This week we saw eight major indexes trigger Price Momentum Oscillator (PMO) crossover SELL signals. Yesterday, the Nasdaq ($COMPQ) and Nasdaq 100 ($NDX) lost their PMO BUY signals. Today they were joined by the SP500 (SPY), Dow Industrials ($INDU), SP100 ($OEX), SP400 (IJH), SP600 (IJR) and Russell 2000 (IWM). We are sure we've missed a few indexes, but you get the picture. We have the charts below with the exception of the SPY given we look at it further down.
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® Charts $ONE Benchmark:
Daily: The short-term RRG has deteriorated significantly. Only one sector has a bullish northeast heading and that is XLE. XLP is the only other sector in the Leading quadrant. It had been moving northeast, but today reversed into a bearish southwest heading.
Speaking of bearish southwest headings, all other sectors are in the Weakening quadrant and are continuing in bearish headings.
Weekly: The intermediate-term RRG still looks bullish. Every sector has a bullish northeast heading. XLU is the strongest given its position in Leading. Don't get overly excited, this chart will likely get very bearish soon.
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: BUY as of 8/2/2022
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: As noted in the opening, the SPY triggered a PMO Crossover SELL signal. The market may've closed higher today, but it made no headway as far as resistance goes. Given our two prior downside exhaustion climaxes, it isn't surprising to see this pause. The VIX continues to puncture the lower Bollinger Band on our inverted scale which is bullish and does suggest a pause or possible upside reversal. We vote for pause.
The RSI managed to rebound today, saving it from negative territory below net neutral (50). Stochastics had a vertical decline and have already hit oversold territory.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Lows expanded, but so did New Highs. It was a wash so the 10-DMA of the High-Low Differential continues lower. When this indicator tops, we generally see more downside.
Climax* Analysis: There were no climax readings today. Total Volume contracted on the 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 DOWN and the condition is OVERSOLD.
STOs have turned back up out of oversold territory, but we didn't see much improvement on %Stocks with Rising Momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is EXTREMELY OVERBOUGHT.
We still see the ITBM/ITVM in overbought territory. They are continuing lower which is very bearish for the market right now. %PMO BUY signals is now in negative territory below 50%.
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.
We had been looking at bullish biases in the short and intermediate terms. Even the long term was beginning to look bullish as more stocks found their way above their 200-day EMA. The picture has changed drastically.
The short-term bias is BEARISH: There are far fewer stocks above their 20/50-day EMAs than the SCI which is at 77.4% and falling. This tells us that the SCI will likely continue lower.
The intermediate-term bias is NEUTRAL but deteriorating given the SCI has topped in overbought territory.
The long-term bias is NEUTRAL, but given the serious deterioration in %Stocks > 50/200-day EMAs. When the GCI tops, we will consider the long-term bias BEARISH. So far it continues to rise, but remains at a low 37.6% reading.
CONCLUSION: The market finished higher, but didn't impress. The rally saw very little Total Volume. The STOs have turned up and the VIX is very oversold--usually that leads to higher prices. However we believe it means we will experience more pause and choppy trading that goes nowhere.
Erin is 45% exposed.
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BITCOIN
Bitcoin has been consolidating over the past week after a strong breakdown from the bearish rising wedge. We had seen a few signs of life, but the indicators are no longer encouraging. The RSI is negative and turning over. The PMO just dropped below the zero line. Stochastics had been rising, but have now topped in very negative territory. We believe this is the calm before the storm.
INTEREST RATES
Yields continue in their rising trends.
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
Yesterday's comments still apply:
"$TNX bullishly broke out of a bearish rising wedge. We consider bullish conclusions to bearish chart patterns as especially bullish. The indicators are strong. The RSI and PMO are rising out of oversold territory. Stochastics are holding above 80 implying internal strength."
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Yesterday's comments still apply, but we do note a bearish filled black candlestick printed today:
"The Dollar hit overhead resistance and paused its strong rally. The RSI was getting overbought so this alleviated those conditions. Stochastics are angling lower, but remain strong above 80. The PMO saw slight deceleration. We could see a small pullback to prior support, but overall UUP looks bullish."
GOLD
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Gold rose slightly today. The cup with handles looks as if it is executing. however, we remain very cautious given this could turn into a short-term bearish reverse flag. Still there are signs of life. The PMO is attempting to reverse yesterday's crossover SELL signal and Stochastics have turned up again.
GOLD Daily Chart: Discounts are very high on PHYS. Investors are still very bearish on Gold. That bearish sentiment could be turning the tide given sentiment is contrarian, but we remain cautious. A market decline could also be responsible for a renewed interest in Gold.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments apply:
"Gold Miners rallied again today, likely helped along by Gold's rally. The PMO is trying to bottom above the signal line which would be very bullish. Participation improved but overall is very bearish. We should watch this group more closely. If the rally continues we will have a bullish double-bottom."
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Yesterday's comments still apply:
"USO popped above the 50-day EMA for the first time since late June. It also broke out of its declining trend. This means we have a bullish conclusion to a bearish descending triangle pattern. Bullish conclusions to bearish chart patterns are especially bullish. Energy is where the money is rotating to and given the major improvement on USO's indicators, we would expect higher prices."
BONDS (TLT)
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: As yields rise, Bonds are struggling. When Erin looked at her scans over the past few days, she has been seeing more inverse Bond ETFs. Not surprising. If you looked at the inverse of this chart it would look very bullish. We've been talking about the Interest Rate Hedge ETF (PFIX). It follows the direction of interest rates. Yields are bullish, Bonds are not.
Full Disclosure: Erin owns PFIX.
Good Luck & Good Trading!
Erin Swenlin 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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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