Here is part of the opening paragraph from today's DP Diamonds Report:
"I am still not in favor of expanding exposure. Big reason would be the diminishing participation within the major indexes. It's going to get harder and harder to find solid winners as there are fewer to pick from."
Below are the visuals behind that statement. I've included the participation charts for the NYSE, Nasdaq, OEX and SPX below. It shows you the %Stocks > 20/50/200-EMAs.
The NYSE, Nasdaq and OEX have less than 50% of their stocks with price > 20-EMA and these numbers are getting worse each day. The Nasdaq has the weakest participation of the bunch. The SPX is the only index with %Stocks > 20-EMA sitting above 50%. I have been looking for sideways consolidation and then a resumption of the rally... given the speedy contraction of participation it is more likely that a decline will continue in the major markets.
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: XLY may look great on the daily RRG, but it does on the weekly RRG which you can reach at this link. XLY may be the only sector traveling in a bearish southwest direction, but it is only in Weakening and based on the positive weekly RRG, I'm expecting to see it hook back around to move toward Leading. On Friday's we will be adding the weekly RRG in addition to the daily for a different perspective. In the short term, new strength is arriving in XLI, XLU and XLE.
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 was up today and we have a possible bullish hammer candlestick which would imply higher prices. However, hammers really aren't great predictors unless they are coming at a low, not in the midst of a consolidation phase. The VIX continues to oscillate below its EMA on the inverted scale implying internal weakness and nervous investors. Total Volume expanded to reach the annual average.
Admittedly, the PMO, RSI and Stochastics aren't that bearish. However, the PMO is beginning to look toppy.
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 SCI on the SPX fell in line with the other major indexes as it finally topped today. The GCI continues lower. Still, these readings themselves are still bullish given we have over 70%+ stocks configured positively in the intermediate and long terms.
S&P 500 New 52-Week Highs/Lows: New Highs contracted slightly, but New Lows expanded enough to turn the 10-DMA of the High-Low Differential down.
Climax* Analysis: Today was not a climax day. The market finished higher, yet breadth numbers were negative.. and not by a little, but by a lot. Additionally, Down/Up Volume Ratios were more elevated than Up/Down Volume Ratios. I don't like this bearish activity on a day when the market closed up 0.34%.
*A climax is a one-day event when market action generates very high readings in, primarily, breadth and volume indicators. We also include the VIX, watching for it to penetrate outside the Bollinger Band envelope. The vertical dotted lines mark climax days -- red for downside climaxes, and green for upside. Climaxes are either initiation or exhaustion.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
The STOs moved much lower. The worst part of this chart is the plummeting of stocks with rising momentum. Only 1/3rd of the SPX have PMOs that are rising.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Both the ITBM and ITVM continue lower but remain overbought. Even more stocks are losing their PMO BUY signals. Nearly half of the SPX stocks are on PMO SELL signals and that number continues to get worse.
Bias Assessment: The short-term bias is now bearish given participation of stocks > 20/50-EMAs is well below the SCI reading. The intermediate-term bullish bias is deteriorating as the SCI will be pulled lower. Fewer stocks are > 200-EMAs than the GCI percentage. The long-term bullish bias is deteriorating.
CONCLUSION: Participation across the board from %Stocks > 20/50/200-EMAs, SCI, GCI, New Highs/New Lows and Net A-D is shrinking even as price tries to trend higher. I have been looking for a pause and then resumption of the rally to new all-time highs; however, with participation tanking so quickly, I believe the market will finally pullback. Limit your exposure and consider tightening stops.
I am 75% exposed to the market with 25% being in cash and readily available to trade.
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Bitcoin broke below the support of the 50-EMA and late October low. Indicators continue to fall. Look for a test of $52,500.
Yields have turned down but remain above their prior declining trend.
10-YEAR T-BOND YIELD
$TNX fell again today and is close to testing its 20-EMA. The RSI is still positive and the PMO hasn't turned down. I am expecting rising yields to return after the 20-EMA is fully tested.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Yesterday's comments still apply:
"UUP paused its breakout rally. The decline didn't damage the indicators and in fact, moved the RSI out of overbought territory. Stochastics are flat but are above 80 suggesting the Dollar should continue to rally."
"I do note that the PMO has now reached overbought territory. For now it is rising."
IT Trend Model: BUY as of 10/28/2021
LT Trend Model: BUY as of 11/16/2021
GLD Daily Chart: Yesterday's comments still apply:
"GLD continues to consolidate after the strong early November rally. The RSI is positive and Stochastics are oscillating above 80. Additionally, the PMO continues to rise and is not overbought."
(Full Disclosure: I own GLD as a "buy and hold" position.)
GOLD Daily Chart: Discounts pared back by quite a bit which tells us investors are feeling more bullish about Gold. It's a wonky looking bull flag, but ultimately I expect price to breakout and test the May/June highs.
GOLD MINERS Golden and Silver Cross Indexes: It appears Gold Miners are in for a pullback, possibly to the 200-EMA. However, the price pattern is still very favorable and participation is still strong at 90% for the SCI.
CRUDE OIL (USO)
IT Trend Model: BUY as of 9/3/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Price is so far holding support at the 50-EMA and the early November low. Technically it is in a symmetrical triangle or pennant attached to a flag pole. The RSI has turned up but neither Stochastics or the PMO have followed suit. Additionally, the RSI is negative. The price pattern suggests this support level will hold, but indicators need to firm up soon.
We will watch this situation closely as price is testing the 50-EMA. This provided a nice jumping off point earlier this month.
IT Trend Model: BUY as of 11/8/2021
LT Trend Model: BUY as of 11/4/2021
TLT Daily Chart: Yesterday's bullish engulfing candlestick played out as expected. Price is now above the 20/50-EMAs and the RSI has entered positive territory. However, the PMO is showing a crossover SELL signal. Stochastics and the RSI don't look negative so I expect we will see a whipsaw back up.
I still believe rates will begin rising again, but in the meantime, TLT might be able to eke out a bit more profit and test overhead resistance at the January low.
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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