One of the symbols that was requested early in today's free DecisionPoint Trading Room was Natural Gas (UNG). Of course, having written a bullish article on it last week, it was doomed to decline. But is it "doomed"? The chart is very bearish right now. However, fundamentals are still on UNG's side given the demand for energy is higher than the supply. We don't believe that it is all over for UNG.
UNG has formed a bearish head and shoulders pattern. Originally I spotted the smaller head and shoulders pattern that now makes up the "head" of the current pattern. It executed but then reversed off the 50-EMA which is why I was bullish. Now we have indicators configured negatively. The RSI is negative and falling, the PMO has topped below its signal line and is free falling lower. Stochastics turned negative in a hurry and are not oversold. Carl also mentioned a reverse OBV divergence in today's DecisionPoint Show. Basically volume poured in to push price to the top of the "right shoulder", but it didn't get price to make a higher high.
The minimum downside target of the head and shoulders pattern is all the way down to $12. Carl and I are in agreement that we won't see that level tested. Why? The 50-EMA is miles above the 200-EMA and that gives us a bullish bias. Fundamentals as noted above will play a part in preventing a decline that deep. So what do we do with UNG? We watch and we wait for an upside reversal. We will be looking for UNG to reverse around $16.50. If that level doesn't hold, worst case is a drop to $15 in my estimation. UNG is excellent watch list material right now and rest assured we will be keeping an eye on it here at DecisionPoint.com.
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 continues to outpace the SPY and is getting stronger. XLRE and XLK are in Leading, but XLK has assumed the bearish southwest heading. XLV is showing incredible strength as it moves northeast toward Leading. This is a sector to keep an eye this week. XLU is in neutral moving nowhere with XLP starting to show some renewed strength despite being in the Lagging category.
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: The market continues to print new all-time highs. Today we had a black candlestick. These are typically bearish, just look at your candlestick charts and you'll notice they typical precede lower prices. It is a black filled candle because price, while it closed higher than on Friday, closed below the open. The chart is still fairly bullish, but we could see a decline off this candlestick.
The RSI is positive and not quite overbought, the PMO is rising and Stochastics are oscillating above 80, meaning there is internal strength. Total Volume was lower and below 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.
The SCI is continuing to rise which is bullish. It is also at a level that can support higher prices, given there is plenty of headroom. The GCI moved slightly higher and is at a bullish 83% reading.
Participation was concerning me last week as it continued lower despite higher prices. That seems to have reversed. However, all of these indicators currently hold a negative divergence with price tops.
Climax Analysis: Up/Down Volume Ratios suggested that we had a climax day. However, we didn't get any confirmation from Net A-D and Net A-D Volume. Additionally, as mentioned before, Total Volume contracted.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
The STOs were mixed with the ITBM ticking slightly lower and the ITVM moving slightly higher. Overall they are in neutral territory and aren't that revealing. Big positive is that we are seeing an expansion in new momentum based on the %PMO Rising.
Intermediate-Term Market Indicators: The intermediate-term rising market trend is UP and the condition is OVERBOUGHT.
Both of these indicators are overbought. They moved slightly higher today, but overall they are moving sideways. I do not like that we are continuing to see fewer PMO Crossover BUY signals.
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.
We have a slight bullish bias in the short term given both the %Stocks > 20/50-EMAs are reading higher than the SCI. Intermediate-term bias is bullish given the SCI is rising and above 60% and the long-term bias is bullish given the GCI reading is around 82%.
CONCLUSION: Today's black candlestick and elevated Up/Down Volume Ratios suggest we could see a decline tomorrow. The market bias is still bullish overall based on our bias assessment so we aren't expecting too much price damage. Additionally, investors are waiting with bated breath for the results of the FOMC meeting this week, so we don't anticipate too much volatility until their statement is released.
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Bitcoin has formed a bull flag suggesting we will see an upside breakout. The PMO is on a SELL signal and Stochastics are pointed downward in negative territory. However, the RSI has remained positive and it appears $60,000 is holding as support. We may not see the breakout just yet, but the pattern suggests Bitcoin will resume its rally soon.
Yields ticked a bit higher today. Long-term yields are moving mostly sideways, but the shorter-term yields are still trending higher overall.
10-YEAR T-BOND YIELD
The 10-year yield is loosely holding within a rising trend channel. We would expect to see $TNX move higher now that it has tested the bottom of it as well as the 20-EMA. The PMO is halting its decline and the RSI is now rising again in positive territory.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is moving mostly sideways. The bearish rising wedge is still the dominate pattern. The PMO and RSI aren't providing many clues, but we do note that Stochastics are rising out of negative territory. Might be time for UUP to test the top of the wedge again.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GLD Daily Chart: The indicators are mixed on GLD. The RSI is staying in positive territory above net neutral (50) which is bullish, but the PMO is looking rather toppy. Stochastics are staying in positive territory, but I'd like to see higher readings.
(Full disclosure: I own GLD as a long-term buy and hold position.)
GOLD Daily Chart: Gold is still technically in a rising trend channel and today price did close above the 200-EMA. As Carl says, "It is a tortured rally" as usual for Gold.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners pulled back after testing the 200-EMA. The PMO is still declining, but we do note the RSI is attempting to reenter positive territory. The big problem is we need to see participation expand past the SCI reading. Otherwise the SCI is going to top and that would be a very bearish picture indeed. Now we look to see if support will hold at the August low; a rally there would set up a nice reverse head and shoulders.
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 rallied but we have a bearish black candlestick. It doesn't worry me too much. The PMO is declining in overbought territory, but other than that, the RSI is positive and Stochastics have turned up.
The bounce off the 20-EMA suggests higher prices, but what we may see is sideways consolidation as the supply and demand issues on fuel and energy become more clear.
IT Trend Model: NEUTRAL as of 10/1/2021
LT Trend Model: SELL as of 10/21/2021
TLT Daily Chart: TLT managed to overcome resistance at our key moving averages, but we are already seeing price pullback to support. Notice the 20-year yield is bouncing off support at 1.9. If yields are going to continue to rise, Bonds will struggle.
Stochastics are topping in overbought territory and the RSI is headed lower (although it remains in positive territory). The PMO is beginning to decelerate and could see a top below the zero line which would be especially bearish. I don't like the outlook on Bonds right now.
Technical Analysis is a windsock, not a crystal ball.
-- Erin Swenlin
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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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