Last night as I studied the 5-month candlestick chart, I debated whether to adjust the trendlines on the rising wedge that we've been monitoring. I was seeing a possible rising trend channel. I still believed there were enough bearish technicals, like an OBV negative divergence and a PMO that had just topped below the signal line, to keep the more bearish rising wedge on the chart. Today it became more clear that we have a longer-term rising trend channel and Carl agrees (he texted me this afternoon!) -- great minds DO think alike.
This puts a much more bullish spin on market behavior. I don't think we are out of the woods, but the situation is less dire than the previous rising wedge implied.
I invite you to read the full DP Alert report on our website DecisionPoint.com. Here is an excerpt regarding some of the concerns that still are out there despite a rising trend channel....
Participation:
The following chart uses different methodologies for objectively showing the depth and trend of participation for intermediate- and long-term time frames.
- The Silver Cross Index (SCI) shows the percentage of SPX stocks on IT Trend Model BUY signals (20-EMA > 50-EMA).
- The Golden Cross Index (GCI) shows the percentage of SPX stocks on LT Trend Model BUY signals (50-EMA > 200-EMA).
- The Bullish Percent Index (BPI) shows the percentage of SPX stocks on Point & Figure BUY signals.
The SCI is continuing its decline. The BPI had a positive crossover, but we've seen this a few times already. I'll be more impressed if it can break its declining trend. The GCI is getting more and more overbought in the long term.
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We did see an increase in overall participation as many stocks moved above their 20-EMAs. The Stocks > 50/200-EMAs remains overbought, but has moved mostly sideways and has avoided serious negative divergences."
Conclusion: While a rising trend channel is more favorable than a bearish rising wedge, there are still problems with overbought indicators. Additionally, price is perched on the bottom of the channel and the 20-EMA so it is definitely vulnerable to retesting the bottom of the channel. The question for today is whether this was a buying exhaustion or a buying initiation. Subscribe today to the DecisionPoint Alert and you can find out!
Happy Charting! - Erin
erin@decisionpoint.com
Technical Analysis is a windsock, not a crystal ball.
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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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