Today the Price Momentum Oscillator (PMO) crossed below its signal line on XLK, generating a SELL signal. It rallied nicely today but it just wasn't enough to prevent the signal. Internals are beginning to give way. The Silver Cross Index (SCI) is about to give us a negative crossover which is a clear SELL signal for the group. Given participation above the 20/50-day EMAs is less than the amount of components with silver crosses, we know that negative crossover for the SCI is imminent. Stochastics continue to move lower and will be below 20 very soon, another sign of internal weakness. Even the Golden Cross Index (GCI) has topped even while there are more stocks with price above their 50/200-day EMAs than those with golden crosses. Beware, it may be holding support now, but we would look for a breakdown soon.
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: Price managed to close higher and prevent a break below support at $390. It didn't change the bearish bias in our minds given the PMO is still falling on a SELL signal. Total volume was also low for a rally day after a big decline.
Stochastics have now moved below 20, a sign of strong internal weakness. The VIX did rebound today, but remains below its moving average on our inverted scale; also a sign of internal weakness.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential topped this week and continues lower which is yet another sign of internal weakness.
Climax* Analysis: There were no climax readings today. We're still feeling the churn from Tuesday's downside exhaustion 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 SOMEWHAT OVERSOLD.
STOs are declining which is yet another sign of internal weakness. Although we had a pretty good rally today, it did really improve the internals by much. We did see more stocks change to positive momentum, but not enough to ignite a rally.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERBOUGHT.
The ITBM/ITVM are both overbought. We expect PMO BUY signals to continue to diminish given only 27% have rising momentum.
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. Participation of stocks above their 20/50-day EMAs is far less than those with "silver crosses".
The intermediate-term bias is BEARISH. The SCI has topped in overbought territory--a very dangerous condition.
The long-term bias is BULLISH. Given the GCI continues to rise and there are more stocks above their 50/200-day EMAs than those with "golden crosses", the bias has to be listed as "bullish". The GCI should continue to rise based on higher percentages above their 50/200-day EMAs. We do not believe this bias will overcome short and intermediate-term weakness.
CONCLUSION: More than likely we are experiencing the churn associated with the recent downside exhaustion climax, not a solid price bottom. Participation improved slightly, but as noted throughout today's review of the indicators, internal weakness abounds--nearly every indicator chart is flashing "weakness". More consolidation or churn is likely, but ultimately, we believe the market will give way to all of that internal weakness. Play it safe and honor your stops.
Erin is 10% exposed but likely adding hedges.
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BITCOIN
Bitcoin may have recaptured the 20-day EMA as support, but we don't see a breakout coming. Partially due to the weakness in the market overall and partially due to the strong hold of overhead resistance. The PMO is rising very slowly and the RSI is tentatively positive above net neutral (50). Stochastics are rising again but are in a declining trend. We don't see strength, but we don't see weakness either. Expect more sideways movement at best.
INTEREST RATES
As suspected, the decline in interest rates seems to have resumed with rate inversions getting worse. We don't think the rise in rates is finished, but clearly the correction is on right now.
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 rose, but it didn't affect the short-term declining trend. Given the indicators are so negative, we expect at least a test of the intermediate-term rising bottoms trendline and 200-day EMA.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP closed beneath the 200-day EMA. It continues to form a price cluster. The PMO is zero help as it remains flat. The RSI is very negative and Stochastics, which had been rising yesterday, turned back down in negative territory. Indicators suggest a breakdown ahead, not an upside reversal.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Gold benefited from the decline in the Dollar but didn't make much headway. The bearish rising wedge still dominates the short term, so while indicators are positive, we can't make any sweeping bullish pronouncements. The Dollar does look as if it is on the brink of a serious breakdown and that could help Gold avoid a breakdown.
GOLD Daily Chart: The PMO may look overbought on GLD, but really it isn't that overbought. $GOLD shows us that it can definitely continue higher. Discounts remain high and moved higher today suggesting traders are bearish and getting more bearish. Bearish sentiment is generally good for Gold. That backdrop, along with the Dollar's weakness, could prevent a breakdown right now.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners were unchanged today so yesterday's comments apply with a few adjustments:
"The PMO bottomed above the signal line just like Gold which is very bullish. The rising trend continues. Stochastics are confirming but the PMO is definitely overbought. Participation remains strong across the board. Notice the surge by the GCI upward. Participation can remain overbought in a strong rising trend and that is exactly what we have. Enjoy the ride, but honor your stops."
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/21/2022
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: USO broke below strong support. Indicators are sickly and we know the Energy sector is in trouble right now. We expect the decline to continue.
The next support level doesn't arrive until USO drops below $60.
BONDS (TLT)
IT Trend Model: BUY as of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: From late October, notice that there are three rising trend lines with increasingly accelerated angles of ascent. This amounts to a parabolic advance, which ultimately we expect to be broken downward. Nothing is guaranteed, but we have a great deal of confidence that parabolics cannot be sustained and will ultimately crash. For a downside target, let's look at the one-year chart.
Offhand we think a downside target would be in the 90s, getting price back below the longest declining trend line on this chart. The advance from the October low corresponds, of course, with the pullback in yields, which we think is getting overdone.
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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Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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