Today the Energy Sector 20-day EMA crossed down through the 50-day EMA (Dark Cross). Since the crossover took place above the 200-day EMA, a NEUTRAL signal was generated. On the bright side, price is holding July price lows. On the not so bright side, price dropped below the 200-day EMA. The Price Momentum Oscillator (PMO) just dipped into negative territory.
This was once the sector survivor, but participation has been decimated. Amazingly, we do not have one stock with price above 20/50-day EMAs, therefore, the Silver Cross Index (SCI) is falling vertically. It isn't over for Energy, but it's getting close. Price support must hold.
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® Chart $ONE Benchmark:
Daily RRG: It doesn't take an RRG expert to read the daily RRG. It couldn't be more bearish (well, maybe it can). All sectors are now in the Lagging quadrant with almost perfect bearish southwest headings.
Weekly: The weekly RRG is deteriorating quickly. Given the ugly daily RRG, it was only a matter of time. We still see XLY, XLE and XLU in the Leading quadrant. XLE is at least traveling northward, but it will likely find its way into the blue Improving quadrant rather than the Leading quadrant.
The remainder of sectors are looking bearish as their once bullish northeast headings begin to turn to the bearish southwest 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: BUY as of 8/2/2022
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: We've had three failed bullish downside exhaustion climaxes and yet, here we are with the market pushing even lower. When bullish signals fail to materialize over and over, you know you're in a bear market. When a bullish chart pattern breaks to the downside, you know you're in a bear market.
One item that continues to allude to prices moving even lower is the VIX. It is still not at the 'fear' levels it was back at bear market rally bottoms. It's finally getting close.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: Today SPY traded lower, but SPX New Lows contracted. It's just a one-day thing, but it is a positive divergence, and that is significant with this indicator.
Climax* Analysis: We got another downside exhaustion climax today, the fourth in a row. The VIX was below the lower Bollinger Band on our inverted scale almost all day. That usually means an upside reversal.
*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.
We can finally write that STOs are extremely oversold. Readings are now challenging June lows. Only 2% of stocks have rising momentum. That's extremely oversold.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
While we see readings that are more oversold than June, they still aren't competing with 2020 lows. We need to watch the ITBM/ITVM closely, they've been right when they change direction. Only 2% of stocks are on a PMO BUY signal.
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.
There's no denying the bearish nature of our bias chart.
Here's what we want to see:
- Stocks moving above their 20-day EMAs
- Next, stocks moving above their 50-day EMAs
- There is a higher %Stocks > 20/50-day EMAs compared to the SCI
Those would be signs of some recovery.
CONCLUSION: The market breadth indicators in particular are extremely oversold with a slight positive divergence on New Lows. Price is now testing June lows. We have a fourth downside exhaustion climax. This is the perfect spot for an upside reversal. At this point we are patiently waiting for a bear market rally. In the meantime, Erin is playing it safe. She is 15% exposed with a 5% hedge.
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BITCOIN
Bitcoin rallied today after a disappointing weekend. It is bullish given support continues to hold at $18,000, but it is struggling to even test the 20-day EMA. Indicators are wishy washy at best. We would expect to see Bitcoin continue to travel in its current trading range.
INTEREST RATES
Yields are accelerating their rise again with no sign of relief yet.
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 rallied strongly continuing its very bullish rally out of the rising trend channel. The RSI is very overbought, but the PMO is not and Stochastics are oscillating above 80. Vertical rises usually fall hard and fast. Overall we believe rates will rise even higher.
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Yields aren't the only ones moving vertically higher, so is the Dollar. We were asked in our trading room about entry on UUP. Until we see some sort of pullback, you're very vulnerable to downside risk. This is a parabolic price move since mid-September. Those pattern generally fail spectacularly; in this case, the breakdown could see UUP testing $28 or $29 at a minimum.
GOLD
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Like the market, Gold is overdue for a comeback. Unfortunately, the rising Dollar is pressuring Gold even lower. The indicators are bad and getting worse. The RSI and Stochastics are oversold, but still falling. The PMO has accelerated its decline.
GOLD Daily Chart: Discounts have not been updated on the day, but we can tell you they are historically high. This tells us investors are extraordinarily bearish on Gold. Given the price chart it isn't a newsflash, but generally when discounts expand to this level, it usually leads to an upside reversal. Given the new acceleration on this decline and the strength of the Dollar, it could be some time before Gold recovers. The Gold volatility shows bearishness, but certainly not extreme bearishness based on readings from early March. More downside is likely ahead.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are suffering given the market is bearish and Gold is bearish. The chart was already a problem on Friday given the breakdown and today GDX's woes continued. Every single Gold Miner has price below its 20/50/200-day EMAs and none have silver or golden crosses. It can't get much more bearish but clearly oversold conditions can persist in the long term.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Friday Crude Oil sunk. Today was a nasty continuation. The RSI is negative and falling. The PMO may be oversold, but is accelerating not decelerating lower. Stochastics have entered oversold territory, but aren't interested in reversing yet. The one bright window is the $OVX, the measurement of volatility. Readings moved below the lower Bollinger on our inverted scale and that tends to arrive before upside reversals. Don't bank on reversal.
BONDS (TLT)
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds managed a positive close on Friday as the 20-year yield calmed, but all yields rose substantially today. TLT dropped nearly 2%. It's been rough for Bonds since August and given the exponential rise in yields, the road doesn't get any easier. Indicators support this line of thinking based on the negative/falling RSI, falling and not oversold PMO as well as Stochastics pointed lower.
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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