DP Alert: Indicators Mixed but Leaning Bullish - Record Lows for VIX


The DP Scoreboards continue to show bullishness in all three time frames as far as price trends and momentum. The only outcast is the Dow which is still waiting on the weekly PMO to have a positive crossover. Unfortunately, the PMO on the weekly chart is still in decline. It is actually increasing the margin between itself and its signal line. The Dow weekly chart is below the Scoreboards so you can see how close it is to logging that BUY signal.

The purpose of the DecisionPoint Alert Daily Update is to quickly review the day's action, internal condition, and Trend Model status of the broad market (S&P 500), the nine SPDR Sectors, the U.S. Dollar, Gold, Crude Oil, and Bonds. To ensure that using this daily reference will be quick and painless, we are as brief as possible, and sometimes we let a chart speak for itself.

SIGNALS: Here we include charts of any important signal changes triggered today by our Intermediate-Term Trend Model.


NOTE: Mechanical trading model signals 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 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.

STOCKS: Based upon a 11/15/2016 Intermediate-Term Trend Model BUY signal, our current intermediate-term market posture for the S&P 500 (SPY) is bullish. The Long-Term Trend Model, which informs our long-term outlook, is on a BUY signal as of 4/1/2016 so our long-term posture is bullish.

Price gapped up on the open for the SPY but it was unable to maintain above rising bottoms support. Good news is that it hit important horizontal support at around $239 and held onto it.

After angling down last week, we are seeing a new rising trend that helped price pop slightly above resistance. I like that after this "pause" or consolidation phase, price is attempting to breakout. The PMO is still rising and is not overbought. Most bullish is the positive divergence between OBV bottoms and price bottoms. My sense is that this divergence is what prepared price for the breakout attempt.

Ultra-Short-Term Indicators: There is a lot of talk about whether these new record lows for the VIX is a good thing or a bad thing. I look at the VIX as a very short-term indicator, meaning I see it as a fear gauge but one that is only useful for a few days. I took a look at the VIX from the past five years and found only two instances where it reached values under ten (it was eyeball test, not an exact test). 2014 was the oldest. It preceded a consolidation for about a week followed by a correction. The last time was back at the end of January. It was followed by a few days of consolidation and then a nice uptrend. Tom and I will be discussing this during our MarketWatchers LIVE shows on Wed/Fri at 12:00p to 1:30p EST. He likes a low VIX as you need some optimism to energize a bull market. I normally see this and get concerned about a decline. I am still thinking these low numbers could result in a consolidation phase or possibly a decline, but these readings, as low as they are, have not punctured the upper Bollinger Band. That is my test for too much optimism. So, long story short, I believe these indicators are bullish for the time being.

Short-Term Indicators: I don't like that they are turning lower just as we had a small breakout. The STO-V is still rising and we do see hesitation marks now and then when they twitch different directions. These indicators need more time to ripen before we can judge whether the top on the STO-B is bearish.

Intermediate-Term Indicators: Similar situation for the IT indicators. The ITBM has topped and the ITVM is rising, though decelerating. As I've noted in previous DP Alerts, I don't get too worked up about the twitching. Now if we see signal line crossovers, that is another story.

Conclusion: Price action is bullish with a tiny breakout from the consolidation zone. The VIX is extraordinarily low, but the Bollinger Bands are intact so I will chalk this up to bullish complacency. Low readings could suggest a quick pullback or decline, but I'm not subscribing to a longer-term breakdown for the market. Our IT indicators are still too bullish for that expectation right now.

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DOLLAR: As of 3/21/2017 the US Dollar Index ETF (UUP) is on an Intermediate-Term Trend Model Neutral signal. The Long-Term Trend Model, which informs our long-term outlook, is on a BUY signal as of 10/17/2016, so our long-term posture is bullish.

It's now or never for the Dollar in my estimation. The bullish declining wedge is getting long in the tooth, with price getting way too close to the apex. This new rally off support needs to pack a punch and get this bullish pattern to activate. The PMO is finally supporting a rally and I like the very positive divergence between OBV and price bottoms.

GOLD: As of 2/3/2016 Gold is on an Intermediate-Term Trend Model BUY signal. The Long-Term Trend Model, which informs our long-term outlook, is on a BUY signal as of 4/11/2017, so our long-term posture is bullish.

I believe that the correction in Gold is about to finish. Unfortunately indicators aren't completely supporting this hypothesis. The PMO has now entered negative territory (always bearish) and the OBV is confirming this decline. However...strong support is nearing at 1200 for Gold and 115 for GLD. This is a good place to find support, but seeing the nearby negative 20/50-EMA crossover (ITTM Neutral signal) AND knowing that the Dollar is finally poised to rally, I have serious concerns. That little voice in the back of my head keeps whispering, "Look at your indicators. Believe in your indicators." I don't know, sometimes you go with your gut. My job of course, is to give you solid analysis and while I believe Gold will find support, the indicator evidence is not supporting it.

CRUDE OIL (USO): As of 3/8/2017 United States Oil Fund (USO) is on an Intermediate-Term Trend Model Neutral signal. The Long-Term Trend Model, which informs our long-term outlook, is on a SELL signal as of 3/9/2017, so our long-term posture is bearish.

I really like that Oil managed to close above $45/barrel. I'm watching for a breakout above $47. That could be the trigger for a recovery. A bottom on the PMO right now would be outstanding. That would set up a very positive divergence between price bottoms in March and May and PMO bottoms. The stage is being set.

BONDS (TLT): As of 3/31/2017 The 20+ Year T-Bonds ETF (TLT) is on an Intermediate-Term Trend Model BUY signal. The Long-Term Trend Model, which informs our long-term outlook, is on a SELL signal as of 11/17/2016, so our long-term posture is bearish.

Not much to say here. The next area of support is optimistically around $118. The breakdown below the 50-EMA does not inspire confidence for a rally off last month's lows.

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Technical Analysis is a windsock, not a crystal ball.

Happy Charting!
- Erin

Erin Swenlin
About the author: is a co-founder of the website along with her father, Carl Swenlin. She launched the DecisionPoint daily blog in 2009 alongside Carl and now serves as a consulting technical analyst and blog contributor at Erin is an active Member of the CMT Association. She holds a Master's degree in Information Resource Management from the Air Force Institute of Technology as well as a Bachelor's degree in Mathematics from the University of Southern California. Learn More
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