Last week I said that I was expecting the market to do a little more work on the downside before the bull market resumed, but the market had other ideas. Prices continued to rally, and on Thursday SPY broke to new, all-time highs. Volume expanded on that day, but it was still well below the one-year average of daily volume. Below we'll look at evidence that fewer stocks are participating in the rally.
As noted in the DP Scoreboard Summary below, all four major indexes triggered PMO BUY Signals today as the PMO crossed above its signal line. This certainly confirms the ST Trend Model BUY signals that appeared after yesterday's strong rally. You'll note in their charts below that all made new intraday all-time highs. These breakouts above overhead resistance are impressive and do suggest we could see continued follow-through. Remember you can reach these charts anytime in the DP shared ChartList. The link is at the top of our blog.
The market recovery since Wednesday has been remarkable. With this steady rally, last week's bearish signals are being erased. I did mention in yesterday's blog that ST Trend Model signals will whipsaw quite a bit but they do help us to characterize the market in the very-short term. These new BUY signals could be considered bullish confirmations of the new rally higher.
I received some very important alerts this afternoon. Gold triggered a new IT Trend Model BUY signal as the 20-EMA crossed above the 50-EMA. In addition, Gold also saw a new PMO BUY signal; and, like the SPX, a new Short-Term Trend Model (STTM) BUY signal was triggered as the 5-EMA crossed above the 20-EMA. STTM signals can whipsaw quite a bit, but they can clarify the significance of short-term breakouts or breakdowns. The new signals on Gold suggest some important areas of resistance could be broken this time around.
In our Conclusions section of the Weekly Wrap last week, I expressed my heightened level of caution due to the negative condition of our indicators. On Monday a nice rally to new, all-time highs gave me cause to doubt my assessment, but the rally stalled on Tuesday, and the bottom fell out on Wednesday. But never mind, the market bounced off Thursday's low, and about half of the loss was recovered by Friday's close. Will Thursday's low be retested, or has another up leg begun? Let's look at the technicals and see if they can give us a clue as to what may happen next.
You'll likely notice the significant changes to the DP Scoreboards (which you can now find on your member homepage in the drop down in the "Market Movers" box!). A clear shift in momentum is taking place. Yesterday the short-term Price Momentum Oscillators (PMOs) were all rising on the Dow, SPX and OEX. Today they were yanked down so far that it triggered PMO crossover SELL signals. The weekly charts last Friday reflected the two new IT PMO SELL signals on the SPX and OEX.
No changes to report on the DecisionPoint Scoreboards. They remain green in all timeframes (with the exception of the Dow IT PMO SELL signal). I suspect we will see some IT PMO SELL signals this Friday, barring a major rally. The OEX is currently configured for an IT PMO SELL signal on the weekly chart.
I thought that last week's breakout was the initiation of a new rally that would continue this week. But no. This week price moved back below the breakout level, but strangely this failure did not develop into a more serious breakdown either. Price just continued to churn sideways, which resulted in the PMO (Price Momentum Oscillator) turning down -- a very short-term SELL signal.
No new changes to the DP Scoreboards to report...except that you can now find the DP Scoreboards on your member homepage! I'll be writing about how to quickly access it in tomorrow's blog. While everything remains green on most of the boards, I did note when reviewing the charts in the DP Shared ChartList that ST PMOs are topping or have topped. The weekly (IT) PMOs may not be able to hold onto the current BUY signals. I'll update you on any new changes that arrive tomorrow on any of the weekly charts.
I realized that I haven't really reviewed the small and mid-cap ETFs in some time. You'll find these charts in the DecisionPoint LIVE shared ChartList if you want to keep an eye on them with my annotations. The chart patterns for these ETFs aren't mimicking the large-caps, but they have managed to hold on to key support. It is always important to see small-caps do well in concert with large-caps. For obvious reasons, you need everyone participating if you're going to have a strong bull market rally. There are still some problems with these charts so I don't think they support a big rally right now. Good news is they don't support a correction either.