The following is an excerpt from the December 13, 2011 blog for Decision Point subscribers. CLICK HERE for a free trial.
It appeared the market was going to rally but it quickly faded. It hit a tipping point at the end of the day on more mixed news out of Europe, and fell off the cliff following the FOMC statement that the economy was sluggish and no easing was on the horizon.
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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 SELL signal as of 8/17/2011, so our long-term posture is bearish.
The pullback continued today on the daily bar chart below. The PMO is still falling but remains just above its EMA. Volume expanded somewhat in comparison to yesterday.
With price continuing to back off the December high, short-term indicators which were previously overbought have cleared and are now becoming oversold. The CVI below is oversold and the STVO is somewhat oversold.
On the PMO Analysis chart we can see that the % PMO Rising is oversold. The other indicators, % Xover BUY Signals and % PMO Above Zero are neutral and falling.
The New Highs/New Lows chart was interesting in that we saw a slight expansion of new highs and the 10-DMA of the High-Low Differential which had topped yesterday, turned back up today.
Bottom Line: We are now looking at a once overbought market, slowly becoming oversold. There is still some distance on the daily chart between price and the bottom of the triangle. Indicators could absorb more decline as they haven't hit extremes but currently being somewhat oversold, they could also support a rally.
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DOLLAR: As of 11/9/2011 the US Dollar Index ETF (UUP) is on a Trend Model BUY signal.
The dollar (UUP) continued its rally, jumping up a percentage point. The PMO is picking up speed and the 50-EMA is starting to put some distance between it and the 200-EMA.
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GOLD: As of 12/13/2011 Gold is on a Trend ModelNEUTRAL signal.
Gold dropped again today and this time it took out intermediate-term support. The 20-EMA crossed below the 50-EMA generating a "NEUTRAL" signal on our Trend Model. Had the 50-EMA been below the 200-EMA (in a Trend Model long-term bear market) it would have been a SELL signal. There might be some good news in that the 200-EMA seemed to provide some support, but it seems much more likely that support will fail and gold will at least test the longer-term support shown on the weekly chart.
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CRUDE OIL (USO): As of 10/27/2011 United States Oil Fund (USO) is on a Trend Model BUY signal.
Oil rallied today on the open, but lost nearly half of its gains within the first hour and spent the rest of the day consolidating.
After testing support yesterday at the bottom of the short-term triangle it is traveling in, it bounced up before testing the neckline the Adam and Eve double-top, which Carl wrote about Friday, and which of course no longer exists. The fact that it rallied before reaching the neckline is positive. Volume skyrocketed but the PMO is still falling.
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Technical analysis is a windsock, not a crystal ball.
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