The buy signals keep streaming in. Today both the Gold Miners (GDX) and Consumer Staples sector (XLP) saw IT Trend Model "Silver Cross" BUY signals. These are triggered when the 20-EMA crosses above the 50-EMA. I'll cover GDX in the section on Gold Miners so let's look at the XLP chart with "under the hood" indicators.
This sector has seen quite a bit of improvement, but XLP still is the weakest of the bunch on the Daily RRG chart with its bearish southwest heading within the Lagging quadrant. Diving in, we do see the PMO has now entered positive territory after an oversold crossover BUY signal. The RSI is positive and not overbought. The OBV is confirming the current rally off the 200-EMA. The Silver Cross Index (SCI) is still bearish as it reads only 34% of stocks with a 20-EMA > 50-EMA. Participation of stocks > 20/50-EMAs is higher than the SCI which is good, but with only 44% above their 50-EMA, we know that the best the SCI could reach is 44%. SCI is considered bearish until it reaches at least 50%. The Golden Cross Index (GCI) is moving lower and is at a mostly neutral reading of 56%. XLP is performing in line with the SPY, not outperforming it like most of the other sectors.
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: Strongest sectors are XLV, XLU and XLY given their strong northeast heading. However, XLRE, XLF and XLE are still showing some strength. XLRE has entered Leading and XLE and XLF are beginning to hook back around. XLP may've had a Silver Cross today, but based on the RRG this is one of the weakest sectors out there.
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 10/18/2021
LT Trend Model: BUY as of 6/8/2020
SPY Daily Chart: The market rallied again today but formed a black candlestick. These occur when price closes higher than the day before, but below its open for the day. This suggests a loosening grip by the bulls. While they won the day with a positive close, they weren't able to finish higher than the open. These candles are bearish; in most cases they precede a decline.
The RSI is nearing overbought territory. The PMO is rising and looks healthy. Stochastics are turning lower in overbought territory, but as long %K oscillates above 80, it implies internal strength.
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 SCI is rising and is now over 58% which is bullish. The GCI is holding steady between 82% and 83% which is also bullish as it suggests a strong foundation.
Participation is still deteriorating even as we see more all-time highs. This is a dual edged sword in my opinion. Lower participation is bad, but we are seeing these indicators moving out of overbought territory for the most part. We will want the rising trend to remain intact while the market is in a short-term rising trend.
Climax Analysis: No climax today. Total Volume was higher today, but we saw negative breadth on Net A-D numbers which is concerning. The VIX has flattened but is still firmly above its EMA on the inverted scale which is positive.
Short-Term Market Indicators: The short-term market trend is UP and the condition is EXTREMELY OVERBOUGHT.
The STOs are still overbought. They are retreating and that typically means an upcoming decline. Notice also that fewer and fewer stocks are showing rising momentum.
Intermediate-Term Market Indicators: The intermediate-term rising market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM are rising but are in near-term overbought territory. Today %crossover BUY signals lost a percentage point.
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 SCI is beginning to hit bullish territory. About 69% of stocks are > 50-EMA which tells us that the SCI has the potential to move higher. Given participation percentages are higher than the SCI, I would read that as a bullish bias. While the GCI is at a bullish 83%, %stocks > 200-EMA is only 79%, that tells us that the GCI will move down not up.
CONCLUSION: Today's black candle and negative Net A-D and Net A-D Volume tell me that we should see a market pause or possible decline this week. The declining STOs and participation also point to weakness. IT indicators are still bullish enough to not look for an extended decline. I continue to look for the market to cool its heels after days of higher prices.
I'm 85% exposed to the market.
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Bitcoin could be setting up a bearish head and shoulders formation. The right shoulder has now formed and price is beginning to test the neckline. The RSI is still positive, but I don't like the look of the PMO and topping Stochastics.
Long-term rates are holding support which suggests long Bonds are going to struggle.
10-YEAR T-BOND YIELD
Yesterday's comments still apply:
"The top of the rising trend channel was tested and now we are seeing the 10-year yield declining. Support looks very strong at the 1.55 level as it aligns with the 20-EMA and the bottom of the channel. Indicators are all topping which suggests we will see support tested."
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar chart is beginning to improve. While the PMO hasn't actually turned up, the RSI and Stochastics have. Price is holding above the August top and has now closed above the 20-EMA. Price is still traveling within a bearish rising wedge, but given price didn't have to go down and test the bottom of the pattern before turning back up, there is a slight bullish bias in the short term.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GLD Daily Chart: Gold backtracked today but is still holding the short-term rising bottoms trendline. Additionally we still have price holding above the 20/50-EMAs. It will need to stay there or a Silver Cross will not happen.
(Full disclosure: I own GLD as a long-term buy and hold position.)
GOLD Daily Chart: Stochastics are looking toppy already, but the PMO has entered positive territory. The RSI is also positive, albeit falling. Gold is barely holding onto its bullish bias. If the Dollar begins to strengthen, Gold will have trouble. Notice that discounts on PHYS have pared back considerably meaning participants are more bullish on Gold. It tells me not to expect a collapse, but that its "tortured" rally should hold up.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners saw an IT Trend Model "Silver Cross" BUY signal. Right now price is being squeezed between support and the 200-EMA. Given the bullish RSI, PMO and strong participation of stocks above their 20/50-EMAs, I'm expecting a breakout. However, the Gold chart above is looking "iffy" so we should be prepared for Miners to struggle a bit here.
CRUDE OIL (USO)
IT Trend Model: BUY as of 9/7/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Crude Oil is holding its rising trend with ease. The PMO is beginning to look toppy and the RSI is overbought. However, notice the strong Stochastics which suggest internal strength. Even if we see USO top here, support is easily available at the 20-EMA and the bottom of the current rising trend channel.
IT Trend Model: NEUTRAL as of 10/1/2021
LT Trend Model: SELL as of 10/21/2021
TLT Daily Chart: TLT experienced a "death cross" of the 50/200-EMAs last week, but today it had a PMO crossover BUY signal trigger. Stochastics look great and the RSI is now in positive territory. Add to that the bullish reverse head and shoulders and we should expect to see higher prices. Notice that the 20-year yield is traveling sideways. It is now headed to test the bottom of the trading channel. More than likely yields will turn back up at that level and that will push prices lower on TLT. Short term, look for higher prices, but know that profits will likely be limited due to support arriving for the 20-year yield.
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.
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