Crude Oil has been in a short-term declining trend since the beginning of November. Big picture it is in a large trading range. After spending so much time being beat down, it is finally making the turn. This looks more promising than the last rally as the PMO didn't confirm it.
Price hasn't managed to pull out of its declining trend channel, but today's big gap up move does suggest it will. The indicators also favor a breakout. The RSI just moved into positive territory and the PMO triggered a crossover BUY signal today. Stochastics are also confirming as they rise again toward positive territory above net neutral (50).
We also follow the volatility index for Crude Oil ($OVX). As with the VIX on its inverted scale, we look where it is in relation to its moving average to determine internal strength and weakness. Currently it is oscillating above its moving average which implies internal strength. We also would like to point out that we could be looking at an intermediate-term double-bottom forming.
TLT also saw a new PMO crossover, but to the downside. This PMO SELL signal looks very dangerous as it is coming in very overbought territory. The correction in interest rates is over in our opinion so we expect TLT to return to the strong support zone at the November lows. Price managed to close above the 50-day EMA, but it is barely hanging on. The RSI moved into negative territory and Stochastics are dropping vertically. This appears to be the end of the rally in TLT as the 20-year yield recovers.
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.
CLICK HERE for Carl's annotated Sector charts.
THE MARKET (S&P 500)
IT Trend Model: BUY as of 11/15/2022
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: We didn't expect a strong rally today given the negative breadth and indicator readings we've seen lately. We do believe this will be somewhat short-lived. Overhead resistance at $390 still needs to be overcome as do the 20/50-day EMA resistance levels.
The PMO is still declining but did decelerate on today's rally. The RSI is rising again, but is still in negative territory. Stochastics have turned up but they are in deeply negative territory. The VIX spiked today, moving above its moving average on the inverted scale. That implies new internal strength. It is getting close to the upper Bollinger Band. A puncture of the upper Band usually leads to downside reversals.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential avoided negative territory today and rose slightly. New Highs are still muted, but not surprising given the decline we recently experienced. What we are looking for now is a positive divergence on New Lows, basically we need to see lower New Lows than we saw earlier this week. That could prove difficult given how shallow they were this week.
Climax* Analysis: There were strong, unanimous climax readings today. While holiday week SPX Total Volume did not confirm, we think it was an upside 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 DOWN and the condition is OVERSOLD.
Also big news today would be that our short-term STOs reversed upward today. That is a good sign. We also saw many more stocks get rising momentum back. A 21% reading is still very low, but a vast improvement from the 2% it hit this week.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM/ITVM are still declining. They tend to take longer to turn around. We only have 9% of the SPX with PMO crossover BUY signals. If rising momentum continues to improve internally, that indicator should reverse soon. When we see these indicators reverse, then we will look for a more lasting bear market rally. For now, they are not confirming.
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 market bias is BEARISH. Participation of stocks above their 20/50-day EMAs is less than the amount with Silver Crosses.
The intermediate-term market bias is BEARISH. While the SCI holds a reading of 68.6%, it is declining after a negative crossover. This indicators suggests the intermediate-term declining trend will continue.
The long-term market bias is BEARISH. The GCI has topped.
CONCLUSION: Here comes Santa Claus! We thought it would be a year without a Santa Claus, but apparently holiday traders aren't going to let that happen. We saw a new upside initiation climax that implies we will see higher prices over the next day or two. The STOs have reversed higher in oversold territory and that is also indicative of a short rally ahead. Unfortunately our intermediate-term indicators aren't confirming so we will look for higher prices or consolidation going into the holiday.
Erin is 15% exposed.
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BITCOIN
Bitcoin took the day to digest yesterday's rally. Price is now back in an official short-term declining trend. It will be easy to dissolve even with sideways movement, but it does give us a bearish bias. The PMO has so far avoided a negative crossover and Stochastics are rising again. The RSI, however, remains bearish in negative territory below net neutral (50). We don't like this price action and the indicators are still wishy washy.
INTEREST RATES
The decline in rates is likely coming to a close with the 30-yr yield breaking its short-term declining trend. Don't forget there is the Interest Rate Hedge ETF (PFIX) which will move higher with rates. We are also looking at TBF, the inverse ETF for TLT.
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
With no change today, yesterday's comments still apply:
"The correction in yields appears over as $TNX rallied strongly and closed above the 50-day EMA for the first time since early November. The PMO is going in for an oversold crossover BUY signal and Stochastics are rising vertically. We expect to see rates continue to rise."
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: We are still monitoring the bullish falling wedge. The pattern implies a breakout ahead. The PMO saw a crossover BUY signal yesterday, but it is so flat. We would like to see some confirmation with the breakout. In the meantime, Stochastics have begun to rise and the PMO BUY is still in effect. We see a bullish bias on the Dollar.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: UUP was up +0.25% and GLD was down -0.17%. This tells us that while Gold did decline it was likely due to the Dollar's rise, not so much by gold sellers. There is a bearish rising wedge and the PMO is readying for an overbought crossover SELL signal. Stochastics are positive and still rising. The RSI is positive. We don't think the rally in Gold is over, but it does look rather precarious.
GOLD Daily Chart: $GVZ is still above its moving average, implying internal strength which is why we aren't that bearish on Gold right now. Discounts are also paring back and that implies that investors are warming to the metal.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"Gold Miners remain above support at the 200-day EMA and August high. The group was breaking down in a big way, but all of sudden participation is back up suggesting the decline was more of a pause than beginning of a corrective move. We still advise caution. If the bullish outlook on Gold changes, this group could plunge."
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/21/2022
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: We covered Crude at the beginning of the article. This is the 6-month candlestick chart. You can see how the declining trend is holding. If you look at many of the oil-related stocks in the Energy sector, they are all showing similar PMO configurations. It appears Energy will reverse sooner than we expected.
BONDS (TLT)
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The 6-month candlestick chart of TLT shows us that price moved higher in parabolic fashion. When these patterns bust, it is generally quick and painful. The reversal is occurring, but not quite as fast as you normally would see coming out of a parabolic. Today saw a bearish filled black candlestick on top of the PMO SELL signal. It really doesn't look good for Bonds right now.
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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