Today the market finished lower after going eight trading days without a decline. Notice on the 5-minute candlestick chart of the SPY below that decline hit early and hard. There were several attempts to pare back losses. There are quite a few bullish features to the chart. There is a rounded bottom that formed, the RSI is positive and the 5-min PMO has reached positive territory after clicking a crossover BUY signal. Looks positive enough.
However, when you add after hours trading to the chart, we can see a declining trend, a negative RSI and PMO top below the signal line.
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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: XLB is now traveling with a bullish northeast heading, looping back toward Leading. Julius has pointed out that this is a very bullish condition and one worth watching. XLK and XLC are also traveling with a northeast heading. XLI is headed toward improving. Sectors to be concerned about are XLU, XLF and XLRE which are traveling southeast.
CLICK HEREfor 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: Today's decline executed the short-term bearish rising wedge. The RSI is still overbought and needs relief. The PMO is somewhat overbought. Good news is the contraction in Total Volume on the decline. It wasn't a day of frenzied selling.
Price has turned back down after hitting the top of a longer-term rising trend channel. Support is plentiful (20-EMA, September top and 50-EMA). The market will need to fall another 2% before it reaches the 20-EMA support level. Stochastics are still above 80 which is positive, but they are trending lower now. The VIX punctured the lower Bollinger Band on the inverted scale, but didn't close below it.
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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 rising and the GCI is moving mostly sideways and below its signal line. In both cases the readings are bullish.
S&P 500 New 52-Week Highs/Lows: New Highs continued to contract. The 10-DMA of the High-Low Differential has now topped and is headed lower which is typically bearish for the market.
Climax* Analysis: Today was not a climax day. However, the VIX's puncture of the lower Bollinger Band is positive in the very short term. You'll note that many times after a puncture, the market reverses; but, given the range between Bands is so tight, it doesn't bring the same bullish outlook it normally does. A reading of 17.8 doesn't suggest investors are not THAT bearish.
*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.
STOs continue to decline which suggests the market will too. Negative divergences led into this market top.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM/ITVM are still rising and are overbought. However, we have seen higher readings. %Crossover BUY signals started declining again today. The intermediate term still looks bullish.
Bias Assessment: Yesterday's comments still apply:
"The short-term bias is bullish given we have more stocks with price > 20/50-EMAs than those with Silver Crosses. Higher percentages mean the SCI can continue to move higher which is then bullish for the intermediate term. We have slightly less stocks with price > 200-EMA and that is preventing the GCI from moving higher. Still, the long-term bias is still bullish given the healthy 83% GCI reading."
CONCLUSION: The market actually topped today, but didn't really damage our participation indicators. The SCI and GCI are still rising. However, the short-term indicators are flashing "caution"--the STOs are headed lower and fewer stocks have rising momentum. I would expect to see the 20-EMA tested in the next few days which would mean another 2% decline at minimum.
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Yesterday's comments still apply:
"After breaking out of the bullish flag, price pulled back to support at the 20-EMA. Bitcoin is now rising in earnest. The minimum upside target of the flag would imply price could reach $83,000. That seems a stretch to me, but certainly new all-time highs are likely to continue given the now rising PMO, strong Stochastics and positive RSI."
Yields are in a declining trend with intermediate-term support levels being tested or broken on longer-term yields.
10-YEAR T-BOND YIELD
$TNX broke through another level of support and is now testing the rising trend. The next level of support is at the August/September highs and the 200-EMA. This could be an area where we could expect a reversal given Stochastics are oversold and trying to turn back up; but the PMO and RSI are still configured negatively.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP is breaking down from a short-term bearish rising wedge. Price closed on the 20-EMA, but given the negative configuration of Stochastics, more than likely we will see a test of the 50-EMA.
Price has now retreated before hitting the top of this longer-term bearish rising wedge. That is bearish.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: BUY as of 10/28/2021
GLD Daily Chart: Gold is rallying. The PMO has a bullish bottom above the signal line and the RSI is positive. Stochastics have now reached above 80 and continue to rise strongly. GLD does have a strong area of resistance ahead, but positive indicators suggest a breakout ahead. Carl pointed out in yesterday's DecisionPoint Show that that resistance line is also a confirmation line of a bullish double-bottom that would also suggest a breakout is imminent.
(Full Disclosure: I own GLD as a "buy and hold" position.)
GOLD Daily Chart: It's make or break time for $GOLD. The indicators are in bullish agreement that we should see the breakout very soon.
GOLD MINERS Golden and Silver Cross Indexes: I discussed Gold Miners at length during yesterday's DecisionPoint Show. Given XLB is breaking out and Gold is looking bullish, conditions are now ripe for Gold Miners and Miners to breakout. A breakout would execute a bullish reverse head and shoulders pattern. The upside target of the pattern implies a move that could challenge the May top. The SCI has joined the PMO by bottoming above its signal line; this is especially bullish.
CRUDE OIL (USO)
IT Trend Model: BUY as of 9/3/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Crude Oil is attempting to reenter its prior rising trend channel. The pullback to the 50-EMA was enough to clear overbought conditions on the indicators. Now those indicators are rising again and look very bullish.
Stochastics are rising strongly. This sure looks like a bull flag that today's rally executed. The minimum upside target this flag is about $71.
IT Trend Model: BUY as of 11/8/2021
LT Trend Model: BUY as of 11/4/2021
TLT Daily Chart: TLT is now up against overhead resistance. The indicators are bullish and yields are looking very bearish so look for TLT to move higher.
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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