The following is an excerpt from the January 8, 2013 blog for Decision Point subscribers.
Stocks: Based upon a 12/10/2012 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 12/13/2012, so our long-term posture is bullish.
What looked like a flag on the daily bar chart yesterday, changed and looks like a short-term top today. The PMO is still rising but is now decelerating. Volume was higher on a down day which could be considered bearish.
Ultra-short-term indicators have fallen to neutral territory from the extremely overbought conditions of last week.
Short-term indicators have topped but remain very overbought.
The intermediate-term ITBM and ITVM both topped below their EMAs which is bearish.
The McClellan Oscillator chart shows negative price divergences on all three indicators which is bearish in all time frames.
Conclusion: The market is short-term overbought and price has topped. Intermediate-term is looking more bearish than before due to a combination of problems that include indicator tops below EMAs and negative divergences. This leaves the market vulnerable to not only a price drop to the bottom of the rising trend channel, but possibly to a more serious breakdown out of the channel. Earnings expectations are very, very low so this could be a set-up for price to move lower on bad earnings headlines; or because expectations are so low, earnings could beat expectations and offer the market a way to avoid a deeper correction.
Dollar: As of 11/28/2012 the US Dollar Index ETF (UUP) is on a Trend Model sell signal.
The dollar keeps hugging the declining tops line, not offering much since last week's slight breakout. The PMO is still rising and if price remains above the 20/50-EMAs a buy signal will trigger, but it just isn't acting like it wants to breakout and rally.
Gold: As of 12/6/2012 Gold is on a Trend Model neutral signal.
Gold is looking a bit, dare I say it, bullish. Price is rising within the bullish descending wedge pattern and the PMO has turned back up. There is also a possible bullish double-bottom forming most clearly in the thumbnail.
John Mauldin has written an excellent article about gold -- reasons to own it or not to own it, and how to buy it. Click here to read it.
Crude Oil (USO): As of 1/2/2013 United States Oil Fund (USO) is on a Trend Model buy signal.
USO has been steadily rising and last week broke out of the short-term rising trend channel. Price is staying above the channel but is struggling to push past the 200-EMA and declining tops resistance. The PMO is still rising but I'm concerned in the short-term about the island reversal pattern in the thumbnail which could point to another retest of rising bottoms support.
Bonds (TLT): As of 12/18/2012 The 20+ Year T-Bonds ETF (TLT) is on a Trend Model neutral signal.
TLT recently had a successful test of support at the September low and has begun rising back toward declining tops support. I don't like that the PMO is still falling on three positive price moves. Also, in the big picture this is a bearish descending triangle pattern in the making.
Technical analysis is a windsock, not a crystal ball.
