposure will likely increase. For now I remain 50% exposed in the market.
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 email@example.com for more information!
Bitcoin is struggling to overcome resistance. There is a bearish rising wedge in the short term that would suggest price will move lower. The PMO is trying to top, but this consolidation has moved the RSI out of overbought territory. I am looking for a move to test the bottom of the wedge and support at $42000. The good news is that the large rounded top has now resolved with this recent rally out of the July lows so long-term, Bitcoin is looking better.
Yields are pulling back after their recent breakout.
10-YEAR T-BOND YIELD
We had a very bullish double-bottom that executed with the rally above the confirmation line, but it failed spectacularly keeping the declining trend drawn from the May top intact. With a negative RSI and topping PMO, it appears $TNX will travel down to support at the July/August lows.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar rose slightly today, but it is likely headed back to test the 50-EMA and the short-term rising trend.
A bearish double-top is forming on the chart. It will trigger should price move below the August low. At that point the rising trend will have been broken as well as the 50/200-EMAs. For now, we will want to see that rising trend and 50/200-EMAs to hold.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GLD Daily Chart: Gold is making its way back up to the July trading channel. GLD did close above the 20-EMA, but it still has work to do. There is still overhead resistance at the bottom of the trading channel and the 50-EMA.
(Full disclosure: I own GLD)
GOLD Daily Chart: $GOLD managed to close just within the bottom of the trading channel. Indicators are improving with a nearly positive RSI and a PMO that has turned back up. We should see Gold recapture the intermediate-term rising trend.
GOLD MINERS Golden and Silver Cross Indexes: We now have a bullish falling wedge on Gold Miners suggesting we will see a breakout. However, participation isn't really improving. If we see price get back above the 20-EMA and resistance at the November/February bottoms, this group could get very interesting.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Crude Oil found support on horizontal support at the May top which preserved the short-term rising trend. This would be an excellent place for a bounce, but the PMO has now moved into negative territory and the RSI is falling not rising.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: BUY as of 8/10/2021
TLT Daily Chart: Given yields failed to hold support, bonds are back in favor. Price did form a shooting star candlestick today which is bearish. However, the PMO is attempting to turn back up and we have symmetrical triangle continuation pattern that does suggest and upside breakout ahead.
The RSI has moved into positive territory. We have a cup shaped bottom with this symmetrical triangle acting as a handle. This would also suggest a breakout ahead.
Technical Analysis is a windsock, not a crystal ball.
(c) Copyright 2021 DecisionPoint.com
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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.