It was a challenge to find stocks/ETFs with bullish configurations in this morning's DecisionPoint Trading Room. However, one ETF was superior to most of the stocks we looked at and that was the Wheat ETF (WEAT). We'll look at that one, but first we want to present the Agricultural Fund (DBA) which is showing improvement alongside Wheat. Today DBA gapped up and closed above both the 20/50-day EMAs. The RSI is positive and rising and the PMO turned back up. Stochastics are rising. We expect overhead resistance to be tested.
Wheat has been in a steady rising trend, but today burst higher with a gap up. The RSI has been positive for a month and today the PMO turned up above its signal line. Stochastics are oscillating above 50 which we find bullish. Overhead resistance is nearing and today's move was strong. We would expect this winner to keep on winning, but it may be due for a small pullback given the size of today's rally.
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: It wasn't so long ago that the daily RRG had all sectors within the Lagging quadrant. All of the sectors within the Improving quadrant have bullish northeast headings that should take them into the Leading quadrant. XLRE, XLY and XLP could find themselves in the Improving quadrant soon. XLU is by far the weakest sector with its bearish westward heading within the Lagging quadrant.
Weekly: XLE is the only bullish sector. All others have bearish southwest headings. XLU is only in the Weakening quadrant, but given its swift move southwest, it will likely join most of the others in the Lagging quadrant.
XLF and XLY are the only sectors within the Improving quadrant but that is likely to change by the end of this week.
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: SELL as of 9/8/2022
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: There are two positives that came out of today. First, support held at the recent September low. The June low has again been compromised, but price could find some support here as it did previously. One reason we are considering a possible rebound is due to the VIX puncturing the lower Bollinger Band on our inverted scale. Typically those punctures lead to a day or two of upward price action.
The big problem is a PMO top beneath the signal line. It doesn't help that Stochastics are pointed downward and the RSI is in negative territory.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Lows expanded so a positive divergence isn't in the cards yet. It is positive that the 10-DMA of the High-Low Differential is continuing to rise.
Climax* Analysis: Only SPX Net A-D Volume hit climax levels today, not enough to declare it a climax day.
*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 NEUTRAL.
STOs continue lower and both have reached negative territory. They are not oversold. %PMOs Rising has pared back, but isn't what we would consider oversold yet.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
Readings may be oversold, but both the ITBM/ITVM continue lower. %PMO BUY signals topped before even reaching 50%. A 36% reading is not oversold.
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 were finally seeing a bullish bias in the short term, but that has changed drastically.
While there is a higher percentage of stocks above their 20/50-day EMAs compared to the SCI, but those percentages aren't rising. We consider the short-term bias to be bearish.
The IT bias is very bearish given the SCI topped beneath its signal line and is carrying such a low percentage.
The LT bias is bearish given the GCI is falling and we are not seeing enough stocks above their 200-day EMA particularly given there are more stocks with golden crosses than above the 50/200-day EMAs. This implies it will continue to deteriorate.
CONCLUSION: The market still has a chance at recovery, but with the June lows being compromised again and the RSI, Stochastics and the PMO negative/falling, we have a recipe for a breakdown. STOs and the ITBM/ITVM are also in agreement that this price level isn't likely to hold. It is important to protect yourself with stops. The SPY doesn't seem weak enough to short, but it IS weak enough to avoid adding positions.
Erin is 15% exposed.
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BITCOIN
Bitcoin hit overhead resistance last week and has been inching lower since. The short-term rising trend is being compromised. The PMO is flat and unhelpful, but both the RSI and Stochastics are negative. We would expect price to continue lower.
INTEREST RATES
Bonds did not trade today.
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
Bonds did not trade today.
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 continues in its recovery after the breakdown from the parabolic rally in September. The breakdown cleared overbought conditions for the RSI which remains positive. The PMO triggered a crossover BUY signal today and Stochastics are rising. The Dollar should test overhead resistance at the September top soon.
GOLD
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: The Dollar's strength is Gold's weakness. Downside pressure from the Dollar pushed Gold out of its rising trend. Indicators are moving southward. Discounts are expanding again telling us investors continue to be bearish on the metal. The GVX is oscillating below its moving average on the inverted scale which implies internal weakness.
GOLD Daily Chart: Support is holding for $GOLD at the July low, but given the topping PMO and Stochastics, we would expect the September low to be tested soon.
GOLD MINERS Golden and Silver Cross Indexes: The setup for Gold Miners couldn't have been better, but the rising Dollar and falling Gold has taken GDX back down. Maybe this will set up a reverse head and shoulders. It's too early to say, we need an upside price reversal now. While participation has pared back, it isn't in the basement so a good day for gold or the market should get these guys to turn back up.
(Full disclosure: Erin owns GDX.)
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: A higher high and a higher low were established on USO so while we saw a deep decline of over 1.75%, it's not dire. Indicators are still configured positively. The RSI is positive, the PMO is rising on an oversold BUY signal and Stochastics remain above 80. We also note that the OVX is almost above its moving average on the inverted scale. That would imply internal strength. Certainly something we'll keep an eye on.
BONDS (TLT)
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: While Bonds didn't trade, the ETF did. The declining trend continues to weigh down Bonds. Indicators are very negative with the RSI negative and falling, the PMO topping beneath its signal line and Stochastics falling. We don't see Bonds recuperating anytime soon.
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.
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