On Fridays in the DecisionPoint Diamonds reports we list our "Sector to Watch". The sector is selected based on new momentum and rising participation. This week, after the close, XLC was the clear winner.
We would prefer a breakout above resistance at the October highs, but we do have a rounded bottom which is a bullish basing pattern. The RSI has moved into positive territory and the PMO generated a crossover BUY signal this week. Volume is coming in strong. The SCI is rising and its percentage is much lower than %Stocks > 20/50-EMAs so we have a strong short-term bullish bias. We are even seeing some of the stocks move above their 200-EMAs. Keep an eye on it next week!
The DecisionPoint Alert Weekly Wrap presents an end-of-week assessment of the trend and condition of the Stock Market, the U.S. Dollar, Gold, Crude Oil, and Bonds. The DecisionPoint Alert daily report (Monday through Thursday) is abbreviated and gives updates on the Weekly Wrap assessments.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
MAJOR MARKET INDEXES
For Friday:
For the week:
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.
For Today: 
For the Week:
RRG® Chart: XLY continues to outperform and is leaving the SPY in the dust. XLK is also continuing to show strength. XLP should hit Improving soon and that was a runner-up for "sector to watch" this week. XLV is seeing money rotate out and its direction on the RRG proves that out. Interestingly, the majority in the Diamond Mine voted for XLI as "sector to watch" but we didn't have the luxury of updated participation on the sector charts. XLC is the clear winner based on the improvement on the chart in participation and rising Silver Cross Index (SCI). XLC has switched directions and is headed north toward Improving.
RRG® charts show you the relative strength and momentum for a group of stocks. Stocks with strong relative strength and momentum appear in the green Leading quadrant. As relative momentum fades, they typically move into the yellow Weakening quadrant. If relative strength then fades, they move into the red Lagging quadrant. Finally, when momentum starts to pick up again, they shift into the blue Improving quadrant.
CLICK HERE for an animated version of the RRG chart.
CLICK HERE for Carl's annotated Sector charts.
THE MARKET (S&P 500)
IT Trend Model: BUY as of 10/18/2021
LT Trend Model: BUY as of 6/8/2020
SPY Daily Chart: Today we finished with a somewhat ominous black candlestick. These candlesticks tell us that price closed below the open, but above the close from the previous day. It could mean that bears are beginning to gain some control. Price is traveling within a bearish rising wedge.
The RSI is now overbought, but still rising. Stochastics are strong and the PMO is still rising. The PMO is beginning to get overbought.
SPY Weekly Chart: The weekly chart also sports a bearish rising wedge and an overbought RSI. The PMO looks healthy enough as it is rising. With price tapping the top of the wedge, it suggests we could see price decline and head toward the bottom of the wedge.
PARTICIPATION: The following chart objectively shows the depth and trend of participation for intermediate- and long-term time frames.
- The Silver Cross Index (SCI) shows the percentage of SPX stocks on IT Trend Model BUY signals (20-EMA > 50-EMA).
- The Golden Cross Index (GCI) shows the percentage of SPX stocks on LT Trend Model BUY signals (50-EMA > 200-EMA).
The SCI continues to rise and is at healthy 66% reading telling us that 2/3rds of the SPX have a 20-EMA > 50-EMA. That is a strong foundation to keep the intermediate-term rising trend rising. This week we also saw a positive crossover by the GCI above its signal line which gives us a bullish outlook in the long term as well.
New 52-Week Highs/Lows: New Highs expanded all week long as price continued to press higher. However, readings are now in overbought territory. Note that when this indicator tops, we are generally in for at least a short-term decline.
Climax Analysis: Total Volume was certainly climactic today as it moved well past yesterday's volume bar above the annual average. We had thought this would line up a climax day today, but we had zero confirmation on Net A-D and Volume Ratios. The VIX traveled below its EMA today which points to a loss of internal strength.
*A climax is a one-day event when market action generates very high readings in, primarily, breadth and volume indicators. We also include the VIX, watching for it to penetrate outside the Bollinger Band envelope. The vertical dotted lines mark climax days -- red for downside climaxes, and green for upside. Climaxes are either initiation or exhaustion.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
The STOs rose today which usually means a continuation of the current move. However, we have negative divergences on all of these indicators
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM and ITVM are both overbought but continue to rise. One problem to note is the decline in rising momentum for the stocks in the SPX.
Bias Assessment: Participation is trending higher with rising bottoms. %Stocks > 20/50-EMAs are higher than the SCI which gives us a bullish bias in the short term. We need to see more stocks with their price > 200-EMA so we can ensure that the GCI continues to rise. As noted earlier, the intermediate-term bias is bullish based on 2/3rds of the SPX have a 20-EMA > 50-EMA. The long-term bias is bullish based on the rising GCI and 80%+ reading.
CONCLUSION: This week the market saw no declines. Price is very overbought as are our primary indicators (STOs and ITBM/ITVM). We now have strong negative divergences appearing on our charts. Today's black candlestick combined with the VIX reading moving higher suggest this short-term bull run is in peril. There are strong areas of the market to rotate into, but given the precarious position of the market as a whole, make sure you have stops set on your positions. Increasing your exposure isn't a good idea.
Erin is 85% exposed to the market.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact support@decisionpoint.com for more information!
BITCOIN
The flag formation on Bitcoin technically executed this week, but a rally hasn't materialized yet. At this point, the flag looks less bullish. The RSI is positive, but given the reversal on Stochastics and the falling PMO, more than likely we will see more sideways movement with an outside chance of a breakdown below 60,000.
INTEREST RATES
Interest rates fell this week and picked up speed today. This is bullish for Bonds in nearly all timeframes.
10-YEAR T-BOND YIELD
The first level of support has now been broken. The 50-EMA and support at the early October low melted. Next up is support at 1.40 and the 200-EMA. Given the bearish indicators, we should see it tested soon.
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is in a short-term rising trend but that forms the bottom of a very short-term bearish rising wedge. Resistance is now being hit at the October high. The PMO wants to give us a crossover BUY signal and the RSI is still positive. Stochastics are flattening and never reached above 80. The picture is mixed.
There is an even larger bearish rising wedge visible on the 1-year chart. This at least tells us that price could continue higher despite questionable Stochastics.
UUP Weekly Chart: Price for the week was above support at the March top. The weekly RSI is positive and the weekly PMO is bullish. Overall we would say the bias is bullish for the Dollar, but we do need to be aware of the short-term problems.
GOLD
IT Trend Model: BUY as of 10/28/2021
LT Trend Model: SELL as of 8/9/2021
GOLD Daily Chart: Gold finished the week higher and punctuated it with a strong rally that put price above the October high. The RSI is positive and the PMO now has a bottom above the signal line which is especially bullish.
Discounts are expanding quickly on PHYS which suggests bearish sentiment. That is actually good for Gold given sentiment is contrarian. This week we saw an IT Trend Model "Silver Cross" BUY signal that also sets the stage for Gold to test overhead resistance at the July-September highs.
GOLD Weekly Chart: The weekly chart is somewhat mixed. There is a large bearish descending triangle (flat bottom, declining tops). However, the weekly RSI has moved into positive territory and the weekly PMO narrowly missed a crossover BUY signal.
GOLD MINERS Golden and Silver Cross Indexes: There is a pretty clear reverse head and shoulders on the Gold Miners chart. It still must overcome resistance at both the November 2020 and June/July lows and the 200-EMA. Given the rising and positive RSI and the decelerating PMO, it should. Notice also the expansion in participation amongst stocks > 20/50-EMAs. The SCI may be traveling sideways but given so many stocks are now above their 20/50-EMAs, it should be begin rising in earnest next week.
CRUDE OIL (USO)
IT Trend Model: BUY as of 9/3/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO made a comeback today finishing up nearly 3%. That doesn't fix the problem of a rounded top or a breakdown of the rising trend channel. It could be setting up for a bounce off the 50-EMA. The RSI is now positive and both the PMO and Stochastics are flattening.
A breakout from the short-term declining trend accompanied by a rising PMO and Stochastics would be convincing enough to call this a bottom. For now, the declining trend is holding and there is a high likelihood that supply will be increased to pressure gas prices to move back down.
USO/$WTIC Weekly Chart: $WTIC broke above resistance and is now holding support. The weekly RSI is falling but that has taken it out of overbought territory. The weekly PMO is still rising slightly. There is a bullish rising trend channel on USO, but $WTIC is in a rising wedge. Both patterns suggest price could move lower to test rising trendlines drawn from the November 2020 lows.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 10/1/2021
LT Trend Model: BUY as of 11/4/2021
TLT Daily Chart: TLT broke from its trading channel as yields dove lower. We nearly had a "silver cross" of the 20/50-EMAs that would've triggered an IT Trend Model BUY signal. Yesterday TLT generated a LT Trend Model "Golden Cross" BUY signal. Indicators are positive all around suggesting price will reach at least $152.
Longer-term resistance was broken and the PMO hit positive territory above the zero line. As long as yields continue to cooperate, we should see TLT move to $152.
TLT Weekly Chart: The weekly chart is also favorable. The weekly RSI is now in positive territory. The weekly PMO that has bottomed above its signal line which is especially bullish. Note that there is support available for the 20-year yield. If it rebounds off that level, the party will end for TLT.
Technical Analysis is a windsock, not a crystal ball.
-- Carl & Erin Swenlin
(c) Copyright 2021 DecisionPoint.com
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
NOTE: The signal status reported herein is based upon mechanical trading model signals, specifically, the DecisionPoint Trend Model. They define the implied bias of the price index based upon moving average relationships, but they do not necessarily call for a specific action. They are information flags that should prompt chart review. Further, they do not call for continuous buying or selling during the life of the signal. For example, a BUY signal will probably (but not necessarily) return the best results if action is taken soon after the signal is generated. Additional opportunities for buying may be found as price zigzags higher, but the trader must look for optimum entry points. Conversely, exit points to preserve gains (or minimize losses) may be evident before the model mechanically closes the signal.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.