We noted on the Weekly Sector Summary that every sector finished lower on the week. As part of the DP Diamonds report on Fridays we search for the "sector to watch" for the following week. Digging down under the hood, we only found that XLE and XLY have decent participation, but neither looked particular "good" going into next week.
In the CandleGlance below you can see the negative PMO configurations for all of the sectors. XLY and XLE may appear to have rising PMOs, but XLY's topped today and XLE's kept the same reading as yesterday. If we do not have strength among any of the sectors, it will be very difficult to see higher prices next week. Each sector has work to do.
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
For the week:
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.
For the Week:
RRG® Chart: As far as the short-term RRG, XLK is losing strength. XLY just entered "Leading" and looks healthy on the chart. XLRE and XLC are in Leading, but they are beginning to rotate back toward Weakening.
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: Today we have a bearish engulfing candlestick that suggests lower prices on Monday. The RSI has moved into negative territory and the PMO is finally beginning to put distance between it and its signal line while on a SELL signal. The short-term rising trend is still intact but this is now a test of the bottom of a bearish rising wedge. The expectation is a breakdown here.
There is also an intermediate-term bearish rising wedge. Price is not only testing the short-term rising trend, but it is beginning to challenge the IT rising trendline drawn from the October low.
SPY Weekly Chart: Price has not tested the long-term rising trend yet. The weekly RSI is now out of overbought territory which is positive, but the weekly PMO is still in decline and looking quite bearish.
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).
After crossing below the signal this week, the SCI has continued to move lower. It is drifting toward near-term oversold readings, but we wouldn't call it oversold right now. The GCI continues to lose steam in overbought territory.
Participation is reaching near-term oversold territory, but still are not oversold enough to look for a reversal.
Climax Analysis: Today was not an official climax day based on Net A-D and New Highs/New Lows. However, we did see the VIX drop significantly on our inverted scale. The lower Bollinger Band hasn't been penetrated yet--that is when we will usually experience a bullish reversal. Total Volume was also not climactic.
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 primarily 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.
However, you can see that Volume Ratios did see somewhat climactic numbers, at least on the SPX Volume Ratio. If this was an actual climax, we would lean toward a downside exhaustion climax. However, given we aren't seeing climactic numbers on our other indicators, we hesitate to go 'all in' on calling it a climax.
The S&P 500 version can get different results than the NYSE version because: (a) there are only 500 stocks versus a few thousand; and (b) those 500 stocks are all large-cap stocks that tend to move with more uniformity.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is OVERSOLD.
The STOs are now oversold but they continue to decline. %PMOs rising is beginning to reach oversold territory as well, but we've seen that indicator move lower.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL to SOMEWHAT OVERBOUGHT.
The ITVM is in "Neutral", but the ITBM is still somewhat overbought. The heavy decline in these indicators suggests this IT rising trend is in jeopardy.
Bias Assessment: The bearish bias continues as participation erodes. Remember with EMAs, they move toward price. If it is above an EMA it will rise, if it is below it will fall. We have 64% of members with 20-EMAs > 50-EMAs based on the SCI. However, we have far fewer with their price above the 20/50-EMAs. This means there are many of that 64% that will not keep their silver crosses. The SCI is not oversold.
CONCLUSION: All of the sectors have negative momentum! Indicators are beginning to reach somewhat oversold territory, but participation is so weak it is hard to imagine we will see a strong reversal right now. If you flip through the FAANG+ stocks you'll note that the majority of them dropped today with Apple (AAPL) and Alphabet (GOOGL) seeing the worst declines (-3.31% and -1.86% respectively). If these mega-cap stock declines take hold, there aren't many stocks beneath the surface to take the reins. The market is extremely vulnerable right now.
Erin is currently 70% exposed to the market, but will likely pare her exposure early next week. You may want to consider this approach or at least tighten up your stops.
Calendar: Next week is Quadruple-Witching options expiration. This quarterly event usually results in very high volume on Friday and low volatility toward the end of the week.
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Bitcoin was hit hard this week and is now spending time consolidating. Unfortunately that has formed a bearish reverse flag that suggest prices will move even lower. $42500 and the 200-EMA are nearby for support, but the RSI is negative and the PMO is in decline.
Yields continue to drift sideways after breaking out of their declining trend.
10-YEAR T-BOND YIELD
Putting the spotlight on $TNX, there is a bullish ascending triangle, but price is crowding into the apex and not breaking out which is eroding the pattern. Indicators are still somewhat positive so a breakout isn't out of the question.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar finished somewhat higher on the week as price settled above both the 50/200-EMAs. The RSI is still negative and the PMO hasn't really bottomed yet. It also closed below the 20-EMA. The picture is neutral to somewhat bearish.
UUP Weekly Chart: It looked like we had a bullish double-bottom on the UUP weekly chart, but when price hit the confirmation line, it balked. The weekly PMO is completely neutral. The weekly RSI is somewhat positive. We would expect to see more sideways price movement.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GOLD Daily Chart: GLD nearly triggered an IT Trend Model "Silver Cross" BUY signal this week, but then price collapsed. That bullish signal was scrapped. The RSI is negative. The PMO is currently on a crossover BUY signal but is threatening a SELL signal.
We did see elevated discounts this week. When discounts hit this level last time, Gold began to rally. So far we aren't seeing the same response.
GOLD Weekly Chart: The long-term rising trend is still intact on Gold, as is support at the mid-2020 highs and corresponding low at the end of 2020. The weekly RSI and PMO are not sharing any clues. Our best guess is more consolidation sideways for Gold.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners sputtered this week after an unsuccessful test of overhead resistance at the 50-EMA. This prevented the execution of the bullish falling wedge. The bullish bias has disintegrated as participation continues to deteriorate. The RSI is negative and the PMO has topped. More than likely we will see annual lows challenged once again.
CRUDE OIL (USO)
IT Trend Model: BUY as of 9/3/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO spent the week moving sideways holding support at the 20/50-EMAs. Again we have fairly neutral indicators. In USO's case, the PMO is still rising and the RSI is technically positive so there is a slight bullish bias on the chart going into next week.
USO/$WTIC Weekly Chart: $WTIC is holding above very strong support this week. The weekly indicators are mixed, but given USO is staying above both the 17/43-week EMAs, there is a slight bullish bias in the intermediate term as well as the short term.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: TLT is traveling within a symmetrical triangle. This is continuation pattern that suggests an upside breakout. Again we have neutral indicators that are revealing little. We do have a positive divergence on the OBV leading into this latest rally which leads us to believe we will see an upside breakout this time around.
There is a possible cup and handle pattern which is bullish. It also suggests an upside breakout ahead.
TLT Weekly Chart: The cup and handle pattern is also on the weekly chart. The weekly RSI is positive. The weekly PMO has reached above the zero line.
Technical Analysis is a windsock, not a crystal ball.
-- Carl & 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.
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