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DP (SPY) ALERT WRAP: DecisionPoint.com -- Everything Old Is New Again!
By: Carl Swenlin | January 3, 2020

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GLOBAL MARKETS



BROAD MARKET INDEXES



SECTORS

Each S&P 500 Index component stock is assigned to one, and only one, of 11 major sectors. This is a snapshot of the Intermediate-Term (Silver Cross) and Long-Term (Golden Cross) Trend Model signal status for those sectors.





INTEREST RATES

This chart is included so we can monitor rate inversions. In normal circumstances the longer money is borrowed the higher the interest rate that must be paid. When rates are inverted, the reverse is true.



STOCKS

IT Trend Model: BUY as of 9/6/2019

LT Trend Model: BUY as of 2/26/2019

SPY Daily Chart: It was kind of choppy for a holiday week, but the net change for the week was less than one percent, and the range was less than two percent. A surge to new highs on Thursday was followed by some selling on Friday due to the air strike in Iraq which killed a high-level terrorist. The market recovered from the Friday lows but still closed down. Frankly, the small loss was probably due to internal pressures, not the military action.



SPY Weekly Chart: I'm still coaxing a current parabolic advance, but it is not yet as severe as we saw in early-2018. And I see some similarity with the move to the mid-2018 price top, but steeper.



Climactic Market Indicators: There were no climactic days this week, but the VIX penetrated the lower Bollinger Band, which is a BUY signal in the very short term.



Short-Term Market Indicators: In the last week we can see very short-term negative divergences developing and highlighting underlying weakness in this time frame. For this reason I think Friday's pullback after Thursday's blowoff was justified on strictly technical grounds. News exacerbated the move intraday, but it wasn't necessarily responsible for the entire move.



Intermediate-Term Market Indicators: Both the Golden and Silver Cross Indexes are overbought, and they topped today.



All these indicators are overbought and have topped. Note that the rising trend line drawn from the October low is steeper than the angle of the trend lines to the other important tops shown, with the exception of the 2017/18 parabolic.



CONCLUSION: The trend of the market is UP, and the condition is OVERBOUGHT. Additionally, the angle of ascent from the beginning of December is quite steep and is, in my opinion, not sustainable. Friday's airstrike news was also responsible for positive reactions in gold, crude, and bonds. It remains to be seen just how much current news will affect the markets beyond today. I suspect very little, but we shall see. I continue to have concern about how over-extended the market is technically. A decline of -5% to -10% would alleviate some of the pressure, but the trend has to break first. I keep hearing predictions of a melt up, but that's just shows how extremely bullish sentiment has gotten.

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