Today the Materials Sector (XLB) 20-day EMA crossed down through the 50-day EMA (Dark Cross). If this crossover had occurred above the 200-day EMA, the resulting signal would have been an IT Trend Model NEUTRAL signal, but the crossover was below the 200-day EMA, so an IT Trend Model SELL signal was generated. This definitely gives the chart a negative bias, but this is the ninth 20/50 crossover in the last year, so we view it with some skepticism.
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 daily RRG shows that XLE is in the Leading quadrant, but it has reversed into a bearish southwest heading and will likely reach the Weakening quadrant tomorrow, barring an incredible rally which we doubt will occur. All others have bearish southwest to northwest headings.
Weekly: The weekly RRG is beginning to deteriorate, but not as much as we would've expected. While most sectors are holding northeast headings, some of those sectors are beginning to see southward components (XLC, XLK, XLY and XLRE. XLV looks the most bearish given its southwest heading. XLU is the only sector in the Leading quadrant and it still is going strong.
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: The SPY finished the day in positive territory, but set a lower high and a lower low. There is the possibility of more rally based on the bullish falling wedge. The VIX is near the lower Bollinger Band and that typically means we will see higher prices, but in the grand scheme, it is still awfully low in comparison to the June bottom.
Stochastics tipped upward, but not convincingly. However, price held support today.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Lows expanded, but like the VIX, we aren't seeing readings comparable to May or June. The 10-DMA of the High-Low Differential fell below zero and continues to fall.
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 DOWN and the condition is OVERSOLD.
STOs plummeted today reaching very oversold levels, though not as oversold as June. We saw a slight improvement on %PMOs rising, but based on calculations, we still only 20 stocks in the SPX with rising momentum. We need to see a much bigger improvement to look for a solid market bottom here.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM/ITVM continue lower and have reached neutral territory. Currently only 35 stocks in the SP500 have PMO BUY signals and that number is still shrinking.
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 BEARISH: We have a low percentage of stocks > 20/50-day EMAs and those percentages are far lower than the SCI reading of 59.2%.
The intermediate-term bias is BEARISH: Only 59.2% of stocks have a 20-day EMA above their 50-day EMA (silver crosses). The SCI is accelerating lower.
The long-term bias is BEARISH: The GCI topped last week below 40%. Participation of stocks > 200-day EMAs is now lower than the GCI so it will not be rising for some time.
CONCLUSION: After two days of downside exhaustion climaxes, we finally saw price move higher. Participation saw little to no improvement and indicator readings like New Lows and the VIX aren't oversold. Erin wrote to DecisionPoint Diamonds subscribers that of the 104 industry groups that StockCharts covers, NONE of them have rising momentum. Zero. This was a nice bounce off support and we see a bullish falling wedge, but until we see an improvement in participation, we question whether we will see much, if any, follow-through.
Erin is 15% exposed, four positions, one of which is an inverse ETF.
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BITCOIN
Yesterday's comments still apply:
"While the chart for Bitcoin is bearish, there is now a bullish falling wedge in the short term. Stochastics have turned up and the PMO is decelerating its decline. We still don't think Bitcoin will do much with this pattern."
INTEREST RATES
Interest rates continue climb higher in rising trends. Inversions continue with more likely on the way. We expect a breakout to new 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
While $TNX has a bearish rising wedge pattern, it broke out. A bullish conclusion to a bearish chart pattern is especially bullish. Indicators are very favorable so we expect rates to continue rising.
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 finally broke out today as many are returning to our currency's strength. The RSI did hit overbought territory, but the PMO is accelerating higher and Stochastics remain strong above 80. We expect the Dollar will continue higher.
GOLD
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: A strong Dollar is killing Gold right now. Once a safe haven in difficult markets, it has not garnered much if any attention. Indicators are especially bearish, but a rebound off this support level wouldn't be entirely surprising given the very bearish sentiment.
GOLD Daily Chart: The problem for Gold right now is the Dollar and based on the bullish Dollar chart, we would expect downside pressure to continue for $GOLD. Look for price to test support at $1675.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners gapped down. We no longer have a support level visible. There is now no heartbeat whatsoever as there are no stocks with price above their 20/50/200-day EMAs and none with Golden Crosses (50-day EMA > 200-day EMA) or Silver Crosses (20-day EMA > 50-day EMA).
A gander at the weekly chart gives us some hope of support at $22.50.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO continued its free fall decline, down almost 3%. The indicators couldn't look much worse with the negative RSI, falling Stochastics and nearing PMO SELL signal. Let's not forget, the PMO also topped beneath the zero line.
Support is now being tested, but given those indicators, we don't think it will hold.
BONDS (TLT)
IT Trend Model: SELL as of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday's comments still apply:
"It looks like a short-term bearish reverse flag formed out of the August low is executing with today's deep decline. The PMO and RSI are still falling. Stochastics were rising yesterday but have reversed. We expect TLT to hit the June low."
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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