At lunch I often put on the various financial news networks to find out what the current "buzz" is. Buzz is an excellent descriptor for the usual "noise" provided on these shows. I noted that a few different guests felt that the equal-weighted indexes were outperforming their cap-weighted counterparts. I find that interesting given the chart below.
Since the May lows, RSP has gained about 8.5% as compared to the SPY which is up 12.8% over the same time period. Looking at the relative strength line, I also don't see evidence that we have wide participation in the rally. We've been watching participation daily in this blog and I simply do not see what these guests see. I will say that RSP is performing about as well as the SPY so that is an improvement, but it certainly doesn't make investing in RSP that attractive versus the SPY.
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: XLC has now entered the "Leading" quadrant with XLRE not far behind. XLY is traveling in the bullish northeast heading with XLE beginning to move similarly.
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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: The SPY continues tiptoe along the top of the bearish rising wedge which isn't looking all that bearish right now.
Could we finally be ready to test the top of the rising trend channel? It isn't out of the question, but our indicators are confirming this is not a realistic possibility right now. Currently the RSI is positive and the PMO is on a BUY signal. However, diving into participation, we know there are problems.
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.
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The SCI is rising which is bullish, but the GCI lost some ground this week. The negative divergence on the SCI is also not encouraging.
We did see better participation today. I do note that both %Stocks > 20/50-EMAs are now near-term overbought. And of course, negative divergences remain.
Climax Analysis: We had a possible whiff of an upside exhaustion climax, but numbers weren't outside the normal range. Total Volume didn't even come close to being climactic. Of course, holiday trading could explain the decline. The VIX is comfortably above its EMA on the inverted scale which is generally positive for the market.
NYSE Up/Down and Down/Up volume ratios are also climax detectors. The 9:1 ratio suggested by the late Dr. Martin Zweig in his book, Winning on Wall Street, is especially significant, but we also look for spikes outside the normal range to clarify a particular event. We have an NYSE and S&P 500 version of the ratios, and normally they will only be published when there is a notable reading.
I decided to review our Volume Ratio charts to see if they were showing climactic readings. The NYSE did not. The SPX did make it above the 3.0 level, but not enough to call this an actual climax.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
I like the bump on the STOs, but it could also be an indicator of a possible buying exhaustion given they are overbought again. However, there was marked improvement on %Stocks with Rising PMOs. The reading isn't overbought yet.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Both the ITBM/ITVM rose today in overbought territory. They still have not shaken the negative divergences.
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.
With the bump in participation today, the impending bearish bias seems to have been avoided. I see a very slight bullish bias in both the short and intermediate terms, but again, the %Stocks > 20/50-EMAs is already near-term overbought.
CONCLUSION: The market continued to move higher defying the rising wedge and negative divergences once again as it set new all-time highs. The charts aren't THAT bearish right now, but...we did get a whiff of an upside exhaustion climax in the very short term. The STOs are rising and we did see improvement in participation which leaves me cautiously bullish moving forward. I am currently 70% exposed to the market.
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Bitcoin is now testing overhead resistance at the recent August top as it consolidates sideways along support at the 20-EMA and April low. The RSI is positive, but the PMO hasn't really shaken its decline.
Yields are moving mostly sideways since breaking out of their declining trend.
10-YEAR T-BOND YIELD
$TNX is doing its best to avoid the bearish implications of the short-term double-top. The RSI is neutral and the PMO is mostly flat. The 50-EMA is now forming resistance. Look for at least a test of the confirmation line of the double-top.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP has now lost moving average support after its textbook breakdown from the bearish rising wedge. The RSI is negative and the PMO is dropping in earnest. It's time to look for a test of support at the August low and possibly the March/June lows.
I've been focused on possible bullish patterns on the one-year chart, but today I noted a large double-top formation. If price drops below the confirmation line, the breakdown could take UUP down to support at the January/May lows.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GLD Daily Chart: Despite the drop in the Dollar, Gold pulled back. The good news is that it remains above the key moving averages and inside the rising trend.
(Full disclosure: I own GLD)
GOLD Daily Chart: $GOLD wasn't able to test the top of the prior trading range before angling lower which is bearish. However, the rest of the chart looks bullish given the positive RSI and newly positive PMO. We can also see a possible "silver cross" ahead which would give us an IT Trend Model BUY signal.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners closed slightly higher and seem to be clinging to the short-term rising trend. We do have a bullish falling wedge and I can make out a possible reverse head and shoulders. The PMO is on a BUY signal. The RSI is mostly neutral. Given the SCI is at 3.33% and participation numbers are 13% and 47%, there is a nice bullish bias that suggests Gold Miners should continue to inch higher.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 8/18/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Nice pop on USO today. Unfortunately it has formed a near textbook bearish shooting star candlestick. This could very easily turn into an island reversal. However, the RSI is still positive and the PMO is rising nicely despite this week's earlier pullback. Overall I'm still bullish on Crude Oil.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: BUY as of 8/10/2021
TLT Daily Chart: Yesterday's comments still apply:
"TLT closed back above the 20-EMA. Price is currently traveling in a symmetrical triangle. These are continuation patterns, meaning the prior trend should be resumed with an upside breakout. The RSI is positive, but the PMO needs some help." I would also add that we have a bullish hammer candlestick today. Given price did not have to test the bottom of the symmetrical triangle before rallying, there is a high likelihood we will see a breakout this time.
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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