DecisionPoint

DP WEEKLY WRAP: New All-Time Highs, but Not for Small-Cap Stocks

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While the broad market indexes are currently making all-time highs, the S&P 600 Small-Cap Index (IJR) is struggling and remains about -14% below its all-time highs. This lack of small-cap participation is a concern, because the large-caps can't carry the market forever. The OBV is currently in a reverse divergence -- the OBV is making a higher high, but price is not. This tells us that price can't move higher in spite of increased volume.


Another set of S&P 600 indicators available on StockCharts.com shows the internal weakness of the small-cap index, with only about 45% of stocks above their 200EMA. This is almost 30 percentage points below the percentage of S&P 500 stocks above their 200EMA.


The DecisionPoint Weekly Wrap presents an end-of-week assessment of the trend and condition of the stock market (S&P 500), the U.S. Dollar, Gold, Crude Oil, and Bonds.


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GLOBAL MARKETS


BROAD 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 and Long-Term Trend Model signal status for those sectors.


INTEREST RATES

The yield curve is inverted, meaning that longer-term interest rates are lower than shorter-term rates.


STOCKS

IT Trend Model: BUY as of 6/11/2019

LT Trend Model: BUY as of 2/26/2019

SPY Daily Chart: The volume for today's move to all-time highs was only 78% of the one-year average volume. We have another rising wedge, and yesterday the VIX touched the top Bollinger Band, so we should look for a short-term top early next week.

SPY Weekly Chart: This chart is totally bullish.

Climactic Market Indicators: Net advances are the only thing climactic I see on this chart.

Short-Term Market Indicators: The STO-B and STO-V turned up on Friday. That could be good for another short move up.

Intermediate-Term Market Indicators: These indicators are overbought, but could accommodate further price advance.

 

CONCLUSION: The market is at all-time highs, and the Fed is hinting strongly that we're probably going to get an interest rate cut at the end of the month. I don't get it. We have a rate inversion, and the market is overvalued. I am reminded of a Fed Chairman quote (I think it was Volker): We have the best economy that money can buy. At any rate, the volume this week was substandard, and, with small-caps lagging, the advance is not broad based. I think we're going to hit a rough patch soon.

Next week is an options expiration week, so we should expect low volatility toward the end of the week -- not guaranteed, but usual.


DOLLAR (UUP)

IT Trend Model: BUY as of 7/5/2019

LT Trend Model: BUY as of 5/25/2018

UUP Daily Chart: As you can see, UUP has foiled every attempt I have made to define its movements with trend lines. What I can make out at this point is the it has been in a ragged consolidation for about three months.

UUP Weekly Chart: It is not impossible, but it seems highly unlikely that UUP will be able to overcome the long-term overhead resistance just above.


GOLD

IT Trend Model: BUY as of 6/3/2019

LT Trend Model: BUY as of 1/8/2019

GOLD Daily Chart: The advance from the May low through the consolidation above the long-term support line has formed a bullish flag formation. The daily PMO has crossed down through the signal line, a consequence of the recent consolidation.

GOLD Weekly Chart: For the fourth week gold has been consolidating above a long-term line of support. The monthly PMO is positive, albeit somewhat overbought.


CRUDE OIL (USO)

IT Trend Model: NEUTRAL as of 5/30/2019

LT Trend Model: SELL as of 6/4/2019

USO Daily Chart: This week price broke above a declining tops line drawn from the April top, and it also closed the May down gap. This positive action implies that USO will be moving still higher. Note that the 20EMA is about to cross up through the 50EMA, which will generate an IT Trend Model BUY signal.

USO Weekly Chart: Crude (WTIC) in midway a trading range of 42 to 76, and USO maintains a similar range. I continue to believe that price will not escape that range any time soon.


BONDS (TLT)

IT Trend Model: BUY as of 12/6/2018

LT Trend Model: BUY as of 1/2/2019

TLT Daily Chart: Bonds kind of fell off a cliff this week. As of Friday price found support in the area of a May up gap. This move seems counter intuitive considering the expected Fed rate cut later this month.

TLT Weekly Chart: In this longer time frame we can see the price was turned back based upon the line of resistance drawn across the 2015 top. Note that the weekly PMO has turned down, which is a strong negative sign.



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Technical Analysis is a windsock, not a crystal ball.

Happy Charting!
- Carl


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 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


 

Carl Swenlin
About the author: is a veteran technical analyst who has been actively engaged in market analysis since 1981. He was the founder of DecisionPoint, one of the web's premier market timing and technical signal services, which was acquired by StockCharts.com in 2013. Carl has contributed his market commentary and expert analysis to StockCharts since then. He is a Member of the CMT Association. Learn More
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