Today the Materials Sector (XLB) 50-day EMA crossed down through the 200-day EMA, generating a LT Trend Model "Death Cross" SELL signal. While there have been many 20/50-day EMA crossovers in the last year, the 50/200-day EMA crossover hasn't happened since June 2020 as the market was coming out of the 2020 bear market. The PMO is oversold, but shows no sign of turning up.
A weekly chart shows how important support has been broken this week. The next area of support is around $67, but the strongest support level (most touches) is at $60.
The DecisionPoint Alert Weekly Wrap presents an end-of-week assessment of the trend and condition of the Stock Market, the U.S. Dollar, Gold, Crude Oil, and Bonds. The DecisionPoint Alert daily report (Monday through Thursday) is abbreviated and gives updates on the Weekly Wrap assessments.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
MAJOR MARKET INDEXES
For Today:
For the Week:
SECTORS
Each S&P 500 Index component stock is assigned to one of 11 major sectors. This is a snapshot of the Intermediate-Term (Silver Cross) and Long-Term (Golden Cross) Trend Model signal status for those sectors.
For Today: 
For the Week:
RRG® Daily Chart ($ONE Benchmark):
Normally we have to write an extensive description about the RRG as we see actual rotation. Currently all of the sectors are underperforming as they travel in a bearish southwest direction. None of them have turned from that heading. XLE looks slightly better as it is in the Weakening quadrant. If that sector continues to lose ground, it will hit the Lagging quadrant sooner rather than later.
RRG® Weekly Chart ($ONE Benchmark):
The weekly RRG tells us weakness isn't only in the short term, it is clear in the longer term as well. This looks very similar to the daily version. All of the sectors have bearish southwest headings. XLP, XLU and XLE are only in the Weakening quadrant as they have seen some success in this bear market; however, based on today's Diamond Mine Trading Room sector review, XLP and XLU are not healthy enough to go fishing there. Energy is pulling back in a big way and that has given it a new southwest bearish heading.
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 an end-of-quarter, quadruple witching options expiration week, bringing us very high volume and low volatility today. We always make a point to remind our readers not to attribute the high volume to blowoff/blowout events or other factors.
Indicators continue to look sickly with a negative RSI, flat Stochastics and a continued decline for the PMO. The VIX remains under its moving average on the inverted scale which is emblematic of internal weakness.
** This week the FREE DP Trading Room will be on TUESDAY 6/21 given the holiday Monday **
SPY Weekly Chart: This week's dastardly decline brings price to first quarter 2021 lows. The stronger level of support is at $350.
New 52-Week Highs/Lows: New Lows contracted today, but no New Highs were logged.
Climax Analysis: There was no climax activity today. Large Total Volume is attributed to options expiration.
*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 DOWN and the condition is OVERSOLD.
STOs are contracting out of deeply oversold territory which is setting up a positive divergence with price. Still, we only have 2.4% above their 20-day EMA and only 5% with rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
IT indicators continued lower with the ITBM and ITVM now in near-term oversold territory. Note that they are not nearly as oversold as they were in 2020. With so few stock having positive momentum it isn't a surprise that on 4% have PMO BUY signals.
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.
There was major deterioration in the SCIs this week.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of participation.
Energy remains the leader as far as SCI readings go, but that deteriorated significantly on this week's correction.
There is a bearish bias in all three timeframes. Participation is very thin with both the SCI and GCI continuing to move lower and %Stocks > 20/50/200-day EMAs miniscule.
CONCLUSION: The market had an opportunity to rally this week after Wednesday's upside initiation climax paired with positive divergences on many of our indicators. Given we didn't see follow-through on another bullish signal, it is apparent that the bear market downward pressure is winning. The market and indicators are highly oversold, but as bear market rules tell us, oversold conditions are "thin ice". Erin wrote an article that only two industry groups currently have rising momentum (Diversified REITs and Solar). This decline will need to be digested, but we would look for churn and chop at best with prices still moving lower overall. Honor your stops.
Erin is 20% exposed with a 10% hedge. She will be divesting or adding another hedge next week.
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BITCOIN
We've moved to displaying a longer-term version of the Bitcoin chart so that support levels are clearly visible. Bitcoin is clinging to support at $20,000. Should this level be lost, we could see Bitcoin hit $12,000.
INTEREST RATES
Interest rates are pulling back toward support at May highs.
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
We've annotated a bearish rising wedge on $TNX that implies a breakdown from the current rising trend. However, $TNX is holding support at the May high. Stochastics infer that the 10-year yield will break down further. The RSI is still positive and the PMO is still rising. If this short-term support level is broken, we would look for rates to test 2.7%.
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 advanced from 5.23 to 5.78.
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 formed a bullish cup with handle pattern and today executed the pattern. UUP still has to deal with overhead resistance. In the longer term we have a bearish rising wedge. The PMO turned back up and the RSI remains positive. However, Stochastics don't favor a breakout.
UUP Weekly Chart: UUP has now overcome resistance at the closing high in 2020. Resistance is still there based on the intra-week high in 2020. This would be an excellent opportunity for the Dollar to lose strength. The weekly PMO and weekly RSI don't suggest weakness ahead as they are rising strongly.
GOLD
IT Trend Model: BUY as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GOLD Daily Chart: Gold could be forming a bullish double-bottom pattern. Stochastics suggest the pattern should execute. Now we need to get the PMO and RSI on board.
Discounts are rising suggesting investors are getting more bearish on Gold. We would like to see extremes in discounts as sentiment is contrarian and excessive bearishness usually leads to upside price movement.
GOLD Weekly Chart: Gold is holding its rising trend which is encouraging. Unfortunately the weekly RSI and weekly PMO aren't so encouraging. The weekly PMO appears to be accelerating lower and the weekly RSI turned down before reaching positive territory above net neutral (50).
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are bouncing off a strong support zone and Stochastics have turned up. While this looks good, the RSI is still negative and the PMO is still falling. We do see a positive divergence with the OBV which suggests this bounce could turn into a solid rally. However, for that to happen, we will need at least SOME participation. Currently there are no stocks above their 20/50-day EMAs and the SCI is 0%. The GCI will not likely see any improvement as there are only 3.45% above their 200-day EMA.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Crude Oil was a big loser this week. The Energy sector responded in kind. We do have support here at the 50-day EMA and prior highs, but we would be concerned given the RSI is negative and the PMO triggered a crossover SELL signal this week. Stochastics are falling fast and the RSI hit negative territory. There is a high likelihood we will get a breakdown here so tread carefully and consider hedging. One symbol brought up in DP Diamonds yesterday was SCO which is an ultra short ETF of Crude Oil. We make no recommendations but this could be a way to hedge your Energy positions if you aren't ready to sell them.
USO needs to at least maintain is rising trend.
USO/$WTIC Weekly Chart: USO was down over -7.5% this week. Interestingly this top occurred on resistance at about $90. The weekly RSI is now out of overbought territory, but the weekly PMO has topped in overbought territory. We sense Crude Oil will be moving down further.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 1/5/2022
LT Trend Model: SELLas of 1/19/2022
TLT Daily Chart: TLT is on the verge of a breakout given yields dove this week. However, it is now up against overhead resistance. The PMO has been flat all week and is little help. The RSI is negative. Stochastics, however, aren't hinting at a breakout ahead.
TLT Weekly Chart: TLT managed to avoid closing beneath support at 2019 lows. However, intra-week it broke down well below support at $112. The weekly RSI is oversold, but hasn't turned up yet. The weekly PMO is very oversold, but has accelerated lower. The strongest support lies at $105 and looking at the 20-year yield, it does appear that level will be tested.
Good Luck & Good Trading,
Erin Swenlin & 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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