First, a giant "thank you" to Carl who has been covering for me as I deal with spotty internet. He also has noted and assisted in a much needed break for me. He's the best.
As noted previously, comments will be brief and there will be no "lead" article. Instead, let's look at the 10-minute candlestick of the SPY. Since I left the U.S., the market has had a nice rally. The 10-minute candlestick shows us that the PMO is on a BUY signal, but the RSI is overbought. Still, I like the way the PMO is reacting. The only problem is that it is getting overbought.
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: I am still surprised that XLP is Lagging and getting worse. It is a more 'defensive' area of the market and it appears the more 'aggressive' areas, XLY, XLK and XLC are seeing marked improvement. In fact, XLY is the only strong sector given it is in Leading and moving in the bullish northeast direction.
The other sectors have bearish southwest headings and are in the Weakening quadrant. XLRE will likely hit Lagging quadrant tomorrow or at least by the end of the week.
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: NEUTRAL as of 1/21/2022
LT Trend Model: BUY as of 6/8/2020
SPY Daily Chart: The rally is now hitting overhead resistance. With Total Volume continuing to be well below the annual average, we see that investors aren't behind this rally as they should be.
On the bright side, the PMO is now in positive territory and rising with the RSI in positive territory. Stochastics look very bullish as they oscillate above 80. As Carl mentioned in the Weekly Wrap, the VIX is worrisome. Uncharacteristically, the Bollinger Bands are expanding on a rally rather than a volatile decline. It hasn't punctured the Upper Bollinger Band because they are expanding. We know that in this current bear market, the VIX reading is very low. This is an overbought condition and could spell trouble ahead.
Here is the latest recording:
Topic: DecisionPoint Trading Room
Start Time: Mar 21, 2022 08:58 AM
Meeting Recording Link.
Access Passcode: March@21
S&P 500 New 52-Week Highs/Lows: Despite today's rally and finish at the high for the day, New Highs contracted which makes me suspect of a rally continuation.
Climax* Analysis: No climax today.
*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 OVERBOUGHT.
I find it positive that the STOs rose today, but they have been contracting despite the rally higher and that is a negative divergence.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT. Not surprisingly, the IT indicators are still rising. %PMO Crossover BUY signals is very overbought.
PARTICIPATION and BIAS Assessment: 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 bias in all three timeframes is neutral to bullish. It is bullish given %Stocks > 20/50/200-day EMAs is higher than both the SCI and GCI. The problem is that both the SCI and GCI are below 70% which is what we consider "bullish".
CONCLUSION: The rally looks good, but it is now up against overhead resistance at the same time that indicators are overbought or getting overbought. We have negative divergences between the STOs and price. I like price action right now, but with volume contracting we have to wonder if enthusiasm for this rally is waning. Enjoy the gains, but have your finger on the sell button; there is a high likelihood that we are about to see a market top.
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BITCOIN
Bitcoin has broken out above 45,000 and the 200-day EMA. RSI is positive, but a bit overbought. Other than that the PMO and Stochastics suggest prices will move higher.
INTEREST RATES
Carl discussed rates inversions are appearing. It's an unusual situation and to me, suggests there are problems under the surface.
10-YEAR T-BOND YIELD
Yields continue to rise with the 10-year yield now in a steep rising trend. I don't see anything on this chart to suggest they won't continue rising except that the RSI is somewhat overbought.
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 up against resistance, but the indicators are positive so we expect a breakout. (Yay! The exchange rate is actually working in my favor for once. The Euro and Dollar aren't that far apart right now.)
GOLD
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: After the parabolic move in Gold and the subsequent breakout, Gold is still maintaining a rising trend. It is attempting to break that rising trend, but the 50-day EMA is there to catch price. I don't like that the RSI is now negative and the PMO certainly isn't inspiring confidence.
GOLD Daily Chart: I am looking for price to maintain above $1875 and consolidate sideways.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are pulling back after an unsuccessful test of overhead resistance. I don't like that a possible double-top is developing alongside a PMO crossover SELL signal. The RSI remains positive for now. Stochastics are also in positive territory. Participation isn't really breaking down yet.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: An Adam and Eve double-top is developing and the rising trend is beginning to deteriorate. Look for a test of support at $59.50 and the 50-day EMA.
BONDS (TLT)
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With yields rising quickly, Bonds are feeling the pain. We do have a bullish falling wedge, but the RSI remains negative, the PMO is trending lower and Stochastics are very negative. Under "normal" circumstances we would look for a nice rally here. However, we know that we are in a rising rate environment. I still expect an upside breakout, but it won't likely take hold.
Good Luck & Good Trading! I'll post pictures when I have a decent internet connection which means it might take until I get home...sadly in just three days :-(
Erin Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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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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