The Energy sector continues to soar higher. Today it finally recaptured its Intermediate-Term Trend Model "Silver Cross" BUY signal as the 20-EMA crossed above the 50-EMA. The PMO looks great as it has entered positive territory and is far from being overbought. The RSI positive and also not overbought.
Participation is at 100% for stocks > 20/50-EMAs! Given those percentages and an SCI reading of merely 62%, there is a strong bullish bias moving forward for Energy and the stocks within. While participation at 100% is a clearly overbought reading, I would point you to the first quarter of the year where we saw these same conditions persist over weeks.
XLU has quickly lost steam. Carl mentioned that higher costs for energy could be the culprit. That condition doesn't appear ready for change as prices typically rise even higher during the winter months. There is a strong bearish bias when you look at participation of stocks > 20/50-EMAs and compare that to an SCI reading of 29%. The SCI can only get worse from here based on the participation. Granted price has reached possible support at the 200-EMA, but there are no signs of life "under the hood". Look for further price deterioration here.
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: XLE is a clearly outperforming the benchmark SPY by leaps and bounds. As noted in the opening, we believe it will continue even higher. XLY is still Leading, but it is beginning to rotate toward Weakening. XLF hit Leading territory today and we see a marked improvement in relative performance for XLI.
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: Price is being squeezed between the intermediate-term rising bottoms trendline and the short-term declining tops trendline. We expect to see an upside breakout or more sideways action rather than a pullback or sizable decline.
We would be more bullish, but today the RSI moved below net neutral (50) and the PMO topped below its signal line. The "big guys" are seeing declines and bearish biases, so it will now be up to the 'less large' caps to hold it up. This is entirely possible. While the SPY was down 0.29%, $SML was up +1.38% and IWM was up +1.52% so there does seem to be improvement in the lower-cap space.
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 GCI improved slightly, but the SCI fell slightly. I included the BPI as it saw a positive crossover its signal line which is positive in the shorter term.
Participation wasn't really harmed by today's decline. While they %Stocks > 20/50-EMAs topped, they weren't down by much.
Climax Analysis: No climax today. The VIX did top which isn't good on the inverted scale and we did see higher Total Volume for the SPX was higher on a down day.
Short-Term Market Indicators: The short-term market trend is NEUTRAL and the condition is MILDLY OVERBOUGHT.
The STOs powered higher on today's decline which is positive in the short term. Unfortunately this has moved the STO-V into overbought territory. As with most indicators, the STOs can stay overbought for a period of time. Seeing rising bottoms on these indicators out of last week's low is a bullish confirmation.
Intermediate-Term Market Indicators: The intermediate-term rising market trend has been BROKEN and the condition is OVERSOLD.
IT indicators turned up after last week's bottom. They are still in oversold territory and do favor a continuation of last week's rally and the possibility of recapturing the intermediate-term rising trend.
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 market bias is mostly neutral with participation only slightly lower than the SCI. Still we don't like that these participation percentages are lower than the SCI. It tells us that a rising SCI will be hard to recapture.
CONCLUSION: The SPY slid today, taking the PMO and RSI with it. The STOs and ITBM are rising out of oversold territory which does suggest a breakout from the short-term declining trend. The SCI turned down and participation is still shaky. We suspect that mega-caps which have been weakening are pulling the SPY lower. However, this is all with a backdrop of small-caps rallying strongly. They appear ready to take a leadership role. Energy and Financial sectors are showing incredible strength. Rising Crude Oil prices will keep Energy moving higher and rising interest rates with favor Financials. While there is some weakness out there, overall we would look for the SPY to continue to churn sideways until the mega-caps get back on board.
I'm 70% exposed to the market but may add another 5% to 10% to my portfolios in the smaller-cap Energy and Financial stocks.
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Bitcoin's large rounded top is looking more ominous as price struggles to hold above the 200-EMA and January/July tops. Today it lost its "silver cross" as the 20-EMA dipped below the 50-EMA. The PMO has now entered negative territory and the RSI is firmly planted in negative territory. Best case would be more sideways churn.
Yields are breaking out. The 30-Year Yield hasn't yet, but it will likely follow suit this week.
10-YEAR T-BOND YIELD
We have a bullish 10-year yield chart. The PMO has accelerated its on an oversold BUY signal. The RSI is positive and not overbought. We could see a hiccup ahead at overhead resistance. The positive indicators suggest that's what it will be... just a hiccup.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP continues to rise and will likely test overhead resistance this week. Given the positive PMO and RSI we would expect a breakout. However, I do notice that volume has been declining on the current rally off the 200-EMA.
Price is traveling in a solid rising trend channel. The main issue is that it could need to make a trip down to test the rising bottoms trendline. However, given the very positive indicators, we are expecting UUP to finally breakout above the March top.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GLD Daily Chart: Gold is clinging to support at the June low. The Dollar looks strong moving forward and that will obviously put downward pressure on Gold. The RSI and PMO tells us we are likely in for a test of the August low.
(Full disclosure: I own GLD as a long-term buy and hold position.)
GOLD Daily Chart: On Friday we saw a major expansion in discounts on PHYS. Typically oversold readings on this indicator come near price bottoms. Traders are very bearish on Gold right now so we could see those discounts expand further. As noted above a bullish Dollar and rising rates will not favor Gold. This doesn't seem like a good entry.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners were unchanged. We still have a bullish falling wedge pattern that tells us to expect and upside breakout. However, we need to see at least a pulse in participation before we start looking for a bounce.
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 rallied strongly on a gap up. Friday's breakout suggested follow-through would occur today and it did. The RSI is positive and getting overbought. However, I would look to June and point out that the RSI can sit in overbought territory for some time. The PMO looks very healthy and is not overbought.
Look for the rally in Crude Oil to continue this week.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: BUY as of 8/10/2021
TLT Daily Chart: TLT collapsed when interest rates bounce higher. We had a failed breakout from the symmetrical triangle and now it has broken down.
The RSI also moved into negative territory. Price is testing support at the January bottom. I would look for a test of the 200-EMA given the 2nd failure to break out of the bullish symmetrical triangle. We do see support arriving, but given the very negative indicators, it isn't likely to hold.
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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