The Dow flipped to a new PMO SELL signal on Monday; today, we saw the SPX and NDX join in. These are just more signs that the market is angling for a pullback or correction. We saw climactic readings on the VIX and breadth; additionally, the discounts on Sprott Physical Gold Trust are the highest we've seen in some time. Sentiment being contrarian, this is bullish for Gold.
I've included the NDX chart below so you can see the PMO SELL signal that was generated today. Technology has been leading the rally, but it has paused and is now consolidating. I believe it is bullish that price hasn't broken below 7710. If it continues to consolidate, that will get the PMO out of overbought territory. It is completely possible that, with this lack of upside momentum, consolidation could help with that overbought PMO.
The DecisionPoint Alert presents a mid-week assessment of the trend and condition of the stock market (S&P 500), the U.S. Dollar, Gold, Crude Oil and Bonds.
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SECTORS
Each S&P 500 Index component stock is assigned to one, and only one, of eleven 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 2/1/2019
LT Trend Model: BUY (SPY) as of 2/26/2019
SPY Daily Chart: The new PMO SELL signal is annotated below. I had been sure that the previous BUY signal would stick around, but instead of the breakout to new all time highs fueling follow through on the rally, price sputtered. The bearish rising wedge is still in play, but is aging out. When price gets that close to the apex with no resolution, you are subject to a "drift" out of the pattern, which is less meaningful than a true break below the rising trend line. The OBV isn't suggesting serious price weakness. Rising bottoms on OBV confirm the rising bottoms on price.
Climactic Market Indicators: Today we saw climactic Advance/Decline readings. New Highs were also elevated. Combine this with the puncture of the lower Bollinger Band on the VIX and it looks like a possible case of selling exhaustion. However, as we saw in December, these climactic readings can persist without the expected upside reversal.
Short-Term Market Indicators: These indicators remain above the zero line, but both are declining, which is bearish short-term. I noticed a divergence between the two indicators. Honestly, I don't know exactly what it is signaling. I do tend to read divergences as "attention flags" or even "caution flags."
Intermediate-Term Market Indicators: Very bearish configuration. Negative divergences are in play and these indicators are accelerating downward.
Conclusion: The only possible positive chart above is the climactic or ultra-short-term indicator chart. We are seeing climactic readings that typically lead to higher prices, but all of the other charts and indicators are bearish. I would look for price to test the rising bottoms trend line that forms the bottom of the rising wedge on the SPX daily chart.
DOLLAR (UUP)
IT Trend Model: BUY as of 2/7/2019
LT Trend Model: BUY as of 5/25/2018
UUP Daily Chart: The Dollar remains in a rising trend, but it looks as though it is time for UUP to test the bottom of the rising trend channel again. Support could certainly hold at the Mar/Apr tops, but the PMO suggests otherwise.
GOLD
IT Trend Model: Neutral as of 4/16/2019
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: We haven't seen discounts this high since November. I have marked turning points that occurred when we saw similar readings. The PMO is trying to get a BUY signal as well. The head and shoulders pattern is still in play, but barely. It appeared the pattern would execute when the neckline was penetrated, but price rebounded. We don't have a decisive breakout or breakdown yet. Note that high discount rates can persist. While the chart looks pretty decent, that pattern still bothers me.
CRUDE OIL (USO)
IT Trend Model: BUY as of 2/19/2019
LT Trend Model: SELL as of 11/23/2018
USO Daily Chart: USO saw an island reversal last week and price hasn't been able to return to even attempt to close that last gap down. The good news is that support is holding despite the PMO SELL signal. This could be an opportunity for USO to pause and unwind the somewhat overbought PMO. $WTIC is struggling against overhead resistance at around $65/barrel. I am looking for more sideways movement. Best case scenario is a breakout combined with a reversing PMO, which I think is still possible.
BONDS (TLT)
IT Trend Model: BUY as of 12/6/2018
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: Beautiful breakout for TLT. This looks a lot like the breakout last week. The PMO looks slightly more determined this time to go for a crossover BUY signal. If you want something to worry about, the OBV is making new highs, but price isn't even close. Price should follow volume - when it doesn't, it is an attention flag.
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. These 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)
