It's going to be one of those weeks apparently when we watch the DecisionPoint Scoreboards flip out. We have had seven signal changes starting May 4th. The reversals in the short-term trend is typical during volatile periods. What I'm most interested in right now are the bearish signals in the intermediate term. However, today, the first of those intermediate-term signals has moved to a BUY for the NDX. You'll also notice on our sector signal board below the DP Scoreboards summary, we are seeing some new IT BUY signals arriving. It wasn't that long ago that none of the sectors had BUY signals. We might finally be seeing a significant reversal, but we need to see the other indexes get on board.
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.
SECTORS
Each S&P 500 Index component stock is assigned to one, and only one, of 10 major sectors. This is a snapshot of the Intermediate-Term and Long-Term Trend Model signal status for those sectors.
STOCKS
IT Trend Model: BUY as of 5/9/2018
LT Trend Model: BUY as of 4/1/2016
NDX Daily Chart: Since we had some signal changes on the NDX and Dow, I decided to include their signals above the chart. NDX is the first of the four major indexes to move to an IT Trend Model BUY signal. These signals occur when the 20-EMA crosses above the 50-EMA. I like this positive signal change, but more so because it comes on the heels of a nice short-term breakout. We've now reached territory we haven't seen since mid-March and that is encouraging.
IT Trend Model: NEUTRAL as of 3/23/2018
LT Trend Model: BUY as of 4/1/2016
INDU Daily Chart: The Dow chart isn't quite as bullish, but it's getting close. Price has just barely hopped over the declining tops trendline. The new ST Trend Model BUY signal was triggered when the 5-EMA crossed above the 20-EMA. OBV has now made it above the last top which is bullish. The volume pattern this week has been great on this rally, but I direct you to the late February top...it came off a similar volume pattern.
IT Trend Model: NEUTRAL as of 3/23/2018
LT Trend Model: BUY as of 4/1/2016
SPX Daily Chart: The SPX did break above the short-term declining tops line I had annotated in yesterday's DP Bulletin, so I decided to draw the declining tops trendline from the all-time highs. When we do that, today's trading did not breakout. The OBV isn't as healthy as the Dow's. Price has also not passed above last month's high. With the NDX looking more bullish, I admit that I feel more confident in the current rally but a break above that April top would improve my outlook even more.
Climactic Indicators: Breadth readings were elevated, buy not like they were on Friday. This time we are seeing the VIX close ABOVE its upper Bollinger Band in conjunction with elevated breadth readings. Sorry folks, but this one reads like a buying exhaustion. This suggests that in the next day or two we will see a pullback of some sort. Could happen during the trading day with a recovery, but I'm seeing lots of bullish sentiment here and that usually leads to a very short-term reversal.
Short-Term Market Indicators: As far as the indicators that affect our trading the most, I'm pleased to report that they have definitely improved. We see that the STOs are rising nicely out of neutral territory. We will want to watch closely for any possible negative divergences. I'll notify you if I see something noteworthy.
Intermediate-Term Market Indicators: Currently we have a negative divergence in play but these indicators just completed positive crossovers their signal lines. I suspect we will see readings surpass the previous highs from March and April and that will reset that divergence.
Conclusion: We're not out of the woods yet, but I'm starting to see some light through the trees with the new IT Trend Model BUY signal on the NDX and positive crossovers on our intermediate-term indicators. I've said it a few times during this correction, a few days of rally doesn't mean the correction or bear market tendencies are gone. We will need to keep a close eye on the DP Scoreboards and see if the SPX, OEX and Dow join the NDX with new IT BUY signals. I didn't cover small-caps, but they are enjoying the rising dollar and have staged a nice rally. A sustained bull market move needs all to participate. We're getting closer.
DOLLAR (UUP)
IT Trend Model: BUY as of 4/24/2018
LT Trend Model: SELL as of 5/24/2017
UUP Daily Chart: UUP is ready for a pause. This rally has been incredible, but price is reaching interim resistance along the October/December tops (the shoulders of the September-December head and shoulders). This would be an excellent place for a pause. I notice that SCTR tops are in a negative divergence with price and the PMO is now getting very overbought. They typical range for UUP is between -1 and +1. The rally for the Dollar isn't over in my estimation, we just need a quick breather after that steep uphill climb.
GOLD
IT Trend Model: Neutral as of 5/2/2018
LT Trend Model: BUY as of 4/12/2017
GOLD Daily Chart: If the Dollar does take a pause, I would expect to see Gold do the same given the near perfect negative correlation that is in play right now between it and the Dollar. I'm impressed that Gold has held on to support along this year's lows and the 200-EMA. However, this pause for Gold helped form the flag on a reverse flag formation. This is a bearish formation and suggests a downside target the magnitude of the flagpole or in this case, is around 1230/1240. That coincides with horizontal support that is already waiting at the December low.
CRUDE OIL (USO)
IT Trend Model: BUY as of 9/6/2017
LT Trend Model: BUY as of 11/2/2017
USO Daily Chart: USO and $WTIC are enjoying their recent breakout to more multi-year highs. The daily chart is still very bullish with OBV trending higher, the PMO rising and not yet overbought, as well as a top tier SCTR. Oil and the Energy sector in general are very bullish right now.
BONDS (TLT)
IT Trend Model: SELL as of 4/20/2018
LT Trend Model: SELL as of 2/8/2018
TLT Daily Chart: Resistance was met and price headed back down. With that reversal, the PMO topped below its signal line which is particularly bearish. The EMAs are configured as negatively as possible and OBV is trending lower. I said this chart was stinky last Wednesday...I'd have to say it has fermented even more.
Technical Analysis is a windsock, not a crystal ball.
Happy Charting!
- Erin
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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
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
