Technical Analysis: Intermediate-Term Neutral
The following is an excerpt from the May 15, 2012 blog for Decision Point subscribers.
The market was choppy most of the day, had a breakdown at the end of the day and formed a small bearish reverse flag or pennant.
The ETFs are really rolling over right now on our Decision Point Alert Daily Report and that makes sense as we watch the entire market turning over. The few sectors that are left still have some time before negative crossovers occur, it's worth our subscriber's time to call up this report on our website and click on the various sectors in the report to get a closer look.
For readers, I have posted charts below of the six signal changes that occurred today as all of them experienced negative 20-EMA crossovers below the 50-EMA. In all cases, the 50-EMA was above the 200-EMA indicating the sector is still in a bull market, so the signal was a neutral not a sell.
Stocks: Based upon a 12/05/2011 Thrust/Trend Model buy signal, our current intermediate-term market posture for the S&P 500 is bullish. The long-term component of the Trend Model is on a buy signal as of 1/5/2012, so our long-term posture is bullish.
Today's big news... We had an intermediate-term neutral signal generated on our Thrust/Trend Model for the SPX. The 20-EMA crossed below the 50-EMA today which was the trigger. It was not a sell signal because the 50-EMA remains above the 200-EMA which means we are technically in a long-term bull market still. You don't want to go on a sell signal in the midst of a bull market.
In the chart below I annotated the crossover and also the current short-term declining trend channel price is traveling in. It is also important to note in the big picture the continued breakdown below horizontal support at the March low as well as the next line of horizontal support that represents the minimum downside target from the execution of the double-top.
Short-term indicators are somewhat oversold, but not overly so. The CVI and STVO oscillating below zero and are indicative of a weak market. The VTO continues lower but is only moderately oversold.
Short-term STO-B and STO-V topped in somewhat oversold territory and continue lower where there is still room for them to go.
The ITBM/ITVM are both heading lower into oversold territory. There is plenty of space for them to expand lower.
PMO Analysis chart illustrates the market condition in all three time frames. Short-term we are oversold (% PMO Rising), intermediate-term market is somewhat oversold but room to grow and long-term still mostly neutral but moving lower toward oversold territory.
Conclusion: Horizontal support at the January low looks like a good place for a possible turnaround, but intermediate-term indicators are not that promising. We could see a small bounce there or on the way down as oversold short-term indicators are going to need some relief.
Volume was extremely high today as the dollar shot up nearly 1% today likely due to a troubled Euro given current news about Greek depositors withdrew 700 million euros from the nation's banks. It looks like the dollar is headed to test resistance at the January high.
A very strong dollar is bad news for gold which is struggling because of it. Today horizontal support was barely broken, but if the dollar continues to surge, the price breakdown would likely get worse. The 50-EMA crossed below the 200-EMA putting gold officially in a long-term bear market; however, the last time this happened was in 2008 and the signal only lasted about six months.
While the weekly chart's 17-EMA and 43-EMA don't match the daily chart 50/200-EMAs exactly, they still tell the story that gold has enjoyed a bull market for many years. Horizontal support on the weekly chart has been reached.
Technical analysis is a windsock, not a crystal ball.
About Erin Swenlin Heim
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