Today's DP Trading Room (link HERE) was full of interesting discussions and symbols. It turned out that today Carl spent time looking more closely at Gold, Gold Miners and Silver. He detailed how sentiment for Gold and Silver works and then answered a question from the audience about possible entries. Spoiler alert: He believes an entry right now would make sense as both he and Erin are bullish. Both have added to their positions in IAU recently. As we often say, this is NOT a "call to action"; we are simply expressing that there is a strong bullish bias for Gold. We'll look at the chart in its section at the end of the blog.
When Gold does well, it puts the wind at the back of Gold Miners. The chart is really shaping up right now. We'll look at the Gold Miners (GDX) in its section.
Silver (SLV) is also showing a bullish bias. It is hard to argue with the bullish price action on today's breakout, coming alongside an RSI reversal in positive territory. The PMO was already on a BUY signal. We have plenty of overhead resistance to contend with, but today's breakout above resistance and the 50-day EMA is quite bullish.
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
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® Chart ($ONE Benchmark):
Daily:
The short-term picture is bullish. All but two sectors (XLV and XLC) are in the Leading category. Of those "Leading" sectors, the most bullish appear to be XLP and XLU because they have bullish northeast headings.
XLE, XLB and XLF look shaky as they have a strong southward component to their heading. That is pushing them down toward the Weakening quadrant. The rest have strong eastward headings that suggest more upside.
The two sectors in the Weakening quadrant have made an about face and are headed right back into the Leading quadrant. Overall the short term picture is bullish.
Weekly:
The weakest sector is clearly Energy (XLE). It has a strong bearish southwest heading that is taking it further into the Lagging quadrant.
XLB and XLU look suspect. XLB is taking its time leaving the Lagging quadrant given its strong westward heading. XLP is in the Lagging quadrant, but it should hit Improving quadrant very soon. XLU has a strong enough northward heading to get it into the Improving quadrant, but it likely will have to move through Lagging to do it.
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: Carl pointed out the bearish rising wedge that is forming in the short term. Price action started off well this morning, but all of those gains were taken back and the market finished lower. On the bright side, Total Volume was mild on this small decline.
The indicators are still very favorable with the RSI staying in positive territory, the PMO rising and Stochastics oscillating above 80. We also see the VIX remains above its moving average on our inverted scale. This implies internal strength.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: Despite a decline, we did see more New Highs. Of course we must remember that these are intraday readings. This means that the highest reading of the day is recorded, not necessarily the last reading of the day. The 10-DMA of the High-Low Differential is flat and not hinting at future price movement.
Climax* Analysis: There were no climax readings today.
*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.
We have negative divergences on the STOs. This is primarily what has had Erin more bearish of late. However, as she wrote last Saturday in her article, "Climbing the Wall of Worry" you can see indicators pullback or "unwind" while price moves higher. This could be what is happening. Now these indicators are in neutral territory. While %PMOs rising and %Stocks > 20-day EMA are in overbought territory, there is still room for them to move higher. We can't sneeze at 80% of the index carrying rising momentum and price above the 20-day EMA.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Good news is that ITBM/ITVM are rising and we have 87% of the index holding PMO crossover BUY signals. The bad news is that they are very overbought. However, we do not see negative divergences on these indicators.
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 bullish given we have 80% of stocks above their 20-day and 72.2% above their 50-day EMAs. These percentages are much higher than the SCI reading of 57.8%. This implies that the SCI could continue higher.
The intermediate-term bias is bullish. While the SCI reading of 57.8% isn't above the 70% bullish threshold, it is healthy and we know the short-term bias is bullish.
The long-term bias is bearish but improving. We have 47.4% of stocks with price above their 200-day EMA and that is far higher than the GCI reading of 29.8%. The GCI has had a positive crossover its signal line and is rising.
CONCLUSION: Today we had a failed breakout; while price opened on a breakout, it failed to hold above the 200-day EMA. As Carl said, if the market is going to go down, this is the time given overbought indicators, negative divergences on falling short-term STOs and short-term rising wedge. Certainly more upside is possible. The bias in the short and intermediate terms is bullish. Declining short-term indicators isn't necessarily a bad thing given the STOs have managed to unwind on market consolidation. That is typically a characteristic we see in bull markets. Other than those short-term indicators, the rest look favorable. We are going with our bias assessment and will stay on the bullish side.
Erin is 55% exposed.
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BITCOIN
As with the market, Bitcoin is forming a bearish rising wedge. Currently it is bouncing off the bottom of the pattern. Indicators are mixed. Stochastics are oscillating in positive territory as is the RSI. The PMO is turning up but has been mostly flat as Bitcoin oscillates within the wedge. We would look for another test of the upper bound of the bearish rising wedge followed by a breakdown.
INTEREST RATES
Rates were mixed. The yield curve continues to invert which isn't healthy for the economy.
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 still have an overall declining trend on $TNX. An attempt at a rally occurred last week, but overhead resistance at the 20/50-day EMA is sturdy. Indicators are already beginning to show signs of deterioration.
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 is weak. It has basically been consolidating since mid-July. Indicators are mixed. The PMO is declining, the RSI is flat and Stochastics are rising. Sounds like a recipe for more churn and consolidation. So far the rising trend is holding up.
GOLD
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Gold is now on a steeper rising trend. As Carl said this morning, we don't want to see the rising trend accelerate again as it would become parabolic and while fun when price is rising, it is painful when it breaks down. A real test for Gold is about to arrive as it makes its way toward resistance. The indicators are very bullish so we expect to see that level overcome.
GOLD Daily Chart: Discounts are still on the high side implying bearish sentiment is still there. Sentiment being contrarian, this is actually bullish for Gold.
GOLD MINERS Golden and Silver Cross Indexes: As noted in the opening, Gold Miners have an excellent set-up right now. There is a tiny reverse head and shoulders pattern or at a minimum a cup-shaped reversal. The PMO is rising out of oversold territory and more importantly, the RSI has finally hit positive territory. While the SCI and GCI are flat, we see a renewed rise in participation of stocks above their 20/50-day EMAs. Given nearly all of the Gold Miners have EMA configurations like GDX, we will see strong percentages of %Stocks > 20/50-day EMAs first (and likely for awhile) before the SCI gets moving again.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Crude Oil is bouncing constructively off the 200-day EMA. Indicators are mostly negative, but we do see small improvements on the RSI and Stochastics. The bearish filled black candlestick ended the recovery rally. This bounce looks good, but we will temper our bullish expectations. Continue to manage your Energy positions carefully.
BONDS (TLT)
IT Trend Model: BUYas of 8/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The short-term rising trend was interrupted last Friday, but price recaptured it again today. The indicators are leaning bearish which suggests to us that price will continue to consolidate sideways and likely drift out of the rising trend.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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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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