Industrials SPDR (XLI) generated a new IT Trend Model "NEUTRAL" signal. This means the 20-EMA has crossed below the 50-EMA while the 50-EMA was above the 200-EMA. Had the crossover occurred beneath the 200-EMA, then it would have been a SELL signal.
Relative strength against the SPY has been steadily losing ground since the early August top. We've annotated red dotted vertical lines to mark cardinal tops and green dotted vertical lines to mark cardinal lows. The most recent top saw the SCI begin to decline after a negative crossover. Participation is nearly always a clear indication of whether price will move lower and continue lower. On the bright side, readings are getting oversold. The problem is they don't look ready to turn back up yet. When the SCI decelerates or bottoms, then we can talk upside reversal potential.
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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 switched direction and is headed back up to Leading. XLE continue to move quickly toward Leading while defensive XLP and XLU have reversed course to the bearish southwest heading. XLI which just generated an ITTM "Neutral" signal is Lagging and not showing improvement yet.
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: Yesterday's upside initiation climax may not have resulted in a positive close today, but given the long tail on today candlestick, bulls eventually took back control. We got a higher low, but did not see a higher high and price closed just below the 20-EMA. The VIX is back below its EMA on the inverted scale but it is in a nice rising trend out of oversold conditions. The RSI stayed in positive territory but the PMO continues lower.
Price is staying above the 50-EMA and is clinging to the intermediate-term rising trend.
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 BPI did turn up today, but the SCI and GCI are continuing lower.
Participation ticked lower today but didn't drop below the previous lows. The readings are oversold, but as I discussed earlier this week, they aren't in oversold extremes yet. Still, a bottom here would be bullish for the market.
Climax Analysis: No climax today. New Highs did expand slightly even on a down day which is somewhat positive. Total Volume pared back considerably. A lower volume day on a decline is positive.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is OVERSOLD.
The best news today would be that the STOs continued to rise despite today's small decline. This is positive for the market in the short term. Additionally, %PMOs rising ticked up today despite the decline.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
IT indicators continued lower. They are near-term oversold so a reversal here would be positive, but we've certainly seen much lower readings. While we gained a percentage point on %PMOs Rising, we lost a percentage point on %PMO BUY signals.
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 in both the short and intermediate terms persists as participation readings are lower than the SCI reading.
CONCLUSION: The market fell slightly today but we didn't see universal damage to our indicators. Yesterday's upside initiation climax didn't result in much today, but given we saw higher lows and a strong rally into the close, it appears bulls were able to wrest the reins from the morning bears. The STOs are my compass right now and they are rising strongly out of oversold territory. I expanded my exposure to 85% today, taking advantage of those midday lows. My stops are hard on nearly every position.
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Bitcoin is holding above the 20-EMA and the RSI is still positive. The PMO is neutral, giving us no indication that the rally will be sustained. However, there is a positive OBV divergence that led into this rally and that usually means the rally will be sustained.
Yields are moving mostly sideways since breaking out of their declining trend.
10-YEAR T-BOND YIELD
$TNX was up two basis points, putting the 10-year yield above both the 20/50-EMAs. Additionally, the short-term rising bottoms trendline was recaptured. The RSI is positive and the PMO has bottomed above its signal line and above the zero line. If I adjust the rising bottoms trendline to begin from the mid-August low, there is a bullish ascending triangle pattern that would suggest rates will climb above overhead resistance.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar rallied, but finished the day with a bearish shooting star candlestick suggesting this is more of an island reversal. The RSI is positive as it sits above net neutral (50). However, the PMO is still moving sideways and mostly neutral.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GLD Daily Chart: The Dollar was up about a half a percent, but GLD fell heavily. Price is now sitting on support at the June low. Interestingly, discounts have not expanded much. We know that a sell-off like this means participants are bearish, but based on discounts they aren't that bearish.
(Full disclosure: I own GLD)
GOLD Daily Chart: The RSI tumbled into negative territory and isn't oversold yet. The PMO triggered a crossover SELL signal and moved below the zero line. The chart is very bearish, but should we get a nice rally off this level of support, we would have a very interesting bullish reverse head and shoulders. I would not bank on that. There is a high likelihood price will move even lower given the bearish indicators.
GOLD MINERS Golden and Silver Cross Indexes: Not surprisingly the Gold Miners were hit particularly hard today. This time the decline occurred before price tested the top of the bullish falling wedge. While price may be sitting on long-term support, given it turned down before reaching the declining tops trendline, it is very vulnerable to further decline. Participation dropped like a rock. A reversal here would be very bullish. Given the indicators under the hood are so negative, they have lots of work to do.
CRUDE OIL (USO)
IT Trend Model: BUY as of 9/7/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO was up slightly today. Overhead resistance at the July top has yet to be tested. Instead price hovered just above the declining tops trendline.
The indicators are very positive and not at all overbought. Price has overhead resistance to contend with, but indicators tell us to expect a breakout.
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 seems to have been stopped at the overhead resistance zone formed between the July and August tops. However, the PMO is in the process of triggering a crossover BUY signal and the RSI is positive. This breakout from a symmetrical triangle suggests we will see a breakout here."
Technical Analysis is a windsock, not a crystal ball.
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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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