Short-term signals on the DecisionPoint Scoreboards below certainly reflect the market's weakness this month. It would seem that we are bouncing at a critical juncture. The Materials SPDR (XLB) collected an Intermediate-Term Trend Model Neutral signal, which you'll see on the DP Sector Scoreboard.
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.
The ITTM Neutral signal was triggered when the 20-EMA crossed below the 50-EMA while both were above the 200-EMA. (Had the crossover occurred below the 200-EMA, it would've been a SELL signal.) You'll note that XLB reached short-term support. That level is holding, but XLB isn't making much upside headway. The PMO moved below zero this month and it is continuing lower. Although the PMO is at the bottom of a previous trading range, meaning it is set up for a bounce, it still isn't really decelerating its decline. I don't think support will hold here.
STOCKS
IT Trend Model: BUY as of 2/1/2019
LT Trend Model: BUY (SPY) as of 2/26/2019
SPY Daily Chart: After the wedge executed, I went ahead and calculated the downside target based on the back of the pattern. Interestingly, price did test that level and has since rebounded. OBV is improving after breaking its rising trend, while the PMO is headed for the zero line. Note that the last time the PMO dropped below the zero line, it was "pre-bear market."
Climactic Market Indicators: I wrote about a possible buying initiation yesterday based on the climactic breadth readings that followed a lower Bollinger Band puncture. Positive breadth is still there, but volume was a bit anemic on a solid rally. The VIX is back within the band, but we need to see it pop above its average. Bear markets and corrections generally are confirmed by the inability of the VIX to reach above that moving average.
Short-Term Market Indicators: It is great to see these indicators bounce back quickly to confirm this rally. We need to see oscillation above the zero line. If these indicators turn back down shortly before or after crossing the zero line, it would signal a possible new leg lower - or at least consolidation.
Intermediate-Term Market Indicators: We see these indicators are bottoming and are managing to do so above the zero line. Like with the STOs above, bull market readings tend to stay above the zero line. When we see breakdowns below, they generally is accompanied by more downside.
Conclusion: ST indicators are healthy and rising, which suggests more upside. They need to get above the zero line. IT indicators are decelerating just in time, but are just below or at the zero line. While the indicators "look" good with bottoms and moves higher, they need to continue to push upward. Weakness now would be troubling, given the market's history when ST and IT indicators sink below the zero line.
DOLLAR (UUP)
IT Trend Model: BUY as of 2/7/2019
LT Trend Model: BUY as of 5/25/2018
UUP Daily Chart: I had to redraw the rising bottoms line for the wedge annotated in blue. That is a bearish pattern. The rising trend channel is nice, but a PMO SELL signal suggests that the bottom of that channel will be tested soon.
GOLD
IT Trend Model: Neutral as of 4/16/2019
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Gold is beginning to look more bullish. The PMO BUY signal is intact, SCTR is in the hot zone now and it is currently decoupled from the Dollar based on the correlation. The discounts are still very high, which is generally bullish for Gold going forward.
CRUDE OIL (USO)
IT Trend Model: BUY as of 2/19/2019
LT Trend Model: SELL as of 11/23/2018
USO Daily Chart: The tiny trading range is the story here. The PMO is turning up above the zero line, which is encouraging, but a sustained move above $13 has posed a problem. It looks like USO and $WTIC will continue to be range-bound. I'd watch the PMO closely to see if it turns up. That would signal a possible breakout ahead.
BONDS (TLT)
IT Trend Model: BUY as of 12/6/2018
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: TLT has reached overhead resistance. All of the indicator windows are bullish and suggest a breakout.
Technical Analysis is a windsock, not a crystal ball.
Happy Charting!
- Erin
Email: erinh@stockcharts.com
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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)
