Target (TGT) had a big miss on earnings today and declined almost -25%. Being a component of Consumer Staples Sector (XLP), this disaster caused one of the three remaining unscathed S&P Sectors to "have a great fall," and to break support and a rising trend line. The 20-day EMA is within a hair of crossing down through the 50-day EMA (a dark cross), and it should happen tomorrow.
Given XLP is a "defensive" sector, the decline might have been head scratcher for some. However, retailers in general took a hit overall. Had Target been listed in Consumer Discretionary with other retailers, the drop may not have been so significant for XLP. Although, participation within XLP in this decline suggests otherwise as the majority of stocks lost support at their 20/50-day EMAs.
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® Daily Chart ($ONE Benchmark): Today's crash has us looking at the daily $ONE RRG.
On this shorter-term RRG, XLE is the only sector in the Leading quadrant, but it has a bearish southwest heading.
XLU is showing promise as it moves in a bullish northeast direction. XLV was moving in that direction, but today it reversed back toward the Lagging quadrant. XLC could join it soon as it has hooked back into a bearish southwest heading.
All other sectors are in the Lagging quadrant. XLF was in the Improving quadrant yesterday, but it has hooked quickly back around and now finds itself in the Lagging quadrant with a bearish southwest heading. XLRE has a somewhat northward heading, but it doesn't look like it will arrive in the Improving quadrant for some time. All other sectors are in the Lagging quadrant with bearish southwest headings.
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: It was a huge down day, but looking at the last month and a half, not really extraordinary. Volume expanded, but not to blow out levels. Price turned right back down after hitting the top of the declining trend channel and resistance at the 20-day EMA. The VIX tumbled on our inverted scale, unable to even reach the upper Bollinger Band before reversing. The VIX is not at oversold extremes given the lower Bollinger Band still some distance below it.
The PMO topped beneath its signal line well below the zero line. The RSI topped before challenging net neutral (50). Stochastics have failed for the third time to get above net neutral 50.
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S&P 500 New 52-Week Highs/Lows: Not surprisingly New Lows expanded. This has the 10-DMA of the High-Low Differential topping well below the zero line.
Climax* Analysis: There were very strong climax readings again today, this time to the downside, giving us a downside initiation climax.
*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.
We've noticed that the last two tops the STOs had barely made it to positive territory before turning lower. This suggests to us that STOs can be considered overbought even at these low levels. While both did rise today, they're now overbought. PMOs Rising tumbled today over 50 percentage points from yesterday's healthy 77% reading to today's at 26%.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The positive divergences on the ITBM and ITVM didn't result in higher prices. So far most of our bullish indicator signals haven't resulted in much upside. More evidence that the bear market is in force.
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 SCI had turned up yesterday but topped today. The GCI continues its decline.
We were finally seeing more stocks above their 20-day EMAs than their 50-day EMAs which was a bullish sign. That has changed quickly as we have a "bear stack" on %Stocks indicators. The majority of SPX stocks look like the SPY. %Stocks above their 20-day EMAs is below %Stocks above their 50-day EMAs which are below %Stocks above their 200-day EMAs. The first bullish signs are when we see more stocks above their 20-day EMAs in relation to %Stocks above their 50-day EMAs. That suggests improvement which we saw for the first time yesterday. However, today's immediate reversal speaks volumes.
The bias is bearish in all three timeframes.
CONCLUSION: The bear market is in full force as we find bullish signals failing (ex. STO positive divergences and %Stocks above 20-day EMAs > %Stocks above 50-day EMAs yesterday) and bearish signals fulfilling with gusto like yesterday's upside exhaustion climax did. Today's downside initiation climax piggy-backing on yesterday's bearish climax should have us bracing ourselves for more downside. When a defensive sector like Consumer Staples fails spectacularly, you know there are serious problems.
Erin is 20% exposed to the market with a 10% hedge.
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BITCOIN
Bitcoin is clinging to support. Indicators are very negative. The PMO is still falling, the RSI is firmly negative and Stochastics have topped well below net neutral (50). With price consolidating we now see a bearish reverse flag developing. The downside target for these patterns is calculated by subtracting the length of the flag pole from the breakdown point. In this case, by using 25,000 as the point of a possible breakdown and the top of the flagpole conservatively being 40,000, the minimum downside target for Bitcoin would be $10,000! This could get very ugly.
INTEREST RATES
20 and 30-year yields pulled back sharply today which boosted Bond prices.
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
$TNX failed to recapture the short-term bottoms trendline. This decline could be the right shoulder on a small bearish head and shoulders pattern. The neckline is sloping upward and has not been broken yet. Yields may see a bigger pullback than expected.
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 ended its slide lower today. This kept the RSI in positive territory. The PMO and Stochastics have not reversed their declines. Still, we don't expect price will break below support at the 50-day EMA.
GOLD
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: GLD was mostly unchanged today. The indicators are negative and don't hint at a rally.
GOLD Daily Chart: Discounts are still elevated suggesting investors are still very bearish on Gold. That is good for Gold as sentiment is contrarian. Stochastics are back above 20 on $GOLD and support is holding at the January lows. We expect a rebound soon for Gold, particularly if Bitcoin crashes.
GOLD MINERS Golden and Silver Cross Indexes: GDX was taken out by the crash in the market today. Gold prices were mostly unchanged so they didn't have any protection. Currently the SCI reading is zero. %Stocks > their 20/50-day EMAs has been at zero nearly all month. We would look for price to test support at $28.50. That's been a sturdy level, but a continued decline in the market will be a major headwind.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: The bullish ascending triangle pattern isn't busted yet, it just appears that fourth time isn't a charm for a breakout. We will want the rising bottoms trendline that forms the bottom of the triangle to hold up. Indicators are soft so a near-term breakout will likely have to wait.
BONDS (TLT)
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT rallied strongly as yields tumbled. Bonds were some of the only winners on the day. TLT has some work to do. Overhead resistance at the 20-day EMA and the April low is arriving. Indicators are encouraging with the RSI rising, PMO BUY signal and rising Stochastics. All of those indicators remain in negative territory even if they are showing slight improvement. We need more evidence before looking for a breakout above resistance at $120.
Good Luck & Good Trading!
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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