Today we open the Weekly Wrap with the 10-minute candlestick chart of the SPX. We wanted to get a closer look at what this week's "trickle up" to new all-time highs. Yesterday, the market spent the entire day on the rise, today it digested the move. In the process it has formed a bullish flag formation on the 10-minute chart. Additionally, price broke out of a bearish descending triangle in the final minutes of trading.
In addition to bull flag, the 10-minute RSI is rising and isn't overbought. The 10-minute PMO is curling up on this last minute breakout that also had the OBV rising higher at the end of the day. A move like yesterday's required some consolidation and that's exactly what we got. Given the current bullish bias, we would expect to see higher prices next week.
We did notice that "defensive" sectors like Consumer Staples (XLP), Utilities (XLU) and Real Estate (XLRE) did lead today which tempers our bullish expectations.
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
For the week:
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.
For the Week:
RRG® Chart: XLI is making progress toward the "Leading" quadrant and XLP did an about face and is headed back toward "Improving" and "Leading". XLV had been a leader, but it faded away this week. Though Materials (XLB) finished the week as the leader, it is losing a little steam.
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: fPrice is testing the top of the bearish rising wedge. The RSI is in positive territory. This slow "trickle up" has kept the RSI out of overbought territory. The PMO finished the week on a crossover BUY signal, but given its whipsaw, these signals are far from helpful. The negative divergence on the OBV has been cleared as it reached its highs.
Total volume is beginning to wane. Those volume bars are in a negative divergence with price. We should see volume increasing as price rises. Erin discussed in the Diamond Mine trading room today that while it is bullish to see price tapping the top of the wedge, what she really wants to see is price making a concerted move to tap the top of the intermediate-term rising trend channel. Until then, the bearish expectation of the rising wedge remains.
SPY Weekly Chart: The rising wedge dominates the weekly chart. The weekly RSI is overbought, but it is still rising. The weekly PMO has flattened and remains on a crossover SELL signal so we still expect a breakdown in the longer term.
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 SCI is moving out of oversold territory and has now moved to 66%, meaning 2/3rds of the SPX have a 20-EMA > 50-EMA. However, on the down side, the GCI continues to move lower telling us that more members are now seeing "death crosses" on their charts.
Participation has flattened but is attempting to diminish the negative divergences as short-term tops are moving higher.
Climax Analysis: No climaxes this week, but we are beginning to see an expansion of New Highs again. The VIX remains safely above its EMA on the inverted scale but could puncture the upper Bollinger Band next week--that would be a very short-term sell signal.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
STOs rose sharply this week but are beginning to trend lower. This is giving us a short-term negative divergence as price continues to set new all-time highs. Another problem is fewer stocks showing rising momentum. While 2/3rds of the SPX are on "Silver Cross" BUY signals, fewer have rising momentum. This could prevent an upside breakout from the bearish rising wedge.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The IT indicators continued to rise this week, but weren't able to shake off the negative divergences. They are also entering overbought territory.
Bias Assessment: The short-term bullish bias is still in effect as %Stocks above their 20/50-EMAs is higher than the SCI. This tells us that the SCI could continue to rise into next week.
CONCLUSION: This week price made new all-time highs consistently but it wasn't enough to push out of the current bearish rising wedge. There is a slight bullish bias in the short and intermediate terms and negative divergences are diminishing. Consequently next week we expect more "trickle up", but with new momentum waning and an overbought VIX, a pullback is a distinct possibility--remain vigilant. If stocks in your portfolio are seeing momentum shifts to the downside, it is likely time to either tighten up stops or book some profits. Erin is 50% exposed to the market going into next week.
Calendar: Next week is monthly options expiration. Expect low volatility toward the end of the week.
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Bitcoin managed to overcome resistance at 47,700, but price is in a bearish rising wedge. The RSI is also overbought again. The PMO is accelerating higher so we could see price continue to tap the top of the wedge next week.
Yields followed through on the breakout from last week. Long Bonds in particular are the hardest hit.
10-YEAR T-BOND YIELD
Today the 10-year pulled back to the confirmation line of the double-bottom. Technically the closed below it. The RSI has turned down into negative territory, but the PMO didn't see much damage. If $TNX continues lower the double-bottom pattern will negated. There are support levels available so we don't expect a harsh drop to previous lows.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: A bearish double-top is forming on the Dollar. The PMO is turning down below its signal line which is especially bearish. If UUP loses its short-term rising trend and price hits the confirmation line of the double-top, it is vulnerable for a sizable pullback as the minimum downside target of the pattern would be at $24.30. Support is strong right now at the 50/200-EMAs which happen to align with the rising bottoms trendline.
We had considered a possible bullish cup and handle formation, but this week's failure to overcome the July high has negated that pattern.
UUP Weekly Chart: There is a bullish double-bottom visible on the weekly chart and the weekly RSI is positive. Additionally, the weekly PMO is rising. Notice we also have rising bottoms on the PMO which have set up a positive divergence. Longer-term the Dollar looks bullish, but the charts above suggest more downside in the near term.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GOLD Daily Chart: Gold had a rough week. It is beginning to recuperate from its death drop, but price still hasn't reacquired the short-term rising trend. . The indicators are improving, but the 20-EMA is lining up as resistance.
$GOLD started the week off with a 'death cross' of the 50/200-EMAs. Currently the EMAs are bearishly configured with the fastest EMA on the bottom and the slowest on the top. As with GLD above, indicators are improving but Gold has resistance to overcome.
GOLD Weekly Chart: The weekly chart is bearish given the negative weekly RSI and weekly PMO that is on a crossover SELL signal. Price did bounce off strong support, but remains in a declining trend channel.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners came close to testing its lows for the year, but did bounce. This produced a bullish falling wedge. There is a bullish double-bottom in the very short term but the upside target of the pattern is still below the 50-EMA. Overhead resistance is stout. More importantly participation is anemic. There will likely be bargains in this industry group next week, but keep a tight leash on any position you open, price still has to overcome resistance at the July lows.
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 bounced off support this week at the May tops and preserved a rising trend. However, it has already failed at the 20-EMA and the RSI is negative and falling. The PMO has flattened and remains above the zero line, but the OBV is confirming the decline with declining tops of its own. Expect a test of support at $46 for USO.
USO/$WTIC Weekly Chart: The weekly chart for USO looks ominous given the overbought PMO SELL signal this week. The weekly RSI is still positive and price is finding support, but the rounded top suggests price will fail at support at the March top.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: The rise in yields hit TLT hard this week, but it finished strongly as yields did fall today. This has formed a symmetrical triangle. It is a continuation pattern meaning we are to expect an upside breakout. The RSI managed to move into positive territory and the PMO has flattened.
However, we don't think that yields are done rising. Resistance is also nearing at the January low.
TLT Weekly Chart: The weekly chart has merit. The PMO is rising on an oversold crossover BUY signal and the weekly RSI is positive. TLT is currently holding support at the 2019 high. This support level will need to hold. If it doesn't, TLT won't find strong support until it reaches the March low.
Technical Analysis is a windsock, not a crystal ball.
-- Carl & Erin Swenlin
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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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