Yesterday I pointed out to Diamonds subscribers that Solar was poised to move much higher. It still is. Below is the chart of TAN, the Solar ETF. Yesterday, TAN broke out from a bullish falling wedge and today it gapped up and continued higher. Given the recent PMO crossover BUY signal and positive RSI, I believe it will move much higher. Notice that Stochastics are rising strongly as well.
The next test will be overhead resistance at the June high. I have the stop set based on yesterday's close. Given today's rally, you could raise that stop to the 200-EMA. We should see an IT Trend Model "Silver Cross" BUY signal arrive very soon. There are plenty of stocks within this group that are also breaking out. I presented a few in today's Diamonds Report. However, for non-subscribers, I can tell you that the majority of stocks in this industry group are poised to outperform just as TAN is.
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: XLP is in leading, but it is very close to the center. That tells us that it is performing about as well as the SPY right now. XLE, XLI and XLF are coming back to earth, but are still leading in the short term. XLB has popped into Leading. XLU is headed toward Leading while aggressive XLK and XLC are making a home in Lagging.
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 "hammer"-like candlestick pattern that suggests we will see higher prices again tomorrow. We are still seeing the bullish falling wedge pattern. Price could turn and test $430 or even $425 at the bottom of this wedge, so we are curbing our enthusiasm.
Total Volume was slightly lower than yesterday. The PMO is attempting to bottom. The RSI is negative, but it is rising slightly.
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 was unchanged today. Meanwhile, the GCI continues to decline.
Participation is still weak. It did flatten out and has stopped the decline, but we need to see it higher. Many of the stocks in the SPX look like the SPY, price below both the 20/50-EMAs. If see a majority of stocks move above their 20/50-EMAs, that would tell us there is strength under the surface that could propel the market higher. For now, we see some improvement, but not enough.
Climax Analysis: No climax today. We've gone over a week now without a climax day. There is not any thrust behind this rally today. The VIX is now oscillating above its EMA on the inverted scale and that does suggest internal strength in the very short term.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
The STOs were mixed today, so they really aren't confirming today's rally. The STO-B was slightly higher, but the STO-V continued lower. I do like seeing that 50% of the SPX have rising momentum. That does tell us we could see the market bottom. Overall that reading and the STOs are still neutral.
Intermediate-Term Market Indicators: The intermediate-term rising market trend is DOWN and the condition is NEUTRAL to SOMEWHAT OVERSOLD.
The IT indicators were mixed today as well. The ITBM rose slightly, but the ITVM reentered negative territory. No improvement 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 SCI reading is oversold, but given it is in the 40's, there is still a bearish bias. %Stocks > 20-EMA now has a slightly higher percentage than the SCI, but not enough to get excited about. Based on the combination of participation being about the same as the SCI, we would read the short term as having a neutral to bearish bias. Notice that the GCI is higher than the %Stocks > 200-EMA. Until more stocks are above the 200-EMA, the GCI will continue to move lower which gives us a bearish bias in the long term.
CONCLUSION: We saw a market reversal before it tested support at $430. I'm not getting too excited about that given the SPY set a lower low than yesterday. We don't have strong enough participation to expect a major rally. Price is still moving within a bullish falling wedge so it is primed for a breakout; unfortunately with mixed indicators and a bearish to neutral bias, we aren't getting any confirmation that this rally will be lengthy or that we will see a breakout. On the flip side I don't see anything that would imply a big decline ahead. More than likely we are in for sideways consolidation. I just hope we don't see a "drift" out of the bullish wedge. That would negate the pattern and suggest even more churn ahead.
I'm 65% exposed to the market as one of my positions was closed today. I am likely going to add Renewable Energy to my portfolio before the end of this week.
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Bitcoin is in a rising trend. The straight up rally is now being digested. The indicators are still looking strong as the PMO, RSI and Stochastics continue to rise. Overbought conditions are ahead and so is overhead resistance. Look for price to stall somewhat at overhead resistance, but given the positive indicators, I would expect a breakout above 60,000.
Rates fell on long-bonds, but continue to rise on shorter-term bonds.
10-YEAR T-BOND YIELD
$TNX fell again today, dropping below support at the September top. This has brought the RSI out of overbought territory, but it has also caused the PMO to top. Additionally, the steep rising trendline was broken. We had a bearish rising wedge form so this seems a natural reaction. We would look for them to drop to support at 1.45.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP gapped down today. We've annotated a large rising wedge. That is a bearish pattern and suggests the Dollar will break down not only below the August top, but all the way down to the 200-EMA. The PMO is topping and the RSI is headed for negative territory.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GLD Daily Chart: Finally! A strong move to the upside for Gold and GLD. The RSI is now in positive territory and the PMO has accelerated upward on an oversold BUY signal. Overhead resistance is strong at the July lows as it is accompanied by the 200-EMA. Discounts have expanded greatly which gives some credence to this breakout move today.
(Full disclosure: I own GLD as a long-term buy and hold position.)
GOLD Daily Chart: Expanding discounts mean that investors are bearish on Gold. Sentiment being contrarian, this suggests higher prices and a likely rally to $1840.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are picking up speed. Today we finally saw a breakout from the bullish falling wedge. The RSI isn't overbought yet and the PMO is moving higher out of an oversold crossover BUY signal. Participation is booming with over 93% of Miners with price above the 20-EMA and 2/3rds above their 50-EMAs. This gives us a very strong bullish bias given the SCI is reading at only 6.7%. The SCI will begin rising soon suggesting this rally will continue past overhead resistance at $33.
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 was higher on the day but set a lower low and a lower high. It also dropped below the steep rising bottoms trendline. It could certainly use a pullback given the overbought RSI and PMO.
I was able to annotate a rising trend channel on the 1-year daily chart. I would look for price to test the bottom of this rising trend channel soon and then likely continue rising within the channel.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: BUY as of 8/10/2021
TLT Daily Chart: TLT continued to rally as the 20-year yield moved lower again today. Now it is up against resistance at the 20-EMA and August low. The RSI and PMO are rising, but both are in negative territory. The 20-year yield could continue lower, but I note that there is support around 1.9%.
This rebound is arriving along the rising bottoms trendline drawn from the March low. We should see price rise a bit more, but I suspect it will get caught up on resistance at the 50-EMA. If price does not get above the 200-EMA, a LT Trend Model "Death Cross" SELL signal will materialize.
Technical Analysis is a windsock, not a crystal ball.
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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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