We will discuss the implications of the double-bottom confirmation line further down. First, we'd like to show you all of the sectors at a glance (or CandleGlance on StockCharts).
One thing is obvious, Energy (XLE) is the strongest sector by far. The 20-day EMA has been above the 50-day EMA all year long with price dipping down very briefly below the 50-day EMA.
Price Momentum Oscillators (PMOs) are rising on all of the sectors, but XLV is looking weak as the PMO looks toppy below the zero line. XLC, XLY, XLF, XLI, XLRE and XLK have negative EMA configurations--they all have the 50-day EMA below the 200-day EMA. That implies they are in a "bear market" or have a bear market configuration.
XLP, XLB, XLU and of course XLE have 50-day EMAs above the 200-day EMAs. They have bull market configurations.
Don't forget that you have access to all of our annotated sector charts on our website.
Based on new participation, relative strength and the PMO, Industrials (XLI) is worth a look. It was down today, but is maintaining position above the confirmation line of its double-bottom. RSI is positive and PMO is on an oversold BUY signal. The participation percentages are showing improvement as the percentages get higher as the timeframe shrinks. Relative strength is kicking into gear against the SPY and Stochastics are oscillating above 80.
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.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
MAJOR MARKET INDEXES
For Today:
For the Week:
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.
For Today:
For the Week:
RRG® Daily Chart ($ONE Benchmark):
The daily RRG certainly suggests we are in a bear market rally. All sectors are are within the Improving quadrant or Leading quadrant. Nearly all have bullish northeast headings. Those that do not (XLC, XLV and XLE) are still looking strong given they all have easterly components to their headings.
RRG® Weekly Chart ($ONE Benchmark):
The weekly RRG shows all sectors with bearish southwest headings with the exception of XLE which is reversing back toward the Leading quadrant. We have short-term bullishness (daily RRG), but intermediate-term weakness (weekly RRG).
RG® 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: Last week SPY broke above the double bottom confirmation line. This week, price closed down three of the four trading days, yet the breakout was maintained as price moved sideways. The minimum upside target of the double-bottom is about $438. We had expected to see that challenged this week, but instead the market digested the quick sprint higher.
Indicators remain positive with the RSI above net neutral (50), the PMO rising and Stochastics oscillating above 80. The Bollinger Bands on the VIX keep expanding which is preventing an upside breakout on our inverted scale. That is good since punctures of the upper Band tend to lead price lower.
SPY Weekly Chart: The weekly chart tells us there are still problems in the longer term. The weekly RSI turned down in negative territory and the weekly PMO while decelerating, is still moving lower.
New 52-Week Highs/Lows: Yesterday we saw a contraction of New Highs on a rally; today we see an expansion in New Highs on a decline. Overall the numbers are very low. The 10-DMA of the High-Low Differential turned up this week and is still rising.
Climax Analysis: We have had a climax day every day this week, and three of the four were downside climaxes. Today was a downside initiation climax. SPX Total Volume contracted again to only 75% of the 1-year daily average. There wasn't much conviction behind today's decline. Conversely, there wasn't much conviction behind yesterday's rally.
*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 may be initiating a change of trend.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
Short-term indicators have taken this opportunity to relieve overbought conditions. We will often see this during a consolidation phase. It is healthy and leaves room for these indicators to move higher without getting overbought too quickly. We still don't like to see them in decline, but there hasn't been any real price damage associated with their decline. We have a healthy 79% of stocks in the SPX with rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERBOUGHT.
All intermediate-term indicators are rising. 87% of stocks have PMO BUY signals and that number is improving. This can sustain a rally. The one concern is that the reading is overbought and this indicator doesn't stay overbought for very long.
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 following table summarizes participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation.
The following table summarizes participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation.
Most of the SCIs improved this week, whereas the GCIs held steady.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of participation.
All but two SCIs and Three GCIs were below 50, indicating those market/sector indexes were in a bear market.
The long-term bias is bearish. The GCI is at a low 38.6% and didn't see any real improvement this week. We also note that there are only 37% of stocks above their 200-day EMA. This tells us we won't likely see the GCI move higher.
The intermediate-term bias is neutral to bearish. The SCI is rising after a positive crossover, but it remains at a low 28%. It is improving and should continue to improve based on the much higher amount of stocks above the 20/50-day EMAs.
The short-term bias is bullish. We see a high 62.4% of stocks above their 20-day EMAs which is also larger than the 43.4% of stocks above their 50-day EMAs. This demonstrates improving strength within the index.
CONCLUSION: If you weren't looking at a chart, you would think that this was a down week. Well, technically it was, but just barely over one percent down. Nevertheless, the promise of the double-bottom and last week's breakout was not reversed by this week's sideways price movement. Given the near daily market climaxes, we take today's downside initiation climax with a grain of salt. Total Volume was extraordinarily weak which suggests a lack of conviction in selling. We see this week's action as a pause or digestion period. There is still a potential for at least a few more days of rally. $438 is our upside target for the SPY.
Calendar: Amazon (AMZN) will split 20:1 on Monday, June 6. Meta Platforms stock symbol will change from FB to META on Thursday, June 9.
Erin is currently 30% exposed to the market.
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BITCOIN
This week there was a bullish conclusion to the bearish descending triangle. However, that failed to hold and price is back to testing May lows. Bitcoin is establishing a new trading range. We expect that as 2021 prices move off the end of the chart, we will find that Bitcoin will be trading between 27500 and 37500 for a long time to come, unless we get the breakdown. 10000 is likely the floor if this level is lost.
INTEREST RATES
Rates began to climb again this week. The biggest winner on our ETF Tracker was PFIX, the interest rate hedge ETF.
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 reversed course after executing a bearish head and shoulders pattern. support was hit at 2.7% and a bounce ensued. The short-term declining trend was broken. We expect rates to continue rising as indicators are firming up.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount. As buying power shrinks, home prices will come under pressure.
--
This week the 30-Year Fixed Rate fell from 5.10 to 5.09.
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: It was a boring week for the Dollar as it maintained a tight trading range between the 50-day EMA and resistance at the early May low. Indicators are mostly bearish. The RSI is below net neutral (50), the PMO is falling and Stochastics are in negative territory mostly flat. A breakdown seems more likely than a breakout.
UUP Weekly Chart: The weekly chart has taken a turn for the worse. The weekly RSI is positive and has turned up, however, the weekly PMO has topped in extremely overbought territory. While we don't expect destruction of the Dollar, we might see price settle down and soften the current steep rising bottoms trendline.
GOLD
IT Trend Model: BUY as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GOLD Daily Chart: With the Dollar moving sideways, Gold had an opportunity to break out. No such luck. Price is stuck beneath short-term resistance. It hasn't broken down and based on the PMO and Stochastics it should break out.
Discounts began paring back which tells us that investors are less bearish on Gold. That could also work in its favor.
GOLD Weekly Chart: The long-term rising trend drawn from the 2020 low held up, but there is a high likelihood we will see it break down. The weekly PMO is declining and the weekly RSI just topped beneath net neutral (50). If it can't cling to this rising bottoms trendline, there is sturdy support at 1750.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners broke out strongly yesterday but cooled off today. The group is looking more enticing given improved short-term participation, but that participation is still quite thin so be careful when fishing in this group.
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 big news was the follow-through on last week's breakout from the bullish ascending triangle. Despite two ugly filled black candlesticks, price continued higher. The RSI is now in overbought territory, but we've seen it maintain its position above 70 for weeks. Stochastics are rising and oscillating above 80. The PMO is gently rising and isn't overbought. There is a reason the Energy sector is on fire and this is it.
The follow-through today took Crude Oil to a new high for the year and a multi-year high for $WTIC. The last time $WTIC was at this price was in 2008. We expect the all-time high from 2007 will be challenged before this is all over with.
USO/$WTIC Weekly Chart: USO is now entering the 2019 trading range. The weekly RSI is overbought (what's new?) and the weekly PMO is still rising.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Last week we thought Bonds might see a rally given rates were falling and looking very toppy (ex. head and shoulders on $TNX). However, rates reversed and left TLT to languish. Indicators are neutral and flat. We wouldn't expect a huge breakdown, but we also don't favor a big rally ahead. More likely, more of the same.
TLT Weekly Chart: The weekly picture is bearish. Price did stop on 2017 lows, but can't reenter the declining trend channel. The weekly RSI is negative and falling. The weekly PMO is decelerating it decline, but we don't see any upside potential here. On the bright side, support looks fairly strong.
Good Luck and 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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