I thought it was a good time to review the major broad market indexes (SPX, Nasdaq and NYSE) with the Golden and Silver Cross Indexes visible for each. Indicators have begun to reach oversold levels in general, but clearly we have seen much lower readings at the end of the 2020 price low.
SCIs switched gears and declining again. Negative divergences also remain in all timeframes.
The GCIs for the broad market are also continuing to move lower and in their case, they aren't in oversold territory. These indicators can accommodate a lot more downside so a correction isn't out of the question in the intermediate to long terms.
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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: XLK has reached Weakening and continues lower. It hasn't begun to trend toward Lagging though. The Leading sectors are XLY, XLRE and XLC. We can see that XLC is beginning to lose steam. XLP and XLE are making moves from Improving toward Leading. The rest have been relegated to Lagging.
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: The market finished higher by about a quarter of a percent today. This is certainly a valid reversal point given this rally came at the 20-EMA. The market is avoiding the execution of the short-term bearish rising wedge. There was a nice pop in Total Volume, but the VIX remains below its EMA and hasn't yet punctured the lower Bollinger Band. A puncture of the lower Band is a great signal for a reversal. While it came close on Friday, it didn't materialize.
Currently the intermediate-term rising bottoms trendline is holding. It also forms the bottom of the intermediate-term rising wedge. The RSI managed to recover with today's rally, putting it back above net neutral 50. The PMO is still in decline. The 50-EMA is nearby for support, but a test of that EMA would begin a possible execution of the bearish wedges which would point to lower prices.
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.
As noted in the opening, the SCI for the SPX topped today. In fact, it topped below its signal line which is particularly bearish. While reading are getting oversold, we can see that 2019 lows and late 2020 lows are below current readings. I added the BPI to the chart today to show you that those readings are not oversold enough either.
Participation did tick up today. These readings are oversold, but, lower readings were seen at this summers pullbacks. They are not oversold when compared to the September and October 2020 lows.
Climax Analysis: No climax today. I thought we might see a climax today, but given we did not, I would not consider this a lasting pivot point. As noted earlier, the VIX hasn't punctured the lower Band. New Highs contracted and did not expand. Net A-D readings were somewhat elevated but nowhere near 'climactic'.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is OVERSOLD.
STOs are clearly in oversold territory. They were mixed today with STO-B declining again and the STO-V rising slightly. This is a good sign, but I would like to see confirmation from both indicators before going all in on a bullish market call. %PMO Rising is coming out of oversold territory right now which is encouraging.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM both continue to decline. Today the ITVM hit negative territory. Neither is oversold at all. Sadly they sit in "neutral" giving us very little indication that the market is going to hold onto the longer-term rising trend. %PMO BUY signal continues lower. The indicator is getting oversold but can easily accommodate more market decline. Oversold readings are around 20 or lower based on prior market bottoms.
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 bearish bias remains in both the short and intermediate terms. The SCI reading is higher than participation numbers of %Stocks > 20/50-EMAs.
CONCLUSION: I would love to call a market bottom here, but I know that indicators aren't quite oversold enough. Additionally, today's rally was not accompanied by climactic readings on Net A-D, New Highs and the VIX. Total Volume was elevated suggesting investors are ready to buy again, but I would caution against increasing your exposure until we see if price can hold above the 50-EMA or rally again tomorrow.
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Bitcoin continues to trend lower, but is holding onto support at 42500. I spotted a positive OBV divergence that could suggest a rally off the 200-EMA, but the PMO and RSI aren't confirming. Additionally we have a bearish reverse flag formation.
Yields are moving mostly sideways since breaking out of their declining trend.
10-YEAR T-BOND YIELD
We can see a bullish ascending triangle, but price is beginning to crowd into the apex. That usually leads to a busted pattern. The RSI is positive and mostly neutral. The PMO has hit positive territory. While it isn't on the chart, I know that the 5-EMA crossed above the 20-EMA and that gives us a ST Trend Model BUY signal. Rising rates seem likely.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP is basically consolidating above the 200-EMA. Price closed above the 20-EMA which is positive. Overall the chart is mostly neutral given the RSI is sitting at net neutral 50 and the PMO is flat. Hard to make any sweeping conclusions about where the Dollar is going.
Price broke down from the bearish rising wedge, but is now trying to recover.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GLD Daily Chart: GLD was up slightly on a day when the Dollar was unchanged. This suggests buyers came in. The PMO is clinging to a crossover BUY signal. The RSI is negative but trying to rise back into positive territory.
(Full disclosure: I own GLD)
GOLD Daily Chart: $GOLD seems to be forming a large bullish reverse head and shoulders. It's too early to call it as we need to see a breakout above the neckline at $1840.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners rallied after a difficult week. Participation is beginning to shape up as %Stocks > 20-EMA has moved quickly to 1/3rd. That's much higher than the SCI reading of 6.67% suggesting a short-term bullish bias. If we see a sustained rally here I would look for a breakout given price wouldn't have had to test support at $31 nor tap the bottom of the bullish falling wedge.
CRUDE OIL (USO)
IT Trend Model: BUY as of 9/7/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Crude continued to rally pushing Energy stocks higher. USO broke out of a short-term declining trend and is now ready to test the longer-term declining trendline. Given the positive RSI and rising PMO, we would look for a breakout here.
We could be looking at a reverse head and shoulders pattern which is bullish. However, it is coming at the top of a rising trend. In any case, price appears ready to test overhead resistance at the July highs given the rising PMO and RSI.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: BUY as of 8/10/2021
TLT Daily Chart: Another very neutral chart. We do have a symmetrical triangle. It is a continuation pattern and suggests we will see an upside breakout. However, the yield charts are beginning to look more bullish and that would prevent a breakout. The RSI is positive and rising but sitting in mostly neutral territory. The PMO is flat and giving us no indication that a breakout is near.
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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