There was nothing unexpected from the Fed -- a 75 basis point increase and no hint of easing. That last part was disappointing to all the perma-bulls, but their hope was dashed that the Fed would ease a bit. To be clear, that hope never came from the Fed, and Powell emphasized that more rate hikes are on the way. After trying to rally after the announcement, price headed south in earnest. The 5-minute PMO suggests we'll see more of the same tomorrow morning.
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: With rising wedges and trend channels, the ability (or lack thereof) of price to rally to the top of the formation informs us regarding the likelihood of the trend continuing. Note how in the prior four trading days SPY failed to reach the top of the original rising wedge formation, and indeed it set a tighter wedge top. This virtually guaranteed that the wedge would break down, which it did today. It is our opinion that breakdowns usually occur in order to set a less accelerated rising trend line, but today's selling makes us wonder if the October lows are going to be tested.
Our primary indicators took a hit. The RSI moved into negative territory below net neutral (50). The PMO ominously topped beneath the zero line and Stochastics dipped below 80. On the positive side, the VIX remains well above its moving average on the inverted scale suggesting investors aren't overly bearish.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: Again we remind you that New Highs/New Lows are calculated intraday, meaning if a stock hits a New High (New Low) anytime during the day, it is counted in the tally even if price doesn't close at the New High (New Low). New Highs didn't suffer, but more than likely that is due to the condition explained above. We did see more New Lows, but the 10-DMA of the High-Low Differential continues higher. It is near-term overbought though.
Climax* Analysis: There was very strong climax activity today, and we clearly have a new downside initiation climax.
*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.
Good news/Bad news. Good news is that these indicators are no longer overbought. The bad news is that they are falling fast. STOs are usually on the ball as far as marking near-term pivot points and their last top proved quite prescient. Now we wait for them to reverse.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL to OVERBOUGHT.
IT indicators are still encouraging, but they do tend to be slow to react. The ITVM did contract slightly, but the ITBM is rising and we still have 93% of the SPX holding PMO crossover BUY signals. The concern is the loss of %PMOs Rising on the chart above. The BUY signals are in jeopardy given on 66% have rising PMOs.
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 bias in the short term is BULLISH. While %Stocks > their 20/50-day EMAs took a hit, those percentages are still above the SCI reading.
The bias in the intermediate term is NEUTRAL. The SCI decelerated and could top soon.
The bias in the long term is NEUTRAL. We are waiting on the GCI to have a positive crossover its signal line before we can switch to a bullish long-term bias. We would also like to see a higher reading on the GCI.
CONCLUSION: There are number of bearish signs and signals that appeared quickly on today's strong decline. The two worst in our opinion are the PMO topping beneath the zero line and today's downside initiation climax. The confirmation of the bearish rising wedges on broken rising trends, along with a big contraction by short-term indicators, leave us wondering if this is already the end of the bear market rally. It's been one big day of decline on "news" that everyone already knew (even though perma-bulls were in denial) which is concerning. If you're using mental stops, consider making them hard.
Erin is 50% exposed.
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BITCOIN
Bitcoin is still moving sideways. While support at $20,500 was lost, it is still holding above both the 20/50-day EMAs. We aren't bullish though. The RSI may be positive, but it is declining. The PMO is trying to top and Stochastics have already dipped lower.
INTEREST RATES
Interest rates were mixed on the day. The one-year yield continues to hit multi-year highs.
The Yield Curve Chart from StockCharts.com shows us the inversions taking place. The red line should move higher from left to right. Inversions are occurring where it moves downward.
10-YEAR T-BOND YIELD
Yesterday's comments still apply:
"$TNX is clinging to multiple support levels, but given the PMO, it isn't likely to hold. The rising trend was violated. An upside reversal isn't out of the question given Stochastics have turned up and the RSI remains in positive territory above net neutral (50)."
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 rallied somewhat but it didn't get the PMO to turn up. The RSI is back in positive territory and Stochastics just hit positive territory. We will know more when we see whether the short-term declining tops trendline is test or broken. Should price turn back down before testing that level, it would just strengthen the bearish descending triangle pattern.
GOLD
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: GLD technically broke out of the short-term declining tops trendline, but we can't get excited given the large bearish engulfing candlestick. It also looks like more of a 'drift' sideways than a strong breakout. The PMO remains on a crossover BUY signal, but the RSI and Stochastics are still negative. We see more sideways consolidation along support ahead, but if the PMO generates a SELL signal, we'd look for the breakdown.
GOLD Daily Chart: $GOLD shows a consolidation zone between $1625 and $1675. In the case of $GOLD, Stochastics have ticked upward. Rather than a bearish engulfing candlestick, we have a shooting star (long wick). Still, we are more encouraged by this chart than GLD's. We'd look for more sideways consolidation overall.
GOLD MINERS Golden and Silver Cross Indexes: GDX dropped perilously and ruined its bullish participation. %Stocks above their 20/50-day EMAs plunged and the SCI topped. Stochastics are falling. While the PMO is on a BUY signal, we expect to see, at best sideways movement along the support zone between $22 and $23.
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 formed a bullish engulfing candlestick as a follow-on to yesterday's bearish filled black candlestick. We see this as a good sign. Indicators are improving as the PMO is beginning to accelerate a bit. Stochastics are about to move above 80 and the RSI is comfortably within positive territory above net neutral (50). The $OVX is still above its moving average on the inverted scale suggesting internal strength. This was the only area of the market that was unscathed by today's large decline. We expect it to continue higher.
BONDS (TLT)
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The declining tops trendline is still intact and price did not overcome the 20-day EMA. The RSI is negative. The PMO is rising on a BUY signal, but we don't like how Stochastics have flattened. More than likely we will see a drift through the declining tops trendline. A breakout above the 20-day EMA would have us move bullish.
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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