People have been talking about a Santa Claus Rally since November, but the official time frame for such a rally is the last five trading days of the year and the first two trading days of the new year. This originated with the late Yale Hirsh in his Trader's Almanac. (Hat tip to Tom McClellan -- mcoscillator.com -- for the reminder in his McClellan Market Report last week.) The rally time frame started on Friday, so two days into it we have a flat market. It is a good idea with these kinds of things to take them with a grain of salt. We can be aware that there may be a positive tendency about now, but trade on the technical evidence.
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: It may appear that the bullish falling wedge confirmed today. Well, technically it did with the "breakout" above the top of the pattern. However, it is more of a 'drift' than a breakout. We need more confirmation before we determine the pattern is viable.
It doesn't look like a breakout on the 1-year daily chart. The PMO should hit negative territory this week barring a huge rally. The RSI is negative. Stochastics are trying to rise.
Here is the latest recording. No recording on 12/26:
S&P 500 New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential turned back up today as New Highs expanded. It is in negative territory, but if we see more expansion in New Highs, it should get back up there.
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 DOWN and the condition is NEUTRAL.
The STO-B hit positive territory today and both STOs are rising bullishly. It hasn't resulted in much upside price movement. However, we do spot some positive divergences (rising bottoms on the indicators, falling bottoms on price).
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
%PMO BUY signals rose today in oversold territory. The ITBM/ITVM are attempting to turn around. The ITBM did turn up slightly, but the ITVM is still falling.
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 BEARISH. We have lower percentages of stocks above their 20/50-day EMAs than the SCI percentage.
The intermediate-term bias is BEARISH. The SCI is falling after a negative crossover in overbought territory.
The long-term bias is NEUTRAL. The GCI is flattening and we do see more stocks above their 50/200-day EMAs than those with golden crosses (50-day EMA > 200-day EMA).
CONCLUSION: We are seeing a some bullish activity in the short term. A possible breakout from a bullish falling wedge was positive. Short-term indicators are continuing to rise. Participation is improving somewhat. Most positive are the positive divergences visible on the short-term indicator chart. If the ITBM/ITVM start rising together, it would confirm the bullish short-term indicators. Santa is hovering above the chimney and based on the indicators, it does look like he'll make an appearance this week. However, we currently don't see a rally sticking around much after the new year.
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BITCOIN
Bitcoin is tightening up its trading range. The RSI has turned down and the PMO is flirting with a crossover SELL signal. Stochastics are very bearish. Price is stuck beneath the 20-day EMA. The chart says Bitcoin will move lower.
INTEREST RATES
Yields are back on the rise and we believe they will test prior highs if they aren't already.
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 is now testing the intermediate-term declining trend. Given the strength of the RSI, PMO and Stochastics, we would look for a breakout.
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 firming up a bullish falling wedge. Currently price is below all key moving averages and the RSI is negative. However, the PMO had a recent crossover BUY signal and Stochastics have almost reached positive territory. The chart has a bullish bias, but price is drifting sideways.
Based on the original bullish falling wedge, price did confirm...kind of. Again we want to see actual breakouts not 'drifts' through trendlines.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Gold is traveling within a bearish rising wedge. You can see that based on the prior two tops, we have a rising wedge within a rising wedge. However, today's intraday high did pop above it. The PMO is flat but sitting on a crossover SELL signal. The RSI has been positive since the beginning of November and Stochastics are staying above net neutral (50) so there is internal strength. Although based on $GVZ, that strength is being lost.
GOLD Daily Chart: $GOLD saw a recent PMO SELL signal. Stochastics on $GOLD have hit negative territory. Discounts popped a bit higher so traders are bit more bearish. Gold will likely trickle higher, but it is vulnerable to a breakdown.
GOLD MINERS Golden and Silver Cross Indexes: GDX is testing overhead resistance again at $30. The PMO is on a SELL signal, but it hasn't really hurt the group. The RSI is positive and Stochastics are very bullish. Most importantly, participation is strong within the group. 100% have price above their 50-day EMA and nearly 90% are above their 20-day EMA. This favors a break above $30, but Gold is looking precarious and a deep decline in Gold will weigh heavy on the group.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/21/2022
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil is continuing to rally after a very rough November and early December. The declining trend has been broken, as has the 50-day EMA. There is strong resistance arriving around $72.50 and the 200-day EMA. Given the positive RSI, rising PMO on a BUY signal and Stochastics pushing above 80, we would look for Oil to continue to move higher.
BONDS (TLT)
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With yields on the rise, Bonds are declining quickly. Support has been met, but based on the falling RSI, falling PMO on an overbought SELL signal and Stochastics moving lower, we believe the decline in Bonds is only getting started.
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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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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