The following is an excerpt from the October 16, 2012 blog for Decision Point subscribers.
Stocks continued the move up as a few more positive earnings reports were released today. The market closed just short of the day's high after a small pullback.
Stocks: Based upon a 06/29/2012 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.
Price started moving higher from where it left off yesterday stretching up toward the top of the new trading channel we defined yesterday as the likely price range until the election. Volume expanded and the PMO has now turned up in response to the price leap of the past two days.
Ultra-short-term indicators made it to overbought territory today and could warn of a possible pullback, however they also have room to get further overbought if the rally continues.
Short-term indicators moved neutral and are still rising along with the market.
I noted above that the PMO bottomed today. It is the first part of the Thrust component of our Thrust/Trend model. The PBI is the second part and yesterday it had a positive crossover with its EMA. The PMO still has not had a positive crossover, so the Thrust component cannot move to a buy just yet.
Conclusion: Until the election it is very likely that we will see the market confine itself to this near horizontal trend channel. Ultra-short-term indicators are overbought but not at extremes and short-term indicators clearly have plenty of room before they even reach overbought. By the time price reaches the top of the trading range, most, if not all of those indicators will be overbought and be ready for some relief. The one thing that could shake things up would be a major news event that could push price up through resistance or conversely cause it to breakdown out of the channel.
Dollar: As of 8/22/2012 the US Dollar Index ETF (UUP) is on a Trend Model neutral signal.
The dollar broke down today but remains ensconced above horizontal support and declining tops resistance. The PMO is still rising but flattened out considerably today possibly in preparation for a top.
Gold As of 8/8/2012 Gold is on a Trend Model buy signal.
Gold reacted to the recent breakdown with a move back up toward the breakdown point. With the PMO still falling steadily, the technical expectation would be more downside or at least some price consolidation. Next support level would be the 50-EMA followed by the rising bottoms line drawn from the June low.
Crude Oil (USO): As of 10/02/2012 United States Oil Fund (USO) is on a Trend Model sell signal.
USO has been chopping violently since mid-September but ultimately is not trending up or down. The PMO did turn up today and is moving positively for the first time since August. The PMO buy signal has not been generated and won't until it has a positive crossover with its EMA. The weekly chart shows the PMO rising now as well avoiding a negative crossover. On the weekly chart we see price is right in the middle of support and resistance. If USO is finally ready to make a move back up, the weekly chart exhibits strong resistance waiting around 40.
Bonds (TLT): As of 9/7/2012 The 20+ Year T-Bonds ETF (TLT) is on a Trend Model neutral signal.
Bonds broke down today pushing price back down into the declining trend channel. The PMO topped below zero but remains above its EMA. The last PMO top did not result in a negative crossover as price found support near the October/December 2011 highs. In the thumbnail we see that price is still above an ultra-short-term rising bottom, but it is not a good sign that this recent breakout and rally stalled quickly.
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