My email inbox presented two new important signals. First is the Intermediate-Term Trend Model (ITTM) BUY signal for USO. We've been watching it as it managed to find support and rallied strongly. Second is the Short-Term Trend Model (STTM) Neutral signal on the Dow Industrials. I've updated the DecisionPoint Scoreboard Summary below:
A few new Price Momentum Oscillator (PMO) BUY signals appeared on the DP Scoreboards Thursday and Friday. Friday, the SPY generated a PMO BUY signal as well. You'll note on the charts below the Scoreboards, that these three major indexes had difficult days, but price managed to stay above declining tops line or horizontal support.
Greg Morris gave us an article on "Fake News!" this week, and it prompted me to reflect on how much "Flood News" we have gotten: Reporters standing in water, reporters standing in front of water, reporters standing in the rain in front of water and in the water. And all the while the stock market paid no attention. The week before last, SPY officially entered a falling trend, and this week on Tuesday we saw a successful retest of the correction low set last week. Then on Wednesday price broke out and left the declining trend channel behind, and Thursday volume expanded as the breakout was extended. Friday the PMO crossed up through its signal line.
It's the last day of the month so all of our monthly charts have "gone final". First, here are the DecisionPoint Scoreboards currently (you can add these to your member dashboard!). You'll note two new Short-Term Trend Model (STTM) BUY signals arrived on the SPX and OEX. These signals are triggered when the 5-EMA crosses above the 20-EMA. You'll find those daily charts in the DecisionPoint Chart Gallery and for annotated charts, go to the DecisionPoint Shared ChartList (link at top of DecisionPoint Blog page). Momentum signals are bearish, but in all four indexes, the daily PMO is now rising toward a positive crossover. However, only the NDX shows a PMO bottom on the weekly chart; although the other three are decelerating their decline.
As you can see on the DecisionPoint Scoreboard summary, we had two new Short-Term Trend Model (STTM) BUY signals on the Dow and NDX. I've annotated the charts below the Scoreboards. Of particular note on those charts are the breakouts above the declining tops trendlines. The PMO on the NDX has now bottomed, but the Dow's PMO is still in a slow decline. The other big new signal was an Intermediate-Term Trend Model (ITTM) SELL signal on USO. Oil has been volatile but has been in a steady downtrend for quite some time. I'll go over that signal change in the section on Oil below.
First, thank you to all of the live MarketWatchers LIVE webinar viewers! You've been making writing my blog articles easy by posing excellent questions in the chat room during the live show. Today's question was how I determine if a Price Momentum Oscillator (PMO) is overbought or oversold. There can be some confusion because I do point out "near-term" overbought and oversold conditions which can be confused with the overall PMO range in the longer term which will have different thresholds. Properly confused? Great! Let me explain.
While we usually focus on the large-cap market indexes, they often disguise what is happening with smaller-cap stocks. Recently I decided to delve into this question with a chart showing the relative strength of smaller-cap indexes. The first relative strength panel examines all S&P 500 stocks on an equal-weighted basis. (The S&P 500 is a cap-weighted index, and its fifty largest stocks comprise about 70% of the index weighting.) To get the relative strength line, we divided the Guggenheim S&P 500 Equal Weight ETF (RSP) by the benchmark index, SPY. Granted, RSP isn't a smaller-cap index, but it gives the smaller-cap stocks in the SPX more weight. The other two relative strength panes are for the S&P 400 Mid-Cap ETF (MDY) and the S&P 600 Small-Cap ETF (IJR). As you can see, relative strength has been falling on all three indexes since the end of 2016.
No changes to report on the DecisionPoint Scoreboards and based on the charts in the DecisionPoint ChartList (link at top of the DecisionPoint blog page), I only see the Intermediate-Term Trend Model signals nearing Neutral signals on the daily chart. 20-EMAs are steadily dropping toward negative crossovers the 50-EMAs.
Today was my first day back on the MarketWatchers LIVE show (you'll find the recording under the "Webinars" tab) and it was so much fun to reconnect with all the fans in the chat room and on Twitter. During our "Mailbag" segment, I was asked what I used to determine the overall health of the market in the intermediate and long terms. The answer was actually quite simple: I use the weekly and monthly PMOs. The signals tend to be very timely and very accurate.
DP Alert: SPY Bounces Off Rising Bottoms Support - IT Indicators Reaching Near-Term Oversold Territory
After a wonderful wedding and honeymoon, I have finally returned! It took some time to review and update my annotations and I see that we've had quite a few signal changes while I was gone. The market has been meandering lower this month since I left and consequently the DP indicators have seen some bearish changes. Let's get started with a fresh review.