The DecisionPoint Scoreboards had quite a shake-up over the past week. We lost five buy signals. In addition, the NDX lost its Intermediate-Term PMO BUY signal. This is a very bad sign for the market given the NDX is tech-heavy, a sector that "leads" the market. It appears it may be about to "lead" the market lower.
I've included the charts that display these new signal changes. As I noted above, the big signal would be the IT PMO SELL signal.
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
For Friday:
For the week:
SECTORS
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.
For Today: 
For the Week:
CLICK HERE for Carl's annotated Sector charts.
THE MARKET (S&P 500)
IT Trend Model: BUY as of 5/8/2020
LT Trend Model: BUY as of 6/8/2020
SPY Daily Chart: The market is holding above support along the 50-EMA, but it has popped below the bearish rising wedge. A "decisive" execution of rising wedge would mean a 3%+ decline from the breakdown point. However given the negativity of the indicators, We suspect this is just the beginning of a more significant breakdown.
Total volume was well-above the annual average. The RSI continues lower in negative territory below net neutral (50).
SPY Weekly Chart: The SPY was down almost 2.5% this week. Price has been rising out of the bearish megaphone pattern. We can see that according the weekly RSI price itself isn't overbought, but this continued rise out of the broadening pattern does tell us that overall the market is overbought. The weekly PMO is topping right now and could join the NDX with a SELL signal of its own.
S&P 500 Monthly Chart: The monthly PMO is healthy, but the RSI is moving into overbought territory. Overall the SPY did finish in positive territory for the month.
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.
It isn't easy to see, but the BPI topped below its signal line today. The SCI continues lower. Neither is oversold and both could fall further. The GCI finished slightly higher this week. The current reading is the highest recorded value for the GCI (dataset began in 2017). Even at the top of the last bull market we had a lower reading on the GCI.
Participation dropped significantly this week as more stocks lost support at their 20/50-EMAs. In the long term, we still have an overbought reading for %stocks above their 200-EMA, but we can see it is turning over with readings now dropping into what was previously considered overbought territory. This indicator needs to unwind further.
Climax Analysis: We didn't have a climax day, but we did see two climax days this week with the most powerful coming yesterday. We noted that yesterday's appeared to be a selling "initiation" to lower prices. This is likely the beginning. On the bright side, the VIX which had hit the lower Bollinger Band on the inverted scale is rising again. That typically leads to a very short-term bottom. However, the drop in the VIX this week also points to a selling initiation not exhaustion.
NYSE Up/Down and Down/Up volume ratios can be also be used as climax detectors. We use the 9:1 ratio suggested by the late Dr. Martin Zweig in his book, Winning on Wall Street. These climaxes happen less frequently than those on the chart above, and they can be used to clarify a particular event. We have an NYSE and S&P 500 version of the ratios, and normally they will only be published when there is a climax ratio.
The NYSE Volume Ratios didn't climax and hasn't since the October low. However,....
The S&P 500 version can get different results than the NYSE version because: (a) there are only 500 stocks versus a few thousand; and (b) those 500 stocks are all large-cap stocks that tend to move with more uniformity.
...the SPY did have a climax yesterday which confirmed the selling initiation. We've seen previously that these climaxes have marked lows. Note the situation was different in both cases previously. Those climaxes did not arrive before a long, sustained decline leading into it.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
The STO-B hit negative territory but it is far from being oversold. The STO-V also lost ground today. The %Stocks indicators dropped off significantly. Neither is particularly oversold and could move lower.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
The ITBM/ITVM have been somewhat indecisive this week, but they are finishing the week in a decline. The market bias is still bullish in this timeframe. Yet these indicators are quite overbought suggesting that bias will begin to disintegrate as they move lower. We now have less that half of the members of the SPX on PMO BUY signals and the number is continuing to decline. This reading is far from being oversold.
CONCLUSION: The decline continued in the market, but it didn't erase overbought readings on most of our indicators. The indicators are falling suggesting next week will see a breakdown from the rising wedge as expected, accompanied by a breakdown from the 50-EMA. The SPY likely will test support at about 370. Don't hold your breath on that support level holding. If this decline picks up momentum, it will be hard to slow down the train. Watch your stops and make sure you are in sectors and industry groups that can ride out the storm. For more information on what they might be, check out the current Diamonds Recap.
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BITCOIN
Bitcoin continues to correct. Support is at 42500 and the 50-EMA. Given the PMO sell signal and drop in the OBV, that won't likely be the stopping point.
INTEREST RATES
Longer-term interest rates have been rising since the August low, and they have recently become parabolic. While we don't expect to see a parabolic crash, some retracement is probable.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 5/28/2020
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: After breaking down below the short-term head and shoulders neckline, the Dollar reverse course and rallied strongly today. The PMO switched direction and triggered a new crossover BUY signal. The RSI has moved into positive territory. It appears the Dollar is ready to test overhead resistance.
If the Dollar can keep this rally going, we will have a bullish double-bottom.
UUP Weekly Chart: We've monitoring a bullish falling wedge on the weekly chart. There have been a few attempts to breakout, but noting significant has occurred. This week's bar looks positive given that price finished out the week near its high. The RSI is still negative, but it is rising. Most importantly we have a weekly PMO crossover BUY signal.
UUP Monthly Chart: The long-term view on the monthly chart is bearish. The PMO is in decline and the RSI is negative. If we see a rally on the execution of the falling wedge on the weekly chart, look for price to turn lower at overhead resistance.
GOLD
IT Trend Model: NEUTRAL as of 1/13/2021
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Gold fell out of bed today. It was already vulnerable as it perched precariously on support. The RSI is now in oversold territory, but the PMO is negatively configured with multiple tops below the signal line. Discounts are back and strong suggesting investors are bearish on Gold. They aren't bearish enough to indicate a price reversal yet. We've seen higher discounts.
The next support level or zone is at about 1675.
GOLD Weekly Chart: Support arrive right at the bottom of the current declining trend channel. The weekly PMO is accelerating lower and the RSI is negative not oversold. The next support level at 1675/1700 will be difficult to hold if at all.
GOLD Monthly Chart: The monthly charts the breakdown of a parabolic. Based on typical parabolic breakdown, Gold could tumble down to 1400. Given the correlation to the Dollar, we should expect Gold to continue lower as the Dollar gains back some strength.
GOLD MINERS Golden and Silver Cross Indexes: We've taken out some of the prior annotations so we can see price more clearly and concentrate on the current support level. Indicators are at oversold levels, but they are still in decline and not extremely oversold yet. The SCI moved sideways this week. Given Gold lost its support, there is a good chance we will see GDX do the same.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: USO has moved into a more accelerated rising trend. It is testing the trend, but given the RSI is positive and no longer overbought and the PMO has easily held onto its BUY signal, this rising trend will likely remain intact.
Last year Crude Oil prices were much higher than what we are seeing now. There is plenty of upside potential on USO.
USO/$WTIC Weekly Chart: The only issue with the weekly chart is an overbought RSI. Given price is so beat down, the RSI will likely take up residence in overbought territory for some time. In a strong bull market move, overbought conditions can persist.
$WTIC Monthly Chart: The declining trend on $WTIC is about to be broken. The RSI is in positive territory and not overbought. The PMO is rising strongly and is also not overbought. Oil should continue to enjoy its long awaited bounce back rally.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: As noted earlier, yields are rising quickly and that has put pressure on Bonds. The PMO has turned up and the RSI is rising out of oversold territory, but don't trust this breakout. Today's breakout may look encouraging, but yields and interest rates are expected to continue rising. The snap back in yields today contributed to today's breakout.
Price is bouncing off support at the March low, but we don't expect a continuation.
TLT Weekly Chart: The weekly chart is negative with a PMO moving lower below the zero line and the RSI moving lower in negative territory. Strong support lies closer to $130.
TLT Monthly Chart: The monthly chart looks especially bearish with an RSI moving into negative territory and a new PMO SELL signal.
Technical Analysis is a windsock, not a crystal ball.
-- Carl & Erin Swenlin
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)
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