One of the sentiment indicators we keep an eye on is the Put/Call Ratio. We invert our scales like we do for the VIX to ensure oversold readings are on the bottom and overbought readings are at the top. Another reason we invert the scale is that sentiment is contrarian (just like the VIX). When investors get excessively bearish, that is bullish for the market.
Notice that the ratios have turned up in near-term oversold territory. We've annotated vertical green lines at key market bottoms and red vertical lines at cardinal tops. It's clear that when the Put/Call Ratio bottoms in oversold territory you generally see a solid market bottom with excellent follow-through to the upside. I'm still not convinced we will see new all-time highs and beyond, but this chart does suggest we will see more upside.
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: All of the sectors that are in the Leading quadrant are 'defensive' in nature. XLC is showing marked improvement and could offer some interesting beatdown opportunities. All other sectors are bearishly configured.
RRG® charts show you the relative strength and momentum for a group of stocks. Stocks with strong relative strength and momentum appear in the green Leading quadrant. As relative momentum fades, they typically move into the yellow Weakening quadrant. If relative strength then fades, they move into the red Lagging quadrant. Finally, when momentum starts to pick up again, they shift into the blue Improving quadrant.
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 10/18/2021
LT Trend Model: BUY as of 6/8/2020
SPY Daily Chart: The market rallied strongly after yesterday's bullish hammer candlestick. This rally did slow the PMO's descent, but it is still technically falling. The RSI has reentered positive territory above net neutral (50).
Total Volume was at the annual average. Stochastics are still falling, but did decelerate the decline. The VIX held above its SMA on the inverted scale which is bullish in the very short term. This bounce came at the right time, the intermediate-term rising trend was about to be compromised.
PARTICIPATION: The following chart objectively shows the depth and trend of participation in two time frames.
- Intermediate-Term - the Silver Cross Index (SCI) shows the percentage of SPX stocks on IT Trend Model BUY signals (20-EMA > 50-EMA). The opposite of the Silver Cross is a "Dark Cross" -- those stocks are, at the very least, in a correction.
- Long-Term - the Golden Cross Index (GCI) shows the percentage of SPX stocks on LT Trend Model BUY signals (50-EMA > 200-EMA). The opposite of a Golden Cross is the "Death Cross" -- those stocks are in a bear market.
The SCI ticked up, but still remains at a neutral reading of 56%. The GCI held steady at 78.8% and is above its signal line.
S&P 500 New 52-Week Highs/Lows: New Highs expanded which isn't surprising. There were no new lows today. The 10-DMA of the High-Low Differential has topped which is bearish.
Climax* Analysis: After yesterday's downside exhaustion climax, we got a strong price advance today accompanied by climactic readings on the indicators. SPX Total Volume was a little light, but SPX Net A-D, SPX Net A-D Volume, and UP/DOWN Volume Ratios were solid, giving us an upside initiation climax. That would indicate higher prices on the way; however, we should note that climaxes have occurred on more than half the trading days in the last three weeks, and the market has maintained a trading range during that time.
*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 indicate either initiation or exhaustion.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is SOMEWHAT OVERSOLD.
The STOs are moving back toward positive territory which is bullish in the short term. %Stocks > 20-EMA and %PMOs Rising are moving up out of somewhat oversold territory, but they haven't broken the declining trend yet so while this is bullish, it's muted.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
All three of these indicators turned back up, but by such a small amount, it still looks like they are mostly declining. It is positive that they've reversed, I just need to see more.
Bias Assessment: Participation did expand, but all indicators remain in a declining trend. Given the SCI reading is very close to the %Stocks > 20/50-EMAs the market bias in the short and intermediate terms is neutral. The rising GCI and its reading above 70% leaves the long-term bias as bullish.
CONCLUSION: Santa may be making his appearance this week. It was a strong rally today and that had most of our indicators turning back up. High Volume Ratios and breadth indicate an upside initiation climax. Higher prices should follow. However, we have declining trends in participation and the SCI is sitting in neutral. I'm not convinced this rally is sustainable. I expect to see more volatile trading within the price range between $445 and $470 for the SPY.
I'm 10% exposed to the market with no plans to expand my portfolio this week.
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 finally broke from the short-term declining trend. I've annotated a bullish falling wedge. The PMO managed a crossover BUY signal today and Stochastics are looking up on this small upside breakout from the wedge. Price is still not above the 200-EMA so the bias is still bearish on Bitcoin.
INTEREST RATES
Yields turned up today, but rates are still mostly moving sideways.
10-YEAR T-BOND YIELD
Today's bounce in the 10-year yield formed a bullish double-bottom on support at 13.5. The rounded top is still in play, but if we do see a breakout above the confirmation line at 15.5, the minimum upside target would be around 17.0. That would mean a breakout from this topping formation. Stochastics are rising again, but are still below net neutral (50). The RSI on the other hand did move into positive territory. The PMO is turning up.
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Yesterday's comments still apply:
"The Dollar is moving sideways inside a symmetrical triangle. These patterns are continuations, so we should expect and upside breakout."
"Stochastics do appear to be rising again and the RSI is positive. The PMO hasn't gotten on board, but overall the indicators do seem to suggest the pattern will eventually break to the upside."
GOLD
IT Trend Model: SELL as of 12/7/2021
LT Trend Model: SELL as of 12/3/2021
GLD Daily Chart: Gold rallied last week, but price is pulling back after Friday's decline. Price never closed above the 200-EMA. Indicators are moving mostly sideways. Stochastics have turned down which is bearish in the short term.
GOLD Daily Chart: The RSI on $GOLD is negative and moving lower. The PMO is still rising and could give us a crossover BUY signal soon, but we need to see those key moving averages as support, not resistance.
GOLD MINERS Golden and Silver Cross Indexes: Miners are looking more bullish. Participation is improving but the SCI, BPI and PMO are still below their signal lines and the RSI is still negative. However, the bias for GDX is bullish given participation readings are higher than the SCI reading.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/30/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Crude Oil rallied strongly today. Energy (XLE) was the top performer, likely due to this rally. It is certainly encouraging given the PMO triggered a crossover BUY signal, but Stochastics and the RSI are iffy. I need to see overhead resistance broken at the 20-EMA and gap resistance. I got caught on the previous pullback by getting too bullish too soon so exercise caution.
BONDS (TLT)
IT Trend Model: BUY as of 11/8/2021
LT Trend Model: BUY as of 11/5/2021
TLT Daily Chart: TLT fell and closed beneath the 50-EMA. The RSI and Stochastics are neutral to bearish and there is a PMO SELL signal in place. I expect to see the 200-EMA tested as well as the rising bottoms trendline drawn from the October lows.
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.