Most of you are familiar with "bias assessment" given we have a section on it daily. I decided to compare the biases on the SPY, NDX, NYSE and Dow 30 and report it in this Saturday's ChartWatchers newsletter. Let's first do a quick review on bias analysis.
We've found that by analyzing the Golden/Silver Cross Indexes (GCI/SCI) along with Participation of Stocks > 20/50/200-day EMAs, we can determine the market bias in all three timeframes.
The GCI measures how many stocks within an index have "golden crosses" or a 50-day EMA that is greater than the 200-day EMA. A stock with this configuration has a long-term bullish bias.
The SCI measures how many stocks have a "silver cross" or a 20-day EMA that is greater than the 50-day EMA. A stock with this configuration typically has a short- to intermediate-term bullish bias.
In order to get a golden cross, a stock needs to have price above both the 50/200-day EMAs. Therefore, if we have a lower percentage of stocks below those EMAs, a bearish bias is developing.
In order to get a silver cross, a stock needs to have price above both the 20/50-day EMAs. Therefore, a lower percentage of stocks > 20/50-day EMAs suggests a short- and intermediate-term bearish bias developing.
Now that we know what we're looking for, let's look "under the hood" at four of the major indexes--SPY, Nasdaq 100 (QQQ), NYSE and Dow 30. We will compare the participation percentages of stocks > 20/50/200-day EMAs to the GCI and SCI.
The SPY displays shows an SCI that is turning down at 71%. Note that %Stocks > 20/50-day EMAs are much lower at 56% and 66%. This means that we have a short- and intermediate-term bearish bias. Long term, the bias is bullish moving toward neutral. The GCI is at a bullish 81% and is still rising, but we have fewer stocks > 200-day EMAs. This tells me that the prior bullish bias is deteriorating, but given the high number of stocks with golden crosses, it isn't bearish yet.
Participation is extremely weak within the QQQ and unfortunately, those participation numbers are not oversold. They can get much worse. The SCI is at 52%, but stocks > 20/50-day EMAs is much lower giving us a bearish bias in the short and intermediate terms. Long-term there is also a bearish bias given the GCI is reading below 70% and %Stocks > 200-day EMA is lower.
The NYSE has a bearish 53% reading on the SCI, but it is still rising. Given the percent stocks > 20/50-EMAs is about the same, but moving lower, we would read this as a neutral to bearish bias in the short and intermediate terms. The long-term bias is also bearish given the GCI is below 70% and there are fewer stocks > 200-day EMAs in comparison to the GCI.
The Dow 30 is still looking alright. The %Stocks > 20/50-day EMAs is higher than the SCI giving us a somewhat bullish bias in the short and intermediate terms. Unfortunately those participation numbers are very overbought. The GCI is at a somewhat bullish 70%, but we know based on 83% having price above their 200-day EMA that we still have a bullish bias in the long term.
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
For Today:
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: 
Short-term (Daily) RRG: It is easy to see which sectors are the most bullish. XLE, XLI, XLF and XLB are all within Leading and continue to head in the bullish northeast direction. The defensive sectors are all residing in the Weakening quadrant, but both XLP and XLU have reversed direction and could see the Leading quadrant early next week. XLRE and XLV are still Weakening, but are looking bearish as they make their way toward Lagging. XLC and XLK are the clear short-term laggards. With the emphasis on value stocks, those two areas will likely suffer further. XLY is in Improving, but appears to be avoiding the Leading quadrant.
Intermediate-Term (Weekly) RRG: In the longer term, XLC is still Lagging, but it is at least not traveling in the bearish southwest direction. XLK may be in the Leading quadrant, but it has reversed course and is moving toward Weakening. XLY should hit Weakening next week. Interestingly, in the intermediate term, all sectors with the exception of XLC, XLK and XLY have bullish northeast headings. The most bullish is actually XLE which has reversed course and is hooking back toward Leading. That is the set up Julius de Kempenaer (creator of RRG) looks for--northeast hook from Weakening into Leading.
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: The big news for today is that the SPY triggered a PMO crossover SELL signal. It isn't a surprise, especially given the OEX and NDX had already lost their PMO BUY signals. Price is now sitting on the 50-day EMA. This doesn't really align with horizontal support. There is possible support at $460, the mid-November low, but it isn't strong given that is the only "touch" on that support level. More than likely we will see the decline continue until it reaches the $450 support zone.
In addition to a PMO SELL signal, the RSI is now in negative territory below net neutral (50) and Stochastics are falling fast.
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SPY Weekly Chart: Price did not test the top of the rising wedge before heading lower this week. That makes the SPY vulnerable to a breakdown from this bearish pattern. The weekly RSI is still positive, but it is moving lower. The weekly PMO is still in decline below its signal line.
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.
The SCI is reading above 70% which is positive, but it has now topped which 'seals' or confirms the negative divergence with price. The GCI is still rising, but remains in a negative divergence with price. The reading of 81% is bullish for the long term.
The following table summarizes participation for the major market indexes and sectors.
New 52-Week Highs/Lows: Although the market fell again, New Highs did expand. We do remind you that these are readings that count all New Highs that occurred during the trading day. Some of those New Highs don't exist by the end of the trading day, particularly on afternoon declines.
Climax Analysis: We had a downside initiation climax on Wednesday and it manifested as expected. Total Volume was above the annual average all week. VIX Bollinger Bands have squeezed and will now make it very easy for it to puncture to the upside and downside; therefore, we should take those punctures with a grain of salt. The VIX closed beneath its EMA on the inverted scale for the past three days which suggests internal weakness.
*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 DOWN and the condition is NEUTRAL.
STOs are mixed again with the STO-B falling and the STO-V rising. In any case, the readings are in neutral territory and aren't providing a great deal of insight. %Stocks > 20-day EMA and %PMOs Rising are falling. Momentum is now negative for the majority of the SPX. Neither of those indicators are oversold and can accommodate much more downside.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM/ITVM are also mixed with the ITBM falling and the ITVM rising. %PMO Crossover BUY signals is falling fast out of overbought territory. This indicator is not in oversold territory.
Bias Assessment: I discussed the market bias in the intro. Short-term and intermediate-term biases are bearish. Long-term bias is bullish but deteriorating.
CONCLUSION: We believe that the decline is far from over. Indicators are negative with the majority of them continuing to decline. Additionally, indicators are not yet oversold and can accommodate more decline. The majority of the SPX have sagging momentum. We don't see any hints that this decline is over. High yield Energy and Financial stocks look pretty good going into next week. Growth stocks are a high risk right now. Watch your positions closely.
Erin added to her portfolio today but she remains only 15% exposed to the market.
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BITCOIN
Bitcoin has reached support right around 40,000. However, we don't see this as a solid support level given the PMO is falling after a SELL signal below the zero line. The RSI is still falling and isn't that oversold. Stochastics are oversold and might be turning up, but overall we don't believe Bitcoin will hold this support level.
INTEREST RATES
Interest rates flew skyward this week and don't appear ready to abate. Given the now hawkish FOMC, rising rates will likely be with us for some time.
10-YEAR T-BOND YIELD
$TNX broke out and hit an annual high. The RSI is overbought, but the PMO is not and it is rising strongly. Stochastics are bullish above 80. We expect the 10-year yield will continue to rise next week. This should benefit Financial stocks.
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 has been consolidating sideways. There is now a bearish descending triangle (flat bottoms, declining tops) that suggests a breakdown ahead. Indicators are in agreement with the RSI in negative territory, the PMO accelerating lower and not yet oversold, and Stochastics turning down in negative territory.
UUP Weekly Chart: The weekly chart is beginning to deteriorate. The weekly RSI is still positive, but the weekly PMO has turned down bearishly.
GOLD
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: SELL as of 12/3/2021
GOLD Daily Chart: Should the Dollar breakdown, Gold will benefit. After forming a bearish rising wedge, Gold gapped down to confirm the formation. Price did reverse today and is holding support. The PMO is still headed toward a crossover SELL signal and Stochastics are showing no improvement.
Discounts on the Sprott Physical Gold Trust are still very elevated which tells us that investors are still very bearish on Gold. However, with sentiment being contrarian, this isn't a bad thing. We have seen deeper discounts so it is hard to say if it is signaling a reversal near term.
GOLD Weekly Chart: Gold is still in a declining trend. The weekly chart confirms that discounts aren't oversold yet. Indicators are mostly neutral in this timeframe.
GOLD MINERS Golden and Silver Cross Indexes: With the decline in Gold this week, GDX suffered some serious losses. While price did finish higher today, support is looking weak at best. The PMO triggered a crossover SELL signal and Stochastics are falling fast in negative territory. The SCI has turned down and with fewer stocks above their 20/50-day EMAs, the bias is bearish in the short and intermediate terms. A 10% reading on the GCI and %Stocks > 200-day EMAs give us a very bearish long-term bias.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: There is a bearish rising wedge on USO that suggests a decline ahead. The PMO is rising strongly, the RSI is positive and Stochastics are oscillating above zero so we aren't looking for a deep decline.
Overhead resistance is arriving at the October high, but as noted above, the indicators are still very bullish.
USO/$WTIC Weekly Chart: The weekly PMO has turned back up and the weekly RSI is rising in positive territory. $WTIC still has room to move higher. We would look for at least a test of overhead resistance at those October highs.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 1/5/2022
LT Trend Model: BUYas of 11/5/2021
TLT Daily Chart: Bonds are being decimated by rising yields. Support at the October low is nearing.
However, when we look at a longer-term daily chart, it doesn't seem likely that that level will hold. The strongest area of support is at $139 or the April highs.
TLT Weekly Chart: The weekly chart is getting bearish quickly as the weekly RSI hits negative territory and the weekly PMO is in the midst of a negative crossover. The long-term rising trendline is holding up, but given the bearish daily charts above and the nearing PMO SELL signal, long-term support doesn't really arrive until $130 or the 2021 low.
Have a great weekend & happy charting!
Carl & Erin Swenlin
Technical Analysis is a windsock, not a crystal ball.
-- Carl 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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