DecisionPoint

DP Bulletin: USO PMO BUY Signal - UUP PMO SELL Signal - XLF ITTM Neutral Signal

Signal changes keep coming in with three important new ones today. USO had already logged a new IT Trend Model BUY signal this week and today gets to add a PMO positive crossover BUY signal to the chart. The Dollar has struggled mightily and continues to fall so it was no surprise to see the PMO finally drop below its signal line. XLF, the Financial SPDR, not only logged an IT Trend Model Neutral signal, it dropped below important support.



Let's look at USO first. I've been skeptical of this latest rally, but the added PMO BUY signal does buoy my optimism on USO. I don't like that Oil nor USO have broken above their intermediate-term declining tops lines. I'm giving USO the benefit of the doubt given the two new BUY signals (PMO crossover BUY and IT Trend Model 20/50-EMA crossover BUY). While I'm not ready to jump in myself, I do think USO and Oil will make it to overhead resistance at $10.30 and $50.25, respectively. The only line of caution I want to throw out here is the possibility of an island reversal. The last three days have price clustering into an "island". These are reversal patterns and the expectation, should it execute with a drop below gap support, is a closure of the gap that caused the island to form. 

The PMO was able to avoid a SELL signal last month when it nearly crossed below its signal line. Today the signal triggered. The OBV has dropped from the sky given the high negative volume associated with the last three days of trading. The gap down is ugly on the daily chart, but it is especially problematic on the weekly chart.

Some very important support was broken. This support has held up since the breakout at the end of 2014. The weekly PMO is continuing lower with little hesitation. It is reaching oversold territory, but we all know that during a "crisis" type move to the upside or downside, we can see it stretch outside its normal range. Given we've seen positive readings around 4.0, it wouldn't surprise me to see negative readings below -3.0. At this point, I expect that the UUP will test $23.00. It could be successful if the PMO managed to decelerate (that could happen if we see some consolidation along the way to $23.00). 

The unexpected signal and chart I saw today was XLF. An Intermediate-Term Trend Model (ITTM) Neutral signal was generated when the 20-EMA dropped below the 50-EMA while the 50-EMA was above the 200-EMA. Had the negative crossover occurred below the 200-EMA, the signal would've been a SELL not a Neutral. This decline since early August was actually forewarned by a negative divergence with the PMO. Once price dipped below the 20-EMA and was unable to capture it again, the fall should've been expected. This new ITTM Neutral signal is arriving as the SCTR lost nearly all of its ground, but importantly it was accompanied by a clear break below support. The 200-EMA is nearby to offer support, but with such a negative set-up, I expect support to be found at $22.75. Once there, I believe we will see a rebound as the PMO will be in near-term oversold territory. However, I reserve the right to change that supposition should the technicals like the OBV show deterioration. Right now the OBV is not losing any ground nor showing any divergences. Thus the OBV is not providing any evidence of a drop below that $22.75 support line yet.


Helpful DecisionPoint Links:

DecisionPoint Shared ChartList and DecisionPoint Chart Gallery

Trend Models

Price Momentum Oscillator (PMO)

On Balance Volume

Swenlin Trading Oscillators (STO-B and STO-V)

ITBM and ITVM

SCTR Ranking


 

Technical Analysis is a windsock, not a crystal ball.

Happy Charting!
- Erin


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