A LT Trend Model "Golden Cross" BUY signal was triggered today on 20+ Year Bonds (TLT). I hesitated to make this today's headline given the 50/200-EMAs have been braiding since the end of October. There is a high likelihood we will see whipsaw to a Long-Term Trend Model "Death Cross" SELL signal. Long-term Bond yields are looking bearish, so maybe this one will stick.
For now price is holding above all three key moving averages as well as support at the June top and August low. I'll discuss TLT further in the Bonds section at the end of the report.
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: XLU, XLI and XLF have now entered the Lagging quadrant. XLC is only getting worse within Lagging. XLP is about to hit Improving and XLV (our sector to watch) is making its way toward Leading. XLY is the clear out performer here. XLK is moving in the bullish northeast heading.
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: I opted to adjust the trendlines so that we can see there currently is a bearish rising wedge in play now. The RSI is very overbought but still rising. Total Volume was well above average.
Stochastics are very positive as they oscillate above 80. 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.
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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).
Yesterday's comments still apply:
"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: There was a pop on Total Volume today and we saw a big expansion in New Highs. But was it a "climax day".
Climax* Analysis: Looking at the climax chart, no, it wasn't a climax day. Why? Net A-D was sickly (not good on a big rally) and Volume Ratios were not elevated. This dichotomy does concern me going into trading tomorrow.
*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 were mixed today so I consider them neutral. Big problem... participation is thinning. %Stocks > 20-EMA and %Stocks with rising PMOs both contracted on a day when the market was up +0.47%.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM/ITVM are still rising but are definitely overbought right now. We lost 2% on PMO BUY signals on a big rally.
Bias Assessment: As noted earlier, participation is contracting despite higher prices today.
The GCI had a positive crossover its signal line today which is bullish. 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.
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.
CONCLUSION: The market rallied strongly but participation contracted. This could be due to the Semiconductors and other Technology stocks performing well while the others floundered. The bias in all three timeframes remains bullish, but caution is warranted given the negative divergence between price and participation.
I am 85% exposed to the market with 15% being in cash and readily available to trade.
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Despite executing a bull flag this week price is going no where. The RSI is still positive and Stochastics look very healthy. The PMO had flattened but appears to be angling downward again. The picture is mixed, but strong Stochastics suggest the rally should get going soon.
Short-term rates are now falling with longer-term rates beginning to follow suit.
10-YEAR T-BOND YIELD
$TNX has again broken down through the rising bottoms trendline. As noted previously there is strong support available at the 50-EMA and the mid October low. However, I see a head and shoulders top developing. Given the now negative RSI and falling PMO that is accelerating its decline, we should see yields break down further.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP is rallying back up toward the top of a short-term bearish rising wedge. The RSI and PMO are configured very positively and Stochastics are rising strongly. We could see price break out above this bearish pattern which would be even more bullish for the Dollar.
The longer-term bearish rising wedge has more time to mature as price can make another test of the top of it. However, it is a bearish pattern so we should prepare for the Dollar to decline when it reaches the top.
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 ultimately still holds a rising trend. The "Silver Cross" BUY signal, positive RSI and PMO bottom above the signal line suggest Gold could give a breakout above the 200-EMA a try.
(Full Disclosure: I own GLD as a "buy and hold" position.)
GOLD Daily Chart: Price nearly reentered the rising trend channel today. Stochastics are the main problem, but they are decelerating which is positive. Sentiment is getting bearish again as this is the highest discount on PHYS in a few weeks.
GOLD MINERS Golden and Silver Cross Indexes: GDX had closed the gap from last week intraday but then fell back. We still have a much higher low today and the RSI and Stochastics are beginning to rise. The PMO is about to trigger a crossover SELL signal, but I spy a bullish reverse head and shoulders that could imply higher prices to come.
CRUDE OIL (USO)
IT Trend Model: BUY as of 9/3/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Another big decline for Crude Oil today. We also see an ominous bearish engulfing candlestick that tells us to expect lower prices again tomorrow. The PMO and RSI suggest the decline could continue longer. Stochastics are getting oversold, but the loss of the rising trend channel and 20-EMA tell me to expect Oil to move lower.
IT Trend Model: NEUTRALas of 10/1/2021
LT Trend Model: BUY as of 11/4/2021
TLT Daily Chart: TLT is going nowhere fast, but we did see a strong rally today. The RSI turned up before moving into negative territory and the PMO is about to move above the zero line.
Stochastics have turned back up. Support could hold longer. If long-term yields continue down, that will put the wind at the back of Bonds.
Technical Analysis is a windsock, not a crystal ball.
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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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