The following is an excerpt from the October 2, 2013 blog for Decision Point subscribers.
The market opened way down, quickly hit the low for the day, then recovered nearly all its losses to close down less than two points. I did a quick search of the news and didn't find anything that would explain the price swings, which is why I normally don't include fundamentals in my analysis and conclusions. I like to have an 'awareness' of fundamentals, but I try to limit how much they influence my thinking.
Stocks: Based upon a 9/18/2013 Thrust/Trend Model buy signal, our current intermediate-term market posture for the S&P 500 is bullish. The Trend Model, which informs our long-term outlook, is on a buy signal as of 9/9/2013, so our long-term posture is bullish.
The PMO crossed down through its EMA today, but looking at the thumbnail chart this crossover is not what we would call decisive. The PMO is almost flat over the last several days and could easily cross back up in a day or two of higher prices.
Ultra-short-term indicators ticked downward, remaining in the neutral zone.
Short-term indicators reflect the small bounce by moving up, but we can see they are decelerating, possibly getting ready to turn back down.
Intermediate-term indicators are still negatively configured.
Conclusion: It seems to me that this year there has been an increase in cases where we think a chart pattern has resolved itself in one direction only to have it 'un-resolve' itself a short time later -- gold and TLT being the most immediate examples. The SPX is included as well. We think it has signalled a correction at least down to the bottom of the rising wedge, yet it seems reluctant to carry out the threat. The bottom line is that price and moving average relationships are positive, so we must apply a positive bias to our analysis. Nevertheless, we don't think this correction is quite over, although we may see a bit more of a bounce.
Dollar: As of 7/23/2013 the US Dollar Index ETF (UUP) is on a Trend Model neutral signal. The LT Trend Model, which informs our long-term outlook, is on a sell signal as of 8/13/2013, so our long-term posture is bearish.
UUP has resolved the one-year trading range by breaking down through the bottom of it, but it is not yet a decisive break, and we can see what happened back in February.
But we have been expecting that this might happen and that the current correction would take price down to the bottom of the longer-term trading range seen on the weekly chart.
Gold: As of 9/24/2013 Gold is on a Trend Model sell signal. The LT Trend Model, which informs our long-term outlook, is on a sell signal as of 2/15/2013, so our long-term posture is bearish.
We have drawn the short-term declining trend channel, which now dominates that time frame. Today's rally seems to have been a bounce off horizontal support.
Crude Oil (USO): As of 6/7/2013 United States Oil Fund (USO) is on a Trend Model buy signal. The LT Trend Model, which informs our long-term outlook, is on a buy signal as of 7/3/2013, so our long-term posture is bullish.
We were expecting a bounce off the important support lines, and we were most gratified to see that it actually happened. We still need to see a PMO bottom, and price needs to get back above the 20- and 50-EMAs.
Bonds (TLT): As of 5/20/2013 The 20+ Year T-Bonds ETF (TLT) is on a Trend Model neutral signal. The LT Trend Model, which informs our long-term outlook, is on a sell signal as of 5/29/2013, so our long-term posture is bearish.
The double bottom neckline is still not resolved. Perhaps our focus should be on the fact that price has broken above the declining tops line and is consolidating above it. Price needs to get moving higher or the PMO is going to top.
Technical analysis is a windsock, not a crystal ball.
