Yesterday we noted that the SCI had turned down below its signal line on the SPX. Today, despite a decline, the SCI bottomed and is headed higher again. This could be a sign of a possible upside reversal, but I don't think it is likely. Look at the mid-cap's and small-cap's SCIs. The SCI for the SP400 tipped over aggressively today and the SP600 SCI is topping. At least with the SP400 and SP600 the SCIs are above the signal line.
Let's look at the SCI for the broad markets in comparison to the SPX. The Nasdaq's SCI is still in decline. The SCI for the NYSE is rising, but also decelerating. It could top if we see lower prices. Overall, the health of the indexes is weak. The rise in the SPX's SCI, while positive, isn't convincing.
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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 has now entered Leading alongside XLI, XLF and XLE. However, those Leading sectors are showing weakness as they head south toward Weakening.
CLICK HERE for an animated version of the RRG chart.
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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 has turned down after failing to breakout above the 20/50-EMAs and the bullish falling wedge. The gap from last week has been covered, suggesting more downside ahead. Strong support is nearing around $430. The PMO topped below its signal line last week and is struggling to turn back up. The RSI is negative and falling.
Total Volume was much higher than yesterday but still beneath the annual average.
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.
Without the zoom thumbnail it's hard to see that the SCI did turn up today. It may've risen, but it still looks weak. The GCI is continuing to fall.
Participation continues to fall. The reason we saw the uptick in the SCI despite falling participation is that a few stocks where price is above the 20/50-EMAs remained above both and it eventually was able to drag the 20-EMA above the 50-EMA.
Climax Analysis: No climax today. The VIX is staying above its EMA on the inverted scale which is positive.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
The STOs continued lower and are now in Neutral territory. There was no improvement in stocks with positive momentum.
Intermediate-Term Market Indicators: The intermediate-term rising market trend is DOWN and the condition is NEUTRAL to SOMEWHAT OVERSOLD.
I've added the zoom thumbnail to this chart because it is otherwise impossible to see that these indicators fell today. The %PMO crossover BUY signals is holding steady at 46% for the third day in a row.
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.
Participation is still reading lower than the SCI percentage. They are very close though so I would read the bias as neutral. Completely unhelpful. The SCI is oversold, but given its reading of only 42%, the intermediate-term has a bearish bias. The GCI continues to fall but isn't that oversold yet. With a reading above 80%, there is a long-term bullish bias. Given it is falling, the long-term bullish bias is deteriorating.
CONCLUSION: The market seems prepared to test the bottom of the falling wedge. If it can reverse at horizontal support at $430, that would suggest the next test of the top of the wedge will result in a breakout. Additionally, a reversal at that level could set up a bullish reverse head and shoulders. The STOs are declining and now the ITBM/ITVM have joined. We will likely see price move down to at least $430. The deterioration of most of our indicators tell us to be prepared for a deeper decline; one that will test the bottom of the wedge at a minimum. Time to reevaluate your stops, particularly on aggressive sectors like Technology and Discretionary.
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Bitcoin pulled back some profits today, but nothing significant in the world of crypto. The chart still looks bullish given the positive RSI and rising PMO. However, there may be upcoming issues given the top on Stochastics and the negative divergence it holds with price tops.
Rates fell on long-bonds, but continue to rise on shorter-term bonds.
10-YEAR T-BOND YIELD
$TNX fell 2 basis points today. It seems a natural response to the breakout rally. The PMO is still rising and the RSI, while declining, is in positive territory and not overbought.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP broke out above short-term resistance, confirming the bullish ascending triangle. The RSI is positive and the PMO is rising and not overbought. We would expect to see the Dollar rise a bit more.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GLD Daily Chart: Gold is still in a holding pattern. The PMO is on a BUY signal and the RSI is rising toward positive territory above net neutral (50). As of this writing, the PHYS discount hasn't been updated on Sprott's website. However, I suspect it will be in the same territory it currently is in. This high discounts are generally positive for Gold. It tells us investors are bearish on Gold. The readings are in an area that could suggest a breakout ahead, but they are also not as oversold as they have been. We will rely on the PMO which tells us to expect Gold to eventually leave these doldrums.
(Full disclosure: I own GLD as a long-term buy and hold position.)
GOLD Daily Chart: I'm starting to see a possible reverse head and shoulders in both the shorter term and the intermediate term. Both are bullish patterns. While we do expect the Dollar to continue to rise slowly, we believe Gold will do so too. They usually have an inverse correlation, notice that is changing. I am bullish on both the Dollar and Gold right now. I'm not expecting a giant rally on either, but I believe support will hold.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners reversed today but have not broken out of the bullish falling wedge. This is the best set up we've seen in awhile as the PMO is rising out of oversold territory and the RSI is now positive. Price is holding above the 20-EMA. We saw a spike in %Stocks > 20-EMA and now we are seeing improvement in the intermediate term as %Stocks > 50-EMA is rising nicely. Given the SCI is reading at only 6.7%, the bias is very bullish right now.
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 pulled back slightly today, but it was enough to soften the latest rising bottoms trendline. Crude is due for a pullback, but the indicators are still positive and supportive of higher prices.
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 in this trend channel.
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: BUY as of 8/10/2021
TLT Daily Chart: Nice breakout for TLT as the 20-year yield dropped today. This is confirms the bullish falling wedge pattern. We could certainly see a continuation to the upside, but we do note that it is now up against resistance. If that weren't enough, there is resistance lying in wait at the 20-EMA and the late September top.
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 at resistance of the 20-EMA.
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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