We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount. As buying power has been shrinking, home prices have come under pressure.
This week the 30-Year Fixed Rate fell from 7.08 to 6.61. What strikes us about this is that it appears that mortgage rates are lagging behind Treasury yields by about a month. Since Treasury yields are currently rising again, this week's dip in mortgage rates is not likely to persist.
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.
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: Price has now pulled back to support at $390. The good news is that we have a bullish hollow red candlestick. Basically bulls were able to pull the market out of a much greater loss. The PMO is accelerating upward now. The RSI remains in positive territory above net neutral (50).
The VIX remains above its moving average on our inverted scale and Stochastics are still above 80. Both conditions imply internal strength is still there.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: Negative divergences remain for New Highs, but good news is that the 10-DMA of the High-Low Differential is rising again. When that indicator is rising, generally the market does too.
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.
STOs returned to contracting. The negative divergences are still in play for the short term. Participation of stocks above their 20-day EMA is still strong, but we continue to lose rising momentum. Less than 70% have rising momentum and we see that as bearish in the short term.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERBOUGHT.
Both the ITBM/ITVM are falling and that dilutes our confidence in this bear market rally. We have a negative divergence on %PMO BUY signals, but we still have 84% with BUY signals which is good participation. However, with 68% losing momentum, at least 16% could lose those signals soon.
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. We have a higher participation of stocks above their 20/50-day EMAs than the SCI percentage.
The intermediate-term bias is BULLISH but deteriorating. There is a strong possibility that the SCI will top next week or even tomorrow. That would move us into a bearish bias in the intermediate term.
The long-term bias is Neutral to BULLISH. The GCI is rising, but the reading is still below 50%. There are a substantially higher participation of stocks above their 50/200-day EMAs than those with golden crosses. That leaves plenty of upside potential for the GCI.
CONCLUSION: The deterioration of our short-term and intermediate-term indicators suggest that the pullback isn't over yet. A trip to the bottom of the rising wedge seems imminent. A breakdown there is less certain, but in any case, we should prepare for the market to continue lower. The primary indicators--PMO, RSI and Stochastics-- are still bullish and we have a bullish candlestick today so a bounce isn't out of the question tomorrow. We prefer to rely on the STOs and ITBM/ITVM and they are solidly bearish. Seeing the SCI about to top also suggests an abundance caution should be exercised.
Erin is 55% exposed to the market.
Calendar: Remember, tomorrow is the last trading day before options expiration. This normally brings low volatility, though not guaranteed.
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BITCOIN
Yesterday's comments apply:
"It occurs to us that we may be looking at either a symmetrical triangle or pennant on a flag pole. Either way it is bearish. The bear flag suggests another leg down the size of the last breakdown. That is worst case. A symmetrical triangle implies a breakdown but doesn't tell us how far. For now, indicators have paused their declines, but if we don't see an upside breakout from the symmetrical triangle, Bitcoin could be in for a drop to at least $15,500."
INTEREST RATES
Interest rates bounced today and could be ready to resume their march higher. Bonds may slide.
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 bounced strongly today off a support zone between yesterday's low and the October low. This could be the time we will see a bounce, but we haven't quite seen the fulfillment of the double-top pattern. It suggests the next level of support will be tested first. The PMO also tells us a reversal here will take effort. The RSI is negative and Stochastics still haven't begun to rise as they should on a reversal move. This seems like a pause rather than bottom for the 10-year yield.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is forming a price island. The pattern calls for a gap up. We see the last two gaps as breakaway and continuation gaps. Today's candlestick is also a bearish filled black candle. We can't ignore the higher lows today and yesterday, but we need the indicators to improve before we look for a strong rally.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Gold was down today as the Dollar rose. The problem here is that today not only did we get a gap down, but price closed beneath the 200-day EMA. The upside target of the complex double-bottom hasn't been hit so we consider this a pullback after a breakout rather than the beginning of a more serious decline. Indicators are too positive right now with a positive RSI, rising PMO and Stochastics comfortably above 80.
GOLD Daily Chart: Discounts have moved to one of the highest readings we've seen since 2010. The bearish sentiment has not been shaken even with the strong rally out of the November low. This suggests more upside ahead, it just may be time for Gold to take a breather.
GOLD MINERS Golden and Silver Cross Indexes: Support was finally lost on GDX at the August high. We don't like how Miners are acting. This is a great example of a reverse island. Price gapped up, consolidated and then gapped down leaving a price "island". Indicators are beginning to deteriorate and participation is slimming. Gold's pullback isn't helping. If the market continues lower, these guys are going to struggle mightily. It might be time to let Gold Miners go. Certainly if they lose support at $26 it will be a sign that price will continue lower. Use caution on any miner positions you hold.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/4/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO not surprisingly broke down today. We've been waiting for the bearish rising wedge to be confirmed and today's breakdown does just that. Indicators look very negative. Notice that after $OVX punctured the upper Bollinger Band on the reverse scale price topped. Watch that indicator. When it drops below the bottom Band or even below its moving average we can then start considering a price bottom. For now, we expect a test of $67.50 with a high likelihood it will drop to the September low.
BONDS (TLT)
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With the 20-year yield rising today, TLT paused its fabulous rally. The double-bottom does suggest we will see TLT continue to rise, but now we have to watch closely to see if today's rise in rates takes hold. The RSI, PMO and Stochastics are all favorable and do suggest TLT will continue its rally. We just are concerned that this will be it given the strong resistance at the 50-day EMA and September 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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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:
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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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