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Chart Advisor: Still A Go

Investopedia

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Investopedia
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Friday, February 26, 2021

1/ Benchmark bounce keeps trend intact for now 

2/ Gold, dollar and defensive sectors remain weak 

3/ Amazon breaks support 

4/ The bottom line

1/ Benchmark bounce keeps trend intact for now 

State Street’s S&P 500 ETF (SPY) rebounded from the previous two-day swoon. Doing so today made the price action strengthen just in the nick of time—technically speaking.  

The chart below depicts SPY over the past few months using a clever trend study called the GoNoGo Trend indicator. Developed by a former Bloomberg developer, the indicator amalgamates signals from Moving Averages, Bollinger Band® studies, Moving Average Convergence Divergence (MACD), Relative Strength Index (RSI), and defined support and resistance levels. It boils down these measures into a simple signal. It then displays a ‘Go’ or ‘No Go’ marker, depending on what the indications imply about the possibility of a continuing trend. 

The current state of the chart shows that the blue candles have not changed color, indicating that the trend hasn’t turned. As long as the indicator doesn’t show the No Go signal, the combined effect of these indicators signals the trend is more likely to continue than to change. 

2/ Gold, Dollar and Defensive Sectors Remain Weak 

The movement in the markets over the previous two days was dramatic enough to lift the Cboe Volatility Index (VIX) to a new recent high. Between the benchmark index still trending upward and the VIX also making new highs, something has to give. 

The following collection of ETFs and indexes gives a broader look at the way money is moving across the financial spectrum. It is notable that the U.S. Dollar Index (DXY), State Street’s Gold Trust ETF (GLD), and Invesco’s CurrencyShares Euro ETF (FXE) are all trending lower. Equally notable is the fact that State Street’s Sector Index funds for Utilities (XLU) and Consumer Staples (XLP) have not begun to outpace SPY. The trend for all five of these instruments shows that money is not fleeing to safety. At least not yet. 

3/ Amazon Breaks Support 

If the market is maintaining its upward trend, and investor money is not yet flowing towards safer investments, then what is happening with Amazon (AMZN)? The e-commerce behemoth is essentially a de facto economic indicator of sorts since its operations touch every facet of modern society nowadays. But as the GoNoGo indicator shows, the stock has broken its trend and flashed the No Go indicator. Investors should be careful to take note of this discrepancy and include this data point in their decision making. 

4/ The Bottom Line 

Stock prices rebounded somewhat, enough to keep the major benchmarks from showing bearish trends. Investor money doesn’t seem to be fleeing to safety, even though AMZN shares have broken any semblance of an upward trend.       

Originally Published on February 26, 2021

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