Technology (XLK) rallied strongly, but it wasn't enough to avoid an IT Trend Model "Dark Cross" Neutral Signal. In order to avoid that negative crossover price would have had to rally above the 50-EMA. That could still happen, although the technicals "under the hood" don't look healthy. There is still a strong bearish bias given participation percentages are well below the SCI reading of 41%. This could be a support level at the July low. We likely will see price rise, but it is still traveling in a declining trend channel and could see a failure when it tests the top of the channel.
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 and XLF are the clear leaders with XLB and XLI getting ready to join them in Leading. All other sectors are Lagging with the exception of XLY whose relative strength is failing.
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: We finally saw a bounce off Friday's upside initiation climax. As we often say, it can take a day or two for a climax to resolve. We have a slight break of the declining trend drawn from the previous top. Despite a negative RSI and yesterday's "Dark Cross" of the 20/50-EMAs, we do see a likely short-term bottom here. There is a bullish falling wedge and the PMO is beginning to bottom. While we don't have the OBV bottoms rising, they aren't declining and that sets up a slight positive divergence.
Total SPX Volume contracted. I do not like that the VIX is still oscillating below its EMA on the inverted scale. That tells me there is still internal weakness.
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 began to decline again today after sticking to the same reading for a few days. It now has a very bearish top below the signal line that suggests an unsettling long-term environment for the SPY. The SCI continues to dive lower.
Participation ticked up with price. There is a positive divergence in the short term as %Stocks > 20-EMA has rising bottoms and price has declining bottoms.
Climax Analysis: It appears Friday's upside initiation climax is resolving to the upside. Today was not climax day despite strong buying. Net A-D, Net A-D Volume and Volume Ratios were all well within their normal ranges.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is OVERSOLD.
We finally saw the STOs rise today. I'm reading this as a confirmation of this short-term bottom. Notice all of the indicators on this chart are showing positive divergences.
Intermediate-Term Market Indicators: The intermediate-term rising market trend is DOWN and the condition is OVERSOLD.
For the first time since late September, both the ITBM and ITVM are rising at the same time. Not only are they rising, they are rising out of oversold territory. We have a positive divergence on the ITVM and 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 continues as participation percentages are below the SCI. However, we are starting to see improvement as participation rises and the SCI falls to meet it.
CONCLUSION: Today's conclusion will be proof that we are not "perma-bears". The indicators are very positive and suggest we do have a short-term bottom that should see some follow-through. The bullish falling wedge, positive divergences, newly rising STOs and ITBM/ITVM lead us to have a bullish bias in the short term. We can't speak to the duration or power of any rally to follow until we see the PMO turn back up, see the VIX above its EMA on the inverted scale and see the RSI above net neutral (50). We could easily find ourselves in the midst of choppy trading with an upward bias.
I'm 70% exposed to the market with an emphasis on energy and materials stocks.
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Bitcoin broke out and has now cleared the rounded top formation. Overhead resistance is very close so that could be an area for another pause. The indicators are very bullish so a breakout is likely at the September top.
Yields pulled back at the end of last week, but moved higher on the day.
10-YEAR T-BOND YIELD
$TNX appears to have broken upward out of a bullish flag formation. We expect to see the yield test March highs given the positive RSI and accelerating PMO.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Looks like a textbook breakout and throw back to the breakout point. Today UUP rallied bouncing off strong support. The PMO is neutral, but the RSI is rising in positive territory suggesting UUP could rally a bit higher.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GLD Daily Chart: Price did not follow-through on yesterday's bullish engulfing candlestick. Indeed, the 20-EMA held as overhead resistance given today's decline. At the same time support hasn't been compromised. The PMO is nearing a crossover BUY signal. The problem for Gold is a fairly bullish outlook for the Dollar.
(Full disclosure: I own GLD as a long-term buy and hold position.)
GOLD Daily Chart: Discounts contracted slightly today. They are certainly bearish enough to look for Gold to rally, but they are also not as oversold as we've seen them. The RSI turned down below net neutral (50) which isn't a good look.
GOLD MINERS Golden and Silver Cross Indexes: This rally has promise for Gold Miners. We have a rising PMO and RSI. Participation is beginning to show itself. %Stocks > 20/50-EMAs are higher than the SCI which gives us a bullish bias. We still should tread lightly given so many prior failures to breakout from the bullish falling wedge.
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 broke out of its already rising trend channel. This is very bullish. The RSI is more overbought than we've seen it in the past six months, but remember overbought conditions will persist during a lengthy rally.
Today's rally extinguished my concerns about a reverse island formation.
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 continues to cling to support as it is trapped between support at the July low and resistance at the 200-EMA and August low. Yields have pulled back somewhat but we expect them to begin rising again. This is likely a reverse flag set up. The RSI has turned back down in negative territory and the PMO is still in decline. Add to that last week's IT Trend Model Neutral signal (20-EMA cross below the 50-EMA) which leaves us bearish on Bonds."
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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