Sometimes I can be a little slow on the uptake, and the monthly gold chart is the latest example. This week it dawned on me that gold is in its seventh year of forming a bullish saucer, which would be the reverse equivalent of a bearish rounded top. After activating the Crystal Ball feature of SharpCharts, I am seeing the possibility of breakout and pullback, which would put a handle on the saucer, giving us a "saucer with handle" formation. It could, of course, resolve differently because of imperfections in the crystal ball feature, as well as pilot error, but for now, I am long-term bullish. More on gold below.
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.
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GLOBAL MARKETS
BROAD MARKET INDEXES
SECTORS
Each S&P 500 Index component stock is assigned to one, and only one, of 11 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 6/11/2019
LT Trend Model: BUY as of 2/26/2019
SPY Daily Chart: The market was relatively quiet this week, as market participants paused, holding their breath ahead of the Fed announcement next Wednesday. Last week's strong advance set the flagpole, and this week's consolidation attached a pennant to it, but the news behind it makes it feel contrived.
SPY Weekly Chart: The rally of the last two weeks can be attributed to the Fed's getting dovish. Let's see if if expectations are met next week.
Climactic Market Indicators: The most notable indicator is the VIX, which moved out of the six-day consolidation and up toward the top Bollinger Band on Friday. Still, no triggers have been hit. SPX volume is still light.
Short-Term Market Indicators: They are still overbought and allow for further pullback.
Intermediate-Term Market Indicators: On the whole, these indicators are neutral and are rising from relatively oversold levels, They have plenty of room to go either way.
CONCLUSION: Next week on Wednesday is the Fed announcement following the FOMC meeting, possibly to lower interest rates . . . or not. A rate cut will likely have a positive effect on the market. Also next week is end-of-quarter options expiration, which will result in very high volume on Friday. Do not incorrectly assume that the high volume has any other significance.
Until the dovish Fed comments about two weeks ago, the technicals of the market indicated lower prices ahead. Now it is not so clear. I don't know what the Fed is going to do, stand fast or cut, and I'm not sure how the market will react in either case. As they say, "wait for it."
DOLLAR (UUP)
IT Trend Model: BUY as of 2/7/2019
LT Trend Model: BUY as of 5/25/2018
UUP Daily Chart: Last week price nearly reached the bottom of the large rising wedge formation, and this week it rallied full time. The daily PMO turned up on Friday.
UUP Weekly Chart: If the daily chart looks bullish, the weekly chart dampens that outlook with long-term resistance just above.
GOLD
IT Trend Model: BUY as of 6/3/2019
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: On Friday gold's attempt at a breakout failed. The daily PMO is somewhat overbought, so maybe more back-filling needs to be done.
GOLD Weekly Chart: The most important overhead resistance at 375.00 is visible in this time frame. The weekly PMO looks solidly positive.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 5/30/2019
LT Trend Model: SELL as of 6/4/2019
USO Daily Chart: On Thursday price jumped to fill the prior day's up gap, but oil seemed little affected by the events in the Strait of Hormuz.
USO Weekly Chart: My guess is that WTIC will test the support at about 42.
BONDS (TLT)
IT Trend Model: BUY as of 12/6/2018
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: A parabolic advance carries with it a warning that the vertical excess must be corrected. In the case of TLT, the parabolic was violated, but a price collapse didn't follow (yet). Instead, price is moving sideways and digesting the sharp advance.
TLT Weekly Chart: Price is very close to long-term resistance. If the Fed cuts rates next week, the resistance will probably be penetrated.
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Technical Analysis is a windsock, not a crystal ball.
Happy Charting!
- Carl
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)
