Today the Real Estate Sector (XLRE) 50-day EMA crossed down through the 200-day EMA (death cross), generating an LT Trend Model SELL signal. This signal was not going to be avoided given price is so much lower than both the 50/200-day EMAs.
We do notice some bright spots on the chart despite today's death cross. The RSI is rising and the PMO is in the process of turning up. Stochastics are thinking about moving higher. Two of the more bullish features are the double-bottom pattern that sits on long-term support. The expectation is an upside breakout. Additionally, we note that %Stocks > 20-day EMA is higher than %Stocks > 50-day EMA. This suggests improvement in short-term participation. The Silver Cross Index (SCI) and Golden Cross Index (GCI) are not confirming this given they are both still in decline.
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 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® Weekly Chart: XLE is the only sector that doesn't have a bearish heading. It is hard to tell, but XLE has moved up. It's barely bullish.
XLB and XLU are in the Leading quadrant. XLB should hit the Weakening and/or Lagging quadrant this week. It's very near the center of the RRG which basically tells us than in the last 5 weeks, it has made no headway. XLU is moving due south toward the Weakening quadrant as it loses strength.
XLV and XLP are sharing the Weakening quadrant with XLE. Both have bearish southwest headings.
The remainder of the sectors are in the Lagging quadrant. Given they all have bearish southwest headings, we believe the bear market is still in force.
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: SELL as of 5/5/2022
SPY Daily Chart: We notice that SPY bottomed before it reached the bottom of the declining trend channel. This is bullish and implies that price will break out of the channel soon.
Indicators are showing signs of improvement. The RSI is rising (but remains in negative territory), the PMO turned up and Stochastics ticked up. The Bollinger Bands on the VIX are squeezing tightly together. This means a puncture of the top or the bottom won't necessarily mean a reversal in price.
Here is the latest recording:
Topic: DecisionPoint Trading Room
Start Time: May 23, 2022 09:00 AM
Meeting Recording Link.
Access Passcode: MayDP@23
S&P 500 New 52-Week Highs/Lows: Another bullish indication is that New Lows contracted last week, while price made lower lows -- a positive divergence.
Climax* Analysis: We got solid upside climaxes on all the indicators today, giving us an upside initiation climax. We think it is problematic that SPX Total Volume contracted and did not confirm.
*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 at their core exhaustion events; however, at price pivots they can be seen to be initiating a change of trend.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
There are positive divergences on all of the short-term indicators. We have broader participation given we have almost 2/3rds of the SPX with rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
There are intermediate-term positive divergences on the ITVM and ITBM. One-third of the SPX have PMO Buy signals. That is enough to fuel a rally.
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 short-term bias is improving given %Stocks > 20-day EMA is greater than %Stocks > 50-day EMAs. Many of the stocks' EMAs in the SPX are configured similarly with slowest EMA on top and faster on the bottom. Seeing more stocks above their 20-day EMA is constructive. More so when that percentage is higher than %Stocks above their 50-day EMA. We read the short-term bias as somewhat bullish.
The IT bias is still bearish given the SCI is still declining and is reading at a very low 22.4%.
The LT bias is also bearish. The GCI is falling and is at a low 39.8%.
CONCLUSION: Numerous positive divergences, plus an upside initiation climax gives a solid indication that the rally could have legs; however, SPX Total Volume failed to confirm. This doesn't entirely offset the positive signs, but it does show a lack of conviction. So we have a rally in a bear market, but it is not likely to be much different than the March rally. Still we are keeping a close eye on these positive divergences as they generally are the first sign of a market recovery. We're just not there yet.
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BITCOIN
Bitcoin rallied today but finished the day on a negative note. Support is still holding. Based on the reverse flag formation, if this level of support is lost the minimum downside target of the flag is 10,000.
INTEREST RATES
Rates are still in a short-term declining trend but did close up today.
The Yield Curve Chart from StockCharts.com shows us the inversions taking place. The red line should move higher from left to right. Inversions are occurring where it moves downward.
10-YEAR T-BOND YIELD
Price confirmed the bearish head and shoulder pattern on Thursday when price broke below the red neckline. Price is still holding above support. Should it lose support, the pattern's minimum downside target is around 2.3%.
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The decline continues for the Dollar. Given the negative indicators, we would look for a failed test of the 50-day EMA at a minimum with a high likelihood of a breakdown to the $26.50 level.
GOLD
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold has been enjoying a bit of a resurgence with the Dollar in decline. Yet it hasn't been able to break above resistance at the 20-day EMA and January high. The indicators are firming up giving Gold a bullish bias.
GOLD Daily Chart: $GOLD did an intraday breakout above the 20-day EMA, but price settled below both the 20/200-day EMAs. Discounts are still very high suggesting investors are still quite bearish on Gold. That should work in Gold's favor along with the decline in the Dollar.
GOLD MINERS Golden and Silver Cross Indexes: Miners are seeing higher prices as Gold rises and the market begins to bottom again. The RSI is rising but is still negative. The PMO is rising again but has a lot of margin between it and its signal line. Participation is still very thin based on the SCI reading at 0% and only a slight amount of miners with price above their 20/200-day EMAs. Overhead resistance is arriving soon.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: We've yet to see the breakout from the bullish ascending wedge, but last week's low never reached the rising bottoms trendline. That suggests that fifth time will be a charm and we'll get that breakout. The RSI and Stochastics are very favorable. The PMO is rather useless given its flat pattern.
BONDS (TLT)
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The picture was beginning to brighten for 20-year Bonds as yields finally began to fall again. TLT is again stuck below overhead resistance at the 20-day EMA and mid-April low. We do have a flat price top and rising price bottoms in the very short term. That is a bullish ascending triangle. However, TLT is in a bear market and typically bullish signals and patterns don't fulfill.
Good Luck & Good Trading!
Erin and 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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