Apple (AAPL) has rallied +60% from its May 2016 low, which was also the the low for the previous bear market for AAPL. The price advance for the last month-and-a-half has been pretty vigorous, but the PMO (Price Momentum Oscillator) has topped and crossed down through its signal line, so a correction seems likely.
I thought this "yin yang" symbol was actually a nice metaphor for sentiment. When we look at the sentiment numbers on a chart they are expressed as a percentage. For example, 31% are bullish, 39% are bearish, and the rest fall into the neutral category. It's a fixed space where bulls and bears move together as a part of the whole, balancing each other out. When sentiment moves to one extreme it is generally a warning sign that the market will be moving in the opposite direction.
Chart Spotlights will be a regular addition to the DecisionPoint blog and have already been incorporated into the DecisionPoint Report webinars. The purpose of the Chart Spotlight is not to recommend a particular stock, it is a learning exercise. Many readers and viewers want to understand how to pull up a chart and find the most important characteristics for making their own investment decisions.
Trying to attribute every market up or down tick to news/fundamental events is a fool's errand, but every once in a while the connection between seems pretty obvious. The day after President Trump's address to congress, the market gapped up in response; however, it immediately began a pullback over several days, which filled the gap and then some. Another issue after the up gap was that price was extended +10% above the 200EMA, a distance that begged for some downside relief. Such corrective action began the following day, and ended on Thursday. On Friday price broke above the short-term declining tops line, implying that the pullback was over.
Many of you may have noticed yesterday's DecisionPoint Alert blog headline, "New PMO SELL Signal for the NDX". I had thought we'd make it to DP Scoreboards with all BUY signals, but the NDX refused to give up the Long-Term Price Momentum Oscillator (PMO) SELL signal on the monthly chart yet again. Below are the DP Scoreboards. You'll find these in the DP Chart Galleries, in the DP LIVE Shared ChartList or at the top of the daily DP Alert blog articles.
On Friday gold broke below the rising trend line that forms the bottom of a rising wedge pattern. A breakdown was expected because that is the normal and highly reliable resolution of most rising wedge patterns. The minimum downside target is 1180, but downside estimates for rising wedge patterns are highly unreliable, so we'll need to be alert as price is approaching the next level of support at 1220.
Every Wednesday and Friday, I review the DecisionPoint Market/Sector Summary with my webinar viewers. It is actually only one table that is taken from the full Market/Sector Summary found in the "DP Reports" blog. This table shows us the DecisionPoint Intermediate-Term Trend Model (ITTM) "posture" for the major indexes and sectors. Green shading is an ITTM BUY signal, red shading are ITTM SELL signals and no color is a Neutral signal.
The DecisionPoint Scoreboards in the DP Chart Galleries are now almost completely bullish. Two new Long-Term Price Momentum Oscillator (PMO) BUY signals appeared for the S&P 500 and S&P 100 when the monthly charts went final today. We don't tally up our Long-Term PMO signals until the end of the month when the chart goes "final". Both the SPX and OEX sported these Long-Term PMO BUY signals since mid-month but we don't log them until the last day of the month.
One of the sentiment indicators we follow is the Exposure Index (EI) for the National Association of Active Investment Managers (NAAIM). It is probably somewhat better than other measures of sentiment because it shows how professionals have actually deployed their assets. The far right of the chart shows a recent period of sustained exposure at very high levels. Since the rule of thumb with sentiment is that high levels of bullishness can be bearish for the market, is this a prelude to a price top?
I noticed on the StockCharts.com homepage "symbol cloud" that readers were downloading this chart more than Amazon and the SPX (based on size of the font). I decided to take a look. Wow! TSLA dropped more than 6.4% today! There are some real problems with this chart in the short term.