I can't take full credit for this observation. A subscriber to DecisionPoint Diamonds asked about this ETF and whether it was bullish. I have to say it is very bullish. Before I get into the nuts and bolts of the chart. Remember Dow Theory? The basic idea is that when the transports do well, typically the economy is doing well which in turn leads prices higher in industrial stocks.
The chart doesn't show a breakout and we need that to apply Dow Theory, but a breakout seems imminent. There is a bullish falling wedge and within that wedge is a bullish double-bottom. Neither pattern has been confirmed. We need to see an upside breakout from the wedge. That would likely confirm the double-bottom as it needs a breakout above the green dotted confirmation line I've annotated. The RSI is positive and the PMO also has a double-bottom. Indeed, the PMO is rising strongly after the second bottom. In the intermediate term, the OBV has even lows while price has declining lows. That sets up a positive divergence. Finally, Stochastics are strong with %K thrusting higher above net neutral (50). Relative strength against the SPY is confirmed.
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 the Leading quadrant. XLU has made a comeback and is now in the Improving quadrant. 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: Today's candlestick is a bullish engulfing, suggesting we will see upside follow-through. Additionally price is traveling within a bullish falling wedge. The PMO is attempting to bottom now and the RSI is rising, nearing positive territory.
Total SPX Volume was mostly unchanged from yesterday, not revealing much.
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.
Both the SCI and GCI continue lower with the SCI moving further into oversold territory.
Participation is rising with price out of oversold territory.
Climax Analysis: No climax today. The closed just above its EMA which is promising.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
The STOs continued to rise with the STO-V entering positive territory. All of these indicators revealed positive divergences going into this recent price low. It appears we are getting follow-through. We now have over half of the SPX displaying rising momentum.
Intermediate-Term Market Indicators: The intermediate-term rising market trend is DOWN and the condition is OVERSOLD.
Both the ITBM/ITVM are rising out of oversold territory. The ITVM and %PMO BUY signals featured positive divergences going into this recent price bottom.
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 market bias is now mostly neutral. This is an improvement, but we want to see it %Stocks > 20/50-EMAs rise above the SCI reading to confirm this market bottom.
CONCLUSION: One of the two possible confirmations that this rally is for real that I mentioned in last night's DPA is the VIX rising above its EMA. It's not a decisive breakout, but it is a step in the right direction. The other confirmation I mentioned in yesterday's conclusion was the need for a rising PMO. That hasn't happened yet, but it does look likely if we get follow-through on today's bullish engulfing candlestick. Most of our indicators are rising out of oversold territory. We are still bullish moving forward, but need more confirmation to call out a sustained rally ahead--the SCI needs to turn back up and participation isn't helping just yet.
I'm 70% exposed to the market.
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Bitcoin continues to rally strongly. Today it overcame resistance like a hot knife through butter. The PMO suggests we will see this rally continue, but we need to keep an eye on the now overbought RSI.
Yields are taking a pause after the strong September rise.
10-YEAR T-BOND YIELD
Yesterday's comments still apply:
"$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: We saw a textbook breakout and throw back to the breakout point. UUP continued to rally today. The PMO is looking more healthy and the RSI is still in positive territory. Resistance is arriving soon.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GLD Daily Chart: Gold was higher on the day, but we still don't have a breakout or close above the 20-EMA. The PMO is about to trigger a crossover BUY signal. The RSI is still negative.
(Full disclosure: I own GLD as a long-term buy and hold position.)
GOLD Daily Chart: Discounts continued to contract suggesting investors are more bullish on Gold. It appears Gold is getting ready for a breakout.
GOLD MINERS Golden and Silver Cross Indexes: I highlighted Gold Miners in today's DecisionPoint Diamonds report, so here is the excerpt:
"There is a strong bullish bias in the short term given the %Stocks > 20-EMA is above the SCI reading. We also see slight improvement in the intermediate term given %Stocks > 50-EMA is also above the SCI reading. We are now seeing a pulse. Other positive indications are the nearing PMO crossover BUY signal and the rising RSI that has nearly hit positive territory. Another very positive indicator is Stochastics. We see a nice thrust upward out of oversold territory."
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 today. There is a high probability that we will see it travel lower and test the bottom of the rising trend channel. Price had moved up very quickly, pushing the RSI well into overbought territory. Price needs to take a pause or see a small pullback. The PMO is topping in overbought territory, also suggesting we will see crude move lower.
Today's pullback did reignite 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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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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