Last week I asserted that the market was in the process of forming a major double top. This week, in spite of some price action attempting to refute that assertion, the double top is still evolving. So far the rally attempt appears to have failed, and the thin volume says that there is not as much conviction behind the rally as there ought to be. Specifically, I am referring to the SPX Volume panel below. Note that there was a high volume day on Monday's decline, but volume for the rest of the week was well below the one-year average of volume.
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 2/1/2019
LT Trend Model: BUY as of 2/26/2019
SPY Daily Chart: This week's options expiration was not an end-of-quarter expiration, so total SPX volume was not distorted. (I have highlighted EOQ volume with a pink asterisk.) Note that this week's price bounce was stopped by a short-term declining tops line, as well as short-term horizontal resistance. The daily PMO tried to bottom on Thursday and Friday, but was still falling at each day's close.
SPY Weekly Chart: A month ago SPY had recaptured the previous cyclical bull market rising trend line, but at this point I think the line is more or less irrelevant. That line was violated by a short cyclical bear market that ended in December. Since then a steep advance of nearly +27% established a new cyclical bull market. Since the top of three weeks ago, some corrective action has taken place, but the weekly PMO topped, and there is probably more downside ahead.
Climactic Market Indicators: The VIX managed to move up to its 20-day simple moving average, which may signal the upper limit of the price move.
Short-Term Market Indicators: The STO-B and STO-V have topped very near the zero line -- plenty of room to go either way.
Intermediate-Term Market Indicators: The short rally this week caused some ripples in the ITBM, ITVM, and SPX BPI. They are near the zero line, leaving plenty of room to go lower.
CONCLUSION: On Monday there was follow through from the prior week's decline, but then prices bounced, hinting that maybe the decline was over; however, by the end of the week the SPY weekly PMO topped, and I give that a lot of weight. On the chart immediately above, the PMO, ITBM, and ITVM have only reached neutral, and I think that there will be more to this decline.
DOLLAR (UUP)
IT Trend Model: BUY as of 2/7/2019
LT Trend Model: BUY as of 5/25/2018
UUP Daily Chart: Price is headed toward the top of a very loose rising wedge, and the daily PMO is above the zero line and rising.
UUP Weekly Chart: Price is approaching the line of resistance drawn across the 2017 top. The line actually goes back to a series of tops in 2008/09, so it is stronger than it appears on this weekly chart. My assumption at this time is that the line will not be breached.
GOLD
IT Trend Model: NEUTRAL as of 4/16/2019
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Last week I abandoned the bearish head and shoulders pattern for a bullish falling wedge. On Monday gold broke out of the wedge, promising better days ahead. But not so fast. On Thursday gold dropped back into the wedge, and the daily PMO topped below the zero line. Gold continues to disappoint without completely falling into a ditch.
GOLD Weekly Chart: The weekly PMO is below the signal line and falling. The next support is on the rising trend line drawn from the August low.
CRUDE OIL (USO)
IT Trend Model: BUY as of 2/19/2019
LT Trend Model: BUY as of 4/17/2019
USO Daily Chart: The daily PMO has bottomed after dropping from very overbought levels. The assumption is that the April high will be challenged.
USO Weekly Chart: Price broke down from a rising wedge and has created a more stable rising trend channel.
BONDS (TLT)
IT Trend Model: BUY as of 12/6/2018
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: Last month TLT broke out of a falling wedge, and it has advanced to a level equal to the previous top. The double top is an obvious possible outcome, but it not guaranteed.
TLT Weekly Chart: In this time frame we can see the longer-term upside potential, provided TLT can make it permanently out of the top of the current trading range.
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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)
