Big news today was a new Price Momentum Oscillator (PMO) BUY signal on the Dow. I've noticed the bifurcation of the markets. Today saw a positive close for the Dow, OEX and SPX, but the NDX, $MID and $SML all closed lower. In the case of mid- and small-caps, they took back most of the gains they made yesterday.
The daily chart for the Dow shows the breakout from the consolidation channel it's been traveling in for the past month, occurred yesterday. Today's strong rally was a nice continuation. Overhead resistance is nearing at the all-time high, but the PMO is rising nicely and we can see the OBV moving to levels we've not seen this year.
The DecisionPoint Alert presents an mid-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 5/11/2018
LT Trend Model: BUY as of 4/1/2016
SPY Daily Chart: The SPY doesn't look as healthy. The PMO is still in decline, albeit a slow one. The rising wedge is a concern as that is a bearish pattern with a breakdown as the expectation. On the bright side, the PMO is decelerating somewhat and the OBV has risen above all near-term tops and is ready to challenge heights from Feb/Mar.
Climactic Market Indicators: Unfortunately, these indicators are suggesting to me that the brakes will be applied this week. New highs are retreating and today they moved down further even though price is flirting with all-time highs. The VIX is just about to pop above the upper Bollinger Band. This implies complacency in terms of investor sentiment. Sentiment being contrarian, I'd start to look for a few days of decline.
Short-Term Market Indicators: This chart shows a new divergence in the volume indicator, the STO-V with the STO-B. This is almost never a good thing. It typically occurs before a decline. This is right now a very short-term divergence, but one I think should be heeded nonetheless.
Intermediate-Term Market Indicators: The IT indicators can help us breathe a sigh of relief. They have stayed in a rising trend and are picking back up. The volume indicator (ITVM) is not perking up as quickly as I'd like to see given the divergence on the short-term chart above, but it is still rising and in a rising trend.
Conclusion: The rally has been somewhat lukewarm for the SPY, especially when compared to the move on the Dow Industrials the past two days. The indicator charts are raising serious concerns about the voracity of this new rally and whether it can push prices back to new all-time highs. I'd say short term it isn't as likely, but intermediate term, the indicators are healthy enough and not overbought to support the longer-term rising trend.
DOLLAR (UUP)
IT Trend Model: BUY as of 4/24/2018
LT Trend Model: BUY as of 5/25/2018
UUP Daily Chart: I remain bearish on the Dollar. We saw the 5-EMA cross below the 20-EMA early last week and the rising bottoms trendline is barely holding. The PMO is declining and OBV is mostly sideways. Price is now below both the 20/50-EMAs. I'm looking for a breakdown and likely move to $24.80.
GOLD
IT Trend Model: Neutral as of 5/2/2018
LT Trend Model: SELL as of 6/22/2018
GOLD Daily Chart: Discounts on Sprott Physical Gold Trust (PHYS) are at very high levels with today's reading being close to the annual high we saw in mid-August. This translates as bearish sentiment. High bearishness suggests an upside reversal is nearing. Gold has been poised since it bounced off its low to soar and it just can't get it going. A Short-Term Trend Model BUY signal could arrive soon with a 5-EMA positive crossover the 20-EMA. The PMO is doing everything you could ask of it as it rises higher during a consolidation phase, but price just won't break out.
CRUDE OIL (USO)
IT Trend Model: Neutral as of 8/16/2018
LT Trend Model: BUY as of 11/2/2017
USO Daily Chart: USO broke out today. Indicators all look healthy with the fastest EMAs on top of the slowest. The PMO is rising, as are PMO bottoms to confirm rising price bottoms. The PMO is far from overbought, so more upside is likely.
BONDS (TLT)
IT Trend Model: Neutral as of 9/13/2018
LT Trend Model: SELL as of 9/18/2018
TLT Daily Chart: I'm going to direct you to my blog article from yesterday. It gives a more complete write-up of what I'm seeing in Bonds. I will add that both the PMO and OBV are continuing to slide downward, confirming the very bearish picture for TLT.
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)
