Today the Technology Sector (XLK) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY signal. It may be arriving a little too late as the market begins to slump. The technicals look okay. The RSI is positive and the PMO is rising. However, there are a few small problems. Stochastics are turning lower. The Silver Cross Index (SCI) has flattened. It has held the same reading for three days. Despite a small rally today, participation of %Stocks > 20/50-day EMAs contracted. Relative strength tells us XLK is moving inline with the market. Right now we don't think that is a good thing.
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
For Today:
For the Week:
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.
For Today:
For the Week:
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: Today was options expiration so we generally look for low volatility and lots of volume. Total volume was actually below average and volatility was about as expected. We still have a bearish rising wedge, but it is good to see price bouncing off $390 support. The PMO is trying to top, but the RSI remains steady in positive territory above net neutral (50).
Stochastics are moving lower and are now below 80 which is somewhat bearish. The VIX is staying above its moving average on the inverted scale and that suggests some internal strength.
SPY Weekly Chart: It was a down week, but we saw much higher lows than last week. The weekly PMO is still rising on a crossover BUY signal. We still don't consider the bear market finished.
New 52-Week Highs/Lows: We saw a nice expansion of New Highs today, but the negative divergence is still in play. Very good news is the 10-DMA of the High-Low Differential rising.
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 continued lower but we did see a slight expansion in participation of stocks > 20-day EMA and more stocks with rising momentum. Negative divergences were spotted this week.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERBOUGHT.
The ITVM did rise ever so slightly, but overall IT indicators are trending lower. We also have a negative divergence between price tops and tops on %PMO BUY signals.
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 following table summarizes participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation.
The biggest SCI gain was garnered by Materials (XLB) which was spurred on by a drop in the Dollar. Gold Miners have the largest bullish IT Bias after enjoying a strong rally with Gold over the past two weeks.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of participation.
Energy enjoys the top spot on the spreadsheet, but you can see that the SCI has topped. The run in Energy is waning.
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 80% of stocks above both their 20/50-day EMAs which implies the SCI will continue rising.
The intermediate-term bias is bullish. The SCI, which had paused this week, is now rising and is healthy at 68.6%.
The long-term bias is neutral to bullish. The GCI is rising and participation of stocks > 50/200-day EMAs is larger than the GCI. We add "neutral" to the bias because the GCI is still at a low reading of 34.6%.
CONCLUSION: The market appears to be losing strength to finish the week. Short-term indicators are moving lower and carry negative divergences. IT indicators are confirming there are problems as they trend lower. We do admit that the bias overall is favorable. Participation measured by the SCI and stocks above key moving averages is still strong, but we need to exercise caution here until negative divergences begin to clear or ST indicators turn back up.
Erin is 35% exposed after taking profits and closing a few weak positions.
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BITCOIN
After last week's crash, Bitcoin has spent most of its time consolidating. In the process it has formed a symmetrical triangle or pennant on a flagpole. Both patterns are bearish with the main difference being a flag can give us a possible downside target. The downside target would be $10,500. That's a bit too pessimistic, but ultimately we would look for the short-term rising trend to be broken very soon.
This chart is to show where some of the support/resistance lines come from.
INTEREST RATES
Rates took a breather with a pullback, but a reversal is in the works, starting with yesterday's upside reversal on most yields.
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 stopped the decline in its tracks at the October low and bounced yesterday and today. This may be all the decline we'll get out of that bearish double-top, but based on the PMO and RSI, it isn't out of the woods yet. Should they begin to rise again, the market will likely continue to struggle. Stochastics do give us a ray of hope as they are beginning to rise.
MORTGAGE INTEREST RATES (30-Yr)**
**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 shrinks, home prices will come under pressure.
--
This week the 30-Year Fixed Rate fell from 7.08 to 6.61.
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Like $TNX, the Dollar paused its decline and is attempting to rally back up. The indicators are trying to improve, but none of them are rising with any confidence. There is a possibility we have a reverse price island developing and that would imply a gap up to recapture the rising trend.
This looks like the decline is about to end.
UUP Weekly Chart: The breakdown from the parabolic advance was breathtaking (as they usually are). If we go by the weekly PMO which is on an overbought sell signal and pointed straight down, the Dollar should continue its decline.
GOLD
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GOLD Daily Chart: The rally in Gold could be over, but the Dollar chart is still not revealing enough to call it. Gold also doesn't hold a perfect inverse relationship, but the trend in the Dollar usually is opposite the trend in Gold. Support is arriving quickly at the October top.
The PMO is still rising so a pause at support is still probable. RSI is still positive and Stochastics are above 80. Discounts also remain at historic levels which implies extremely bearish sentiment. Sentiment being contrarian, we should expect the rally to ultimately resume.
GOLD Weekly Chart: It's disappointing to see the drop back below the 43-week EMA, but we were rewarded this week with a weekly PMO crossover BUY signal and a newly positive weekly RSI.
GOLD MINERS Golden and Silver Cross Indexes: Gold miners haven't completely thrown in the towel, but they do look suspect. Participation is beginning to curl over on %Stocks > 20/50-day EMAs and Stochastics are headed below 80. However, today's rally did get the PMO to rise. Unfortunately the future is murky for Gold and the Dollar. This makes GDX hard to read. We will go with the SCI which is rising and look for another test of the 200-day EMA.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/4/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: The change to NEUTRAL was noted above. Not a good look for Crude Oil and Energy as a whole. We have a confirmed double-top and breakdown from a bearish rising wedge. Our expectation is more downside as none of the indicators are bullish right now. On the bright side, after testing support today, price did move higher, forming a bullish hollow red candlestick.
The double-top is easier to see on the 1-year chart.
USO/$WTIC Weekly Chart: The very long-term rising trend is about to be tested. The weekly PMO is turning down and the weekly RSI is falling in negative territory. $WTIC is already testing support, but based on the weak daily chart, we expect that will fail to hold.
BONDS (TLT)
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT has been enjoying a rising trend for a change. However, it is already in the balance as interest rates are beginning to rise again. This is happening right at resistance. The PMO still looks pretty good, but the 'correction' in yields is likely finishing so this is likely the best it's going to do. Maybe we see it reach the upside target of the double-bottom pattern ($102.50), but that does seem optimistic.
TLT Weekly Chart: The rally looks viable as the weekly PMO is turning up. However, this looks very much like the 2nd quarter rally. A move to test the declining tops trendline could occur. The problem is we are bullish on interest rates.
Erin Swenlin And Carl Swenlin
Erin is 35% exposed.
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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