West Texas Crude ($WTIC) dropped a whopping -3.63% today. USO dropped further at -3.81%. Below is the $WTIC chart and you can see we did have a few clues that this might happen. The PMO generated a crossover SELL signal yesterday and the RSI had already topped. Stochastics were still rising which prevented me from getting overly bearish on Crude Oil. Now we have a bearish double-top. Based on the minimum downside target for the pattern, I would look for price to test support at the July top.
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.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
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: XLU which had been looping back in the northeast heading, abruptly moved back down toward Lagging to join already weak XLC. XLI is losing ground quickly as well. My "sector to watch" XLV should hit the Leading quadrant soon.
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: Carl pointed out to me that we have a bearish rising wedge that had developed, but today price popped out of the top which is usually a very bullish sign. The RSI is now in overbought territory, but the PMO is still rising strongly.
You'll note that while the PMO may appear overbought on the chart above, we can see that it is only near-term overbought. We have definitely seen higher readings. The normal range for the SPY's PMO is between -2 and +2.
Free DP Trading Room (10/25) RECORDING LINK:
Topic: DecisionPoint Trading Room
Start Time: Oct 25, 2021 09:00 AM
Meeting Recording Link HERE.
Access Passcode: October#25
For best results, copy and paste the access code to avoid typos.
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 is still rising and is not overbought. Currently if you were to draw a trendline from the last SCI top to the current reading it would form a negative divergence. However, neither price nor the SCI has topped yet so that condition can improve. The GCI has now turned back up and is already close to a positive crossover of its signal line.
S&P 500 New 52-Week Highs/Lows: We've decided to add a section that covers New Highs/New Lows as we had removed it from our Climax Analysis chart. New Highs continue to expand, but like the SCI above, if we drew a trendline from the October high reading to today's, that would form a negative divergence. The 10-DMA of the High-Low Differential is flat but looking toppy. Typically when this indicator tops it is bad for the market. Good news is we don't have a negative divergence present.
Climax* Analysis: No climax today but the SPX Up/Down Volume Ratio was close. Total Volume was elevated, but not climactic. Net A-D numbers were not climactic. The VIX has now turned back up before moving below its EMA which suggests internal strength in the very short term.
*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 OVERBOUGHT.
I like the look of these indicators. They began rising this week and today's readings were powerful. This does put them in overbought territory, but we can see higher readings last month. I'm pleased to see participation broadening a bit more with nearly 3/4 of the SPX with price above the 20-EMA. Additionally, more stocks are showing positive momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Like the STOs the ITBM/ITVM are overbought; however, they are rising and we've seen higher readings previously. I was also pleased to see that %PMO BUY signals is rising again.
Bias Assessment: Given the participation percentages of stocks > 20/50-EMAs is higher than the SCI reading, we have a short-term bullish bias. The SCI rising and being greater than 60% tells us there is also an intermediate-term bullish bias. While the reading of the GCI above 80% gives us a long-term bullish bias, I do note that fewer stocks are above their 200-EMA. While the GCI is rising again, it will be difficult for it to expand much further.
CONCLUSION: The Fed's comments didn't bother investors at all. Participation is expanding and while we do see some negative divergences, they could disappear if indicator readings move higher. The strong upside move on the STOs suggests to me that we should continue to see higher prices...hard to believe after the current run, but I'm not going to argue with the indicators. Stay cautious. It may not be the best time to open new positions given the market is very overbought based on the RSI.
I am 85% exposed to the market with 15% being in cash and readily available to trade.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact email@example.com for more information!
The bull flag was executed this week which tells us to expect higher prices (and likely a new all-time high) for Bitcoin. The RSI is positive and not overbought and the PMO does appear to be flattening in anticipation of an upside reversal. Stochastics are very bullish.
Rates have mostly been in a holding pattern, but longer-term rates are beginning to turn back up.
10-YEAR T-BOND YIELD
$TNX is loosely traveling in a rising trend channel. It had broken below it yesterday, but quickly recaptured the short-term rising trend. The RSI is neutral. The PMO is decelerating and could turn up soon.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP formed a bullish engulfing candlestick today which implies lower prices tomorrow. Given the neutral RSI, declining PMO and now topping Stochastics, I'm looking for a test of the bottom of the bearish rising wedge.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: BUY as of 10/28/2021
GLD Daily Chart: Gold has been all over the place, but today dropped below the 20/50-EMAs. This puts the IT Trend Model "Silver Cross" BUY signal in jeopardy. The RSI has moved into negative territory. The PMO is topping, but not aggressively. Stochastics are bearish and suggest price could test support at what had appeared to be double-bottoms.
(Full Disclosure: I own GLD as a "buy and hold" position.)
GOLD Daily Chart: The rising trend channel on $GOLD was obliterated with today's big drop. Discounts are beginning to expand slightly suggesting investors are moving bearish again on Gold. I think price tells us that.
GOLD MINERS Golden and Silver Cross Indexes: Despite a huge decline in Gold prices, Gold Miners had an excellent day. I'm pleased to see price is bouncing off support at the August low. This could be the beginning of a reverse head and shoulders pattern. While the PMO looks ominous, the RSI is rising again and %K on Stochastics has stopped declining. The SCI isn't going anywhere and with readings of stocks > 20/50-EMA have the same percentage, it isn't likely moving higher, at least for now. Still when I see 20% of Miners with price above the 200-EMA, I am encouraged. I'm keeping my Gold Miner position open for now.
CRUDE OIL (USO)
IT Trend Model: BUY as of 9/3/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Huge decline on USO that broke through the bottom of the intermediate-term rising trend channel. It also took price below the 20-EMA. The RSI has moved into negative territory and Stochastics look terrible. Crude Oil is due for a decline, but supply and demand issues should keep it above the 50-EMA.
IT Trend Model: NEUTRALas of 10/1/2021
LT Trend Model: SELLas of 10/21/2021
TLT Daily Chart: There is giant bearish engulfing candlestick on TLT that suggests support will be broken. It's actually a strong level of support given it aligns with the 20/50/200-EMAs. However, the rising long-term yields could put further downside pressure on TLT.
The RSI may be positive, but the PMO is topping below the signal line. Additionally, we have a "death cross" of the 50/200-EMAs. Stochastics are very negatively configured. I don't expect TLT to hold support here.
Technical Analysis is a windsock, not a crystal ball.
(c) Copyright 2021 DecisionPoint.com
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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.