Crude Oil (USO) had a new Intermediate-Term Trend Model "Silver Cross" BUY signal trigger as the 20-day EMA crossed above the 50-day EMA. The chart is looking bullish. The RSI is positive and not overbought. The PMO is rising and has just pushed past the zero line. The OBV is rising and Stochastics are oscillating above 80. You'll notice that price hit gap resistance and was immediately turned away. It is now making its way back up to challenge that area of overhead resistance. Given indicators look bullish, we would expect a push toward the October highs.
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.
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MAJOR 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.
RRG® Chart: Materials (XLB) is now the only sector residing in the Leading quadrant, but it is traveling in the bearish southwest direction and could land in Lagging even before it hits Weakening. Defensive sectors have now tumbled into the Weakening quadrant suggesting that defensive sector leadership is ending. Up and comers, XLY, XLE and XLI are now in Improving. They are traveling with a bullish northeast heading. XLK is working back toward Leading which is bullish. XLC still may hit Leading, but with the current southerly direction it isn't a given. The most bearish of the sectors, relative strength wise, is XLF which is the only sector in Lagging. It is moving further into that bearish quadrant, traveling in the bearish southwest direction.
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 the market rebounded, but did not reach all-time highs intraday. Total Volume popped and was nearly over the annual average. The VIX is seeing its Bollinger Bands contracting. This could mean a puncture of the upper Band on the inverted scale should readings become even more complacent. When the VIX turns over, especially after an upper Band puncture, we usually will see the market weaken and reverse.
The RSI is positive and the PMO is rising on a crossover BUY signal. The PMO is flattening which is not good news and that is accompanied by a negative OBV divergence with price tops. Stochastics are oscillating above 80 which suggests internal strength.
PARTICIPATION: The following chart objectively shows the depth and trend of participation in two time frames.
- Intermediate-Term - the Silver Cross Index (SCI) shows the percentage of SPX stocks on IT Trend Model BUY signals (20-EMA > 50-EMA). The opposite of the Silver Cross is a "Dark Cross" -- those stocks are, at the very least, in a correction.
- Long-Term - the Golden Cross Index (GCI) shows the percentage of SPX stocks on LT Trend Model BUY signals (50-EMA > 200-EMA). The opposite of a Golden Cross is the "Death Cross" -- those stocks are in a bear market.
Negative divergences remain on the SCI and GCI even though they are rising after crossover above their signal lines. It is positive to see these indicators rising, but the SCI is still somewhat bearish based on a reading below 70%. The GCI is bullish based on its percentage and the fact that it is rising and not yet overbought.
S&P 500 New 52-Week Highs/Lows: New Highs contracted on today's rally which is negative in the very short term.
Climax* Analysis: After talking with Carl, we have decided to call today an upside initiation climax. It certainly isn't a strong one given Volume Ratios didn't quite overcome the 3.0 threshold and New Highs contracted, but with the pop in volume and Net A-D Volume, it passes our sniff test. An upside initiation climax isn't a guarantee that prices will rally.
*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 indicate either initiation or exhaustion.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL to OVERBOUGHT.
Percent PMOs Rising plummeted from an 84% reading on Friday to a 63% reading today. 20% of SPX stocks saw their PMOs turn down today. That is a negative divergence given price finished higher and certainly suggests short-term deterioration. STOs are falling which is also bearish and suggests a short-term decline ahead.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
With only 63% of stocks having a rising PMO, we know that the %PMO Crossover BUY signals indicator will likely turn down very soon. That reading is also overbought. ITBM/ITVM are both rising, but still hold negative divergences with price tops.
Bias Assessment: The short-term bullish bias is beginning to deteriorate as stocks begin to lose the 20-day EMA support level. The bias is still bullish because the participation percentages of stocks > 20/50-day EMAs are higher than the SCI. Given the 68% reading on the SCI, the intermediate-term bias is neutral to bearish. Neutral because it is rising, bearish because the reading is below our 70% threshold. The long-term bias is still bullish given the 80% GCI reading and %Stocks > 200-day EMA is higher than the GCI.
CONCLUSION: We have at least one more day of positive seasonality based on the historical trends after the new year. Climaxes are good for a day or two so today's upside initiation climax goes hand in hand with this seasonality rationale. However, STOs are falling and the short-term bullish bias is deteriorating. Additionally, we still see many negative divergences on our indicators. Be cautious. I'm still holding off on expanding my exposure to the market mainly because I don't like the STOs declining.
I'm 10% exposed the market with the remainder in cash and readily available to trade with.
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BITCOIN
The reverse flag or pennant formation suggests that Bitcoin will breakdown. Indicators are in agreement--the RSI is negative, the PMO is headed for a crossover SELL signal well-below the zero line and Stochastics are flat, not rising.
INTEREST RATES
Interest rates flew higher today and are solidifying their rising trends.
10-YEAR T-BOND YIELD
The 10-year yield exploded, moving up over 7 basis points! We were already seeing a break from the bearish rounded top. Instead of breaking down, $TNX found support at 13.5. A double-bottom was formed and now we are seeing the fruits of its labor. The RSI is positive and the PMO just reached above zero on a crossover BUY signal. Additionally, $TNX had a "Silver Cross" BUY signals as the 20-day EMA crossed above the 50-day EMA. Stochastics are now above 80 which suggests internal strength. We expect that rates will continue rising which will put downward pressure on Bonds and Bond funds/ETFs.
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 rallied today with UUP reaching above its 20-EMA and recapturing the short-term rising trend on very high volume. The RSI is now in positive territory and the PMO is turning up. UUP has a positive OBV divergence with price bottoms suggesting this rally should continue. Stochastics are rising in oversold territory, but it is still early in the game.
GOLD
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: SELL as of 12/3/2021
GLD Daily Chart: The outlook on Gold has changed significantly since last Friday. Last Friday we saw an especially bullish breakout from the bearish rising wedge. Indicators were positive and rising. With today's over 1.5% decline, the PMO topped. The RSI is still positive, but it is nearing negative territory below net neutral (50). We also have a negative OBV divergence with price tops.
GOLD Daily Chart: Interestingly, $GOLD had a "Golden Cross" BUY signal as the 50-day EMA crossed above the 200-day EMA. We use GLD for our mechanical signals and you'll notice above that GLD hasn't yet seen a "Golden Cross" BUY signal. Given all three of the EMAs are "braiding", the signals generated should be taken with a grain of salt given they are susceptible to whipsaw.
GOLD MINERS Golden and Silver Cross Indexes: I really liked Gold Miners and Miners in general going into this trading week, but as our outlook changed quickly on Gold, it is similarly changing for Gold Miners. The SCI has topped and participation is shrinking quickly as more stocks lose price support at their 20/50-day EMAs. It isn't necessarily over for Gold Miners as the 20-EMA is still holding and the RSI is positive with a rising PMO and Stochastics oscillating above 80. The deterioration lowers our confidence in finding "winners" in this group.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: I discussed USO in the opening.
BONDS (TLT)
IT Trend Model: BUY as of 11/8/2021
LT Trend Model: BUY as of 11/5/2021
TLT Daily Chart: It shouldn't be a surprise to see a plunge in TLT given the huge gains in yields today. The chart was already damaged given the negative RSI and falling PMO. We could see a small rebound off this support level at $144, but it is doubtful it will amount to anything given the very high volume decline today.
The intermediate-term rising trend was compromised on today's decline suggesting Bonds are not a good place to park right now. Look for a test of $141 at the October low.
Technical Analysis is a windsock, not a crystal ball.
--Erin Swenlin
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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.
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Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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