Last week it looked as if the market was beginning to form a top, but that result still hasn't been realized. SPY continued to churn sideways, and the daily PMO came within a hair of crossing down through its signal line. There is still evidence that there is a top in the making, and we'll be looking at that 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.
STOCKS
IT Trend Model: BUY as of 11/15/2016
LT Trend Model: BUY as of 4/1/2016
Last week I pointed out that high SPX volume could be a sign of distribution associated with a top. This week SPX volume continued to be heaver than it was during the first three weeks of July, and I still attribute it to distribution.
The weekly PMO has turned down below the signal line. In most cases I consider this to be very bearish, but the PMO is well above the zero line and has been running flat for months. That is not bearish. Price remains near the top of the cyclical bull market rising trend channel.
Short-Term Market Indicators: These indicators are neutral, and they are not telling me anything.
Intermediate-Term Market Indicators: These indicators are still in a negative configuration -- falling well above the zero line and holding unanimous negative divergences.
Conclusion: Our indicators are mostly in agreement that we are watching the formation of a price top. Since the election, the market has been relentless to the up side, and corrections have been small. The evidence of distribution discussed above could lead to something more serious, but I wouldn't be a short seller on the basis of that evidence. For now I expect a minimal correction.
DOLLAR
IT Trend Model: NEUTRAL as of 3/21/2016
LT Trend Model: SELL as of 5/24/2017
The dollar (UUP) finally got a decent bounce on Friday, and the daily PMO turned up. We can see a series of declining tops lines, each one steeper than the one preceding it. Friday's bounce did not break the most recent down trend line.
The weekly chart shows that UUP has found support at the bottom of the two-year trading range. As of Friday UUP is at a decision point. Which way from here?
GOLD
IT Trend Model: BUY as of 7/31/2017
LT Trend Model: BUY as of 4/12/2017
Gold has violated the rising trend line drawn from the July low, and it has topped below the top of the trading range. The reason for this will become apparent when the weekly chart is reviewed, but on this daily chart it is starting to look as if a rounded top is forming. Friday's breakdown was caused by the dollar (UUP) getting a strong bounce. If that continues next week, gold will be in trouble.
For the third time this year gold failed to break above the long-term declining tops line. The weekly PMO is rising above the signal line, but in the bigger picture it has been flat for four months. This chart is neutral to slightly bullish.
CRUDE OIL (USO)
IT Trend Model: BUY as of 8/1/2017
LT Trend Model: SELL as of 3/9/2017
USO has resolved a bearish rising wedge (blue lines) with an upside breakout. An IT Trend Model BUY signal followed on Tuesday when the 20EMA crossed up through the 50EMA. Price is now consolidating below a declining tops line. The PMO is somewhat overbought, but I think that another breakout will take place soon.
The declining tops line seen on the USO daily chart is shown in better perspective on this weekly chart. The weekly PMO is rising, but it is still below the signal line.
BONDS (TLT)
IT Trend Model: BUY as of 3/31/2017
LT Trend Model: BUY as of 6/16/2017
Last week the daily PMO had topped below the signal line, a very negative configuration. This week a second PMO bottom appeared, which is extremely positive. Price broke out of the triangle formation, and the PMO crossed up through the signal line. Price has snapped back to the point of breakout, and the technical expectation will be for the rally to resume next week.
TLT price is still struggling to escape the apex of a triangle formation, but it appears that the resolution will be bullish.
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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)
