The Materials sector has really taken off, and today's surge coaxed the 20EMA up through the 50EMA generating an IT Trend Model BUY Signal.
** IMPORTANT REMINDER **
I am on vacation. I will still be publishing the DP Alert while on vacation, but comments will be abbreviated and "lead" articles will likely be scant. You will get your DP Alert before market open the next day, but it may go out at irregular times.
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:
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: Contradicting yesterday's price top, the market made a new rally high today.
S&P 500 New 52-Week Highs/Lows: New Highs expanded from yesterday's reading, but they are still diverging negatively from Monday's reading.
Climax* Analysis: Another climax day, but a whipsaw into an upside initiation climax. We have to give the most recent action the most weight, but the SPX Total Volume continues to contract, indicating waning conviction.
*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.
The STOs continued downward, and we still expect a decline in this time frame.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
None of these indicators topped today, but I anticipate that they will soon do so, because the % PMO Xover BUY Signals is very overbought. We're still looking for the overbought level for the ITBM/ITVM to shift way down in the normal range.
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 market bias in the short term is bullish given %Stocks > 20/50-day EMAs are much higher than the SCI.
The intermediate term shows a bearish bias as the SCI is reading well below 70%. However, it is rising, so that tells us that the bearish bias is at least improving and moving toward Neutral.
The long-term bias is neutral to bearish. We have slightly higher percentage of stocks > 50/200-day EMAs compared to the GCI so we can't expect to see too much improvement on the GCI. The GCI is at a bearish reading of 56% but has bottomed.
CONCLUSION: Erin was supposed to pick up the commentary today, but the Internet on her boat isn't working. So here I am again wading into the fray. I don't think that that there has been much change since yesterday. The short-term indicators are backing off from overbought readings and telling us to expect a short-term decline at the very least. Intermediate-term indicators are not overbought relative to their normal range, but a short-term decline will probably cause them to top and shift the immediate range much lower.
Erin will remain 15% exposed to the market while she is in Holland/Belgium. It is important to be able to manage positions more closely right now and that is the most risk she is willing to take while unable to stay plugged into the market.
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BITCOIN
Bitcoin has reached a level of horizontal resistance, which happens to coincide with the 200EMA. Formidable, and the fifth time it has been challenged.
INTEREST RATES
The trend is up.
10-YEAR T-BOND YIELD
$TNX is consolidating the top of the rising trend channel.
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 still in a three-week consolidation.
GOLD
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: GLD has set a less accelerated rising trend line, which should be easier to maintain.
GOLD Daily Chart: Other than the outlier down spike in August, we're seeing a saucer with handle formation, which is very bullish.
GOLD MINERS Golden and Silver Cross Indexes: GDX hit the overhead resistance line today and pulled back. Based on gold's positive chart, I expect GDX to go higher as well.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO ticked down today. We hope it manages to set a less accelerated rising trend line off of this month's lows. We expect the longer-term up trend to continue.
BONDS (TLT)
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: M
Good Luck & Good Trading!
Carl 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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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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