Today we had two new IT Trend Model "Silver Cross" BUY signals. The first is on the SPY which I'll address further down and the second was on Technology (XLK). A "silver cross" occurs when the 20-EMA crosses above the 50-EMA.
The XLK chart is very bullish right now. The RSI is positive and the PMO just triggered a crossover BUY signal. The Silver Cross Index (SCI) is rising after a positive crossover its signal line. Given participation of stocks above their 20/50-EMAs is 84% and 64% respectively, the SCI will only improve. The BPI is rising and the Golden Cross Index (GCI) is steadying at a bullish 80%. A strong tech sector usually translates to a strong market.
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
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.
RRG® Chart: XLE and XLF are softening as they have pulled back into Weakening. XLB and XLI are within leading which is positive, but they seem to be fading. The most interesting sectors are Real Estate (XLRE) and Technology (XLK) which are both soaring upward with a slight lean toward Leading.
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 5/8/2020
LT Trend Model: BUY as of 6/8/2020
SPY Daily Chart: We have bullish engulfing candlestick that suggests we will see another higher high. Note the "silver cross" on the SPY. Additionally, the RSI is positive and not overbought. The PMO is nearing positive territory on an oversold crossover BUY signal.
Total Volume contracted quite a bit. The VIX did drop on our inverted scale. I'll discuss that further in the climactic indicators section. Stochastics are strong and rising which also suggests higher prices for the SPY.
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 rising again which is bullish. The GCI continues to deteriorate, but it is at a healthy long-term reading of over 80%. The BPI is rising quickly.
This chart gave me "pause". We had a nice gain and our other indicators are looking very positive... and yet, participation moved lower. It wasn't a huge decline, but given the rally out of last week's low, this is very suspect.
Climax Analysis: It was not a climax day. The VIX had nearly punctured the upper Bollinger Band on Thursday which is why we read that upside climax as an 'exhaustion' instead of an initiation. Note that Net A-D and Net A-D Volume were negative today despite the gain.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
The STOs continue to rise strongly, but that has brought them quickly into overbought territory. Granted we've seen much higher readings and we could still. 80% of stocks in the SPX have rising momentum...but that is the same reading as Friday--no improvement on today's rally.
Intermediate-Term Market Indicators: The intermediate-term rising market trend is UP and the condition is NEUTRAL.
IT indicators are rising with the ITBM nearing positive territory. %PMO BUY signals is over 50 which is bullish and they are expanding.
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.
The SCI reading is oversold and rising, but the actual reading is bearish given it is in the 40's. Participation (%Stocks > 20/50-EMAs) is showing a higher percentage, suggesting that there is a bullish bias. The biggest problem is that participation backed off.
CONCLUSION: Overall the indicators do support higher prices. There is now evidence of some deterioration "under the hood" as participation contracted despite a rally. Additionally, Net A-D was negative on the rally. The VIX has turned down from the upper Bollinger Band on the inverted scale and that is generally short-term bearish. However, with bullish intermediate-term indicators and rising STOs, ultimately we should see higher prices after a short digestion period.
I'm 70% exposed to the market.
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 support@decisionpoint.com for more information!
BITCOIN
Bitcoin is digesting the nearly vertical rally out of the September lows. The RSI and Stochastics are overbought so this pause is helpful to alleviate those conditions. Once finished we would expect to see a breakout to new all-time highs. The PMO is rising on a BUY signal.
INTEREST RATES
Longer-term rates pulled back last week and could be setting up to do the same this week. However, support at the August September highs is intact and we see short-term rates still rising sharply.
10-YEAR T-BOND YIELD
The 10-year yield rose today but didn't finish at highs for the day. The PMO had suggested rough waters ahead, but it has decelerated its decline and Stochastics have turned higher. We would look for rates to continue to rise.
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP triggered a PMO SELL signal today. The RSI is positive and price is holding above support at the 20-EMA and the August top. On the flip side we have that new PMO SELL signal and Stochastics are falling. Best case is more sideways movement, but likely case is a loss of support.
If this support level doesn't hold, we would look for price to test the 50-EMA, but more than likely it will head to the bottom of the bearish rising wedge and possibly test the 200-EMA.
GOLD
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GLD Daily Chart: The short-term rising trend was broken today. The RSI is now negative and Stochastics are pointed downward.
(Full disclosure: I own GLD as a long-term buy and hold position.)
GOLD Daily Chart: Support at $1750 looks vulnerable given the breakdown from the rising trend channel. However, this breakdown is far from decisive and horizontal support is very near. If the Dollar loses support as it appears ready to, Gold should hold support and likely resume its move higher within the rising trend channel.
GOLD MINERS Golden and Silver Cross Indexes: With Gold looking "iffy", Gold Miners pulled back at overhead resistance. The RSI and PMO are healthy. Participation fell slightly, but the readings are still well-above the SCI percentage, meaning the SCI should continue to rise. This area of resistance may take some time to vault given the 200-EMA is also aligning with the November/June/July lows.
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 formed a bearish engulfing candlestick today suggesting prices could move even lower. The steep short-term rising trend is intact, but it forms the bottom of a bearish rising wedge. The RSI and PMO are overbought. Stochastics are overbought, but they aren't showing any damage and can remain overbought for weeks and months.
The PMO appears highly overbought on the chart above, but the one-year charts shows us that it can rise much further. We expect Crude Oil to continue to move higher, we may just see a softening of the rising trend.
BONDS (TLT)
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: BUY as of 8/10/2021
TLT Daily Chart: Price is being squeezed between the 50/200-EMAs and support at $144. The PMO is nearing a crossover BUY signal and the RSI nearly reached positive territory today. Stochastics are also rising, but have hit overbought territory.
The 10-year treasury yield has a bullish chart and you can see that the 20-year yield is sitting on support. It appears to be a waiting game, but given short-term yields are rising strongly, I would expect to see longer-term yields follow suit and that would mean lower prices for Bonds.
Technical Analysis is a windsock, not a crystal ball.
--Erin Swenlin
(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.