We have two charts that we typically use to determine market bias in the short and intermediate terms. One chart makes comparisons between the readings of the Silver Cross Index (SCI) and participation based on %Stocks > 20/50-EMAs. That chart is included in every DP Alert under "Bias Assessment". The other way we look at market bias is evaluating the Swenlin Trading Oscillators (STOs), the IT Breadth Momentum Oscillator (ITBM) and IT Volume Momentum Oscillator (ITVM).
We can see that in the short-term the STOs have lost ground and "green" suggesting the short-term bias is moving bearish. The ITBM/ITVM are near-term overbought, but still showing plenty of "green" on the chart. That tells me the IT bias is still bullish but could be deteriorating somewhat given the ITVM turned down today.
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
SECTORS
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.
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 continues to sit on top of the bearish rising wedge. The black candlestick is typically not bullish. It tells us that while price closed higher than yesterday, it closed lower than it opened. Total Volume was somewhat elevated, but I don't see even a whiff of a climax.
The RSI is still positive and not overbought and the PMO is maintaining its crossover BUY signal.
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.
On Monday (8/9) Carl discussed the concept of a "stealth correction" during the DecisionPoint show. You can watch it HERE.
The GCI was unchanged. The SCI was up a percentage point, so we now have a little over 2/3rds of the stocks in the SPX have a 20-EMA above their 50-EMA.This is a respectable number, but given the rally since the April low has been strong, we should be seeing better participation, hence the negative divergence.
Participation continues lower even as price is making new all-time highs.
Climax Analysis: No climax today, but we did see more New Highs. The VIX is staying above its EMA but is leaving headroom below the upper Bollinger Band on the inverted scale.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
The STOs continued to pull back today, but remain overbought. There is still a slim majority of stocks with rising momentum. We have logged new all-time highs today, yet only about half of the stocks in the SPX have positive momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
As noted in the opening, the ITVM turned down slightly today in overbought territory. Both indicators are near-term overbought.
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.
When we compare participation numbers to the SCI reading, we can see that the market bias in both the ST and IT is neutral to very slightly bearish.
CONCLUSION: STOs are still in decline and are damaging the short-term bullish bias. Additionally, our bias assessment shows a "neutral" bias in both the short and intermediate terms. Participation tells us that large-cap stocks are holding this market up. Nothing new. However, it leaves the market in a precarious position. If those stocks begin to deteriorate or turn down, there aren't any stocks below them to support the market moving higher. However, given those large-cap stocks are strong and getting stronger (Apple (AAPL) came up in my Diamond scans today), the market will likely continue to trickle higher. We just should be ready when those big names begin to fail as they will take the market down with them. I am 60% exposed to the market.
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BITCOIN
Bitcoin is holding support at the 20-EMA and April low. The "breakdown" from the rising wedge turned out to be more of a 'drift' sideways. That bodes well as does the positive RSI. The PMO has work to do.
INTEREST RATES
Yields are moving mostly sideways since breaking out of their declining trend.
10-YEAR T-BOND YIELD
Yesterday's comments still apply:
"$TNX has formed a short-term double-top. The expectation is a breakdown below the confirmation line. At best, we could see it hold up at that confirmation line, but more than likely we will see a test of support at the July/August lows."
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP is now testing support at the 200-EMA after executing the bearish rising wedge as expected to the downside. Given the negative RSI and PMO, I'm bearish on the Dollar.
GOLD
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GLD Daily Chart: GLD was mostly unchanged today. It's holding support at the key moving averages as well as the rising bottoms trendline. The PMO just reached positive territory on GLD.
(Full disclosure: I own GLD)
GOLD Daily Chart: $GOLD also saw the PMO rising into positive territory. I'm bullish on Gold partly due to the indicators but also due to my bearish stance on the Dollar.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners failed to close above the 20-EMA. The RSI is still negative, but the PMO is rising on a crossover BUY signal. The SCI had a positive crossover and we can see that participation is improving overall. The bullish falling wedge suggests a breakout above the 50-EMA.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 8/18/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Yesterday's comments still apply:
"USO was down today after overhead resistance was hit yesterday. This seems a natural reaction to hitting overhead resistance. The indicators aren't showing damage as the RSI is positive and the PMO is still rising. Price will likely test the 20/50-EMAs, but given the oversold PMO BUY signal, I would expect to see Oil prices rise again."
BONDS (TLT)
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: BUY as of 8/10/2021
TLT Daily Chart: 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.
Technical Analysis is a windsock, not a crystal ball.
--Erin Swenlin
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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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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