Today the S&P 600 Small-Cap ETF (IJR), the Technology Sector (XLK), and the Real Estate Sector (XLRE) 20-day EMAs crossed down through the 50-day EMAs (Dark Cross). Since the crossovers occurred below the 200-day EMAs, new IT Trend Model SELL Signals were generated.
We already saw Russell 2000 (IWM) generate a "Dark Cross" so we aren't surprised to see the S&P 600 follow suit. The PMO is now in negative territory. The OBV is also confirming the decline.
Technology (XLK) is breaking down in a big way and likely it is part of the reason why the SPY has weakened. The PMO hasn't reached negative territory, but it will. Notice the thin participation that is getting thinner on stocks above their 20/50-day EMAs. Stochastics are about to top below 20. Very bearish bias on this chart.
XLRE looks slightly better given what appears to be a bullish double-bottom forming. The PMO and RSI are still negative, but Stochastics are attempting to rise. Participation is even thinner on XLRE. We also see a negative crossover on the Golden Cross Index (GCI). While the price pattern looks encouraging, we fail to see how this group can get traction if so few stocks are participating.
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: BUY as of 11/15/2022
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: Bulls might have something to be hopeful about. We have identified a bullish falling wedge on the short-term SPY chart. We also note that the VIX has moved above its moving average which implies new strength.
However, we wouldn't have our finger above the "BUY" button. The RSI is still negative and the PMO is falling and should hit negative territory next week barring a good rally. Stochastics are turning up but are well within negative territory.
SPY Weekly Chart: The long-term declining trend was tested this month, but no breakout occurred. The weekly RSI is negative and the weekly PMO has topped. This confirms the bearish intermediate-term bias that the negative crossover on the SCI had already signaled.
New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential dropped below the zero line this week. Typically when this indicator moves negative, the market moves lower.
Climax Analysis: Only SPX Net A-D had a climax reading today, and SPX Total Volume was holiday low, so this is not a climax day. This week saw two climaxes, an upside initiation climax on Wednesday and a downside initiation climax yesterday. We've determined that they are representative of the churn we are experiencing and will likely continue to experience next week.
*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.
One nice thing about churn, it allows overbought indicators to decompress. The STOs are a good example. The market was only down this week by -0.09%, almost unchanged. This allowed STOs to revert back toward the zero line. We read the rising STOs as decompression, not an indication of a rally to come.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM/ITVM continued to decline unperturbed. %PMO BUY signals remain very oversold at just 9%, but we have seen readings of 0% before. We do have 20% of the index with rising momentum, so %PMO BUY signals could see some improvement next week.
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.
XLY saw the biggest change in its SCI reading. Unfortunately it was to the downside. The sector is extremely weak. Next up was XLRE. The bearish bias is very strong within both sectors.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of participation.
XLU and GDX hold the top spots based on SCI value. XLU has held up well and was one of the few sectors to perform this past month. However, the baton is being passes to Energy (XLE). The bias is still somewhat bearish for XLE, but rising momentum within the sector and its groups make it extremely interesting going into next week.
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 is BEARISH in the short term. While we are seeing a rising trend in %Stocks > 20/50-day EMAs, the readings themselves are low and are in fact, lower than the SCI reading.
The bias in the intermediate term is clearly BEARISH. The SCI had a negative crossover and continues lower.
The long-term bias is BEARISH. The GCI is topping and we don't have that many more stocks above their 50/200-days in comparison to the GCI reading. We expect it to move lower next week.
CONCLUSION: Santa didn't quite make his appearance, but analysts and investors are looking toward next week for him to arrive. While we could see some upside given the slight improvements made in participation, we see a week of more consolidation and churn. Interest rates are on the rise, nearly every sector has falling momentum, our indicators are negative and the economy isn't strengthening. We don't see 2023 bringing us any relief so be prepared. Next week isn't likely to be volatile based on holiday trading, but no guarantees. Keep stops in play and honor them.
Erin is 12% exposed with a 2% hedge.
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BITCOIN
Bitcoin rallied this week, but spent most of it digesting the move. The RSI is negative and Stochastics are topping in negative territory. The PMO looks somewhat favorable. Price remains below the 20-day EMA. We don't see upside potential here.
This chart is to show where some of the support/resistance lines come from.
INTEREST RATES
We believe the correction in interest rates is now over. We've been mentioning the Interest Rate Hedge (PFIX) nearly all week (full disclosure: Erin owns PFIX.). Inverse Bond funds have been making appearances in Erin's Diamond scans so we believe rates will be recapturing prior 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
$TNX rallied this week and today it continued to rise, trading fully above gap support from late November. The rising trend hasn't been broken yet, but based on the oversold PMO crossover BUY signal, positive RSI and Stochastics above 80, we expect much more rally.
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 has been shrinking, home prices have come under pressure.
--
This week the 30-Year Fixed Rate fell from 6.31 to 6.27.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP consolidated the prior week's rally. It has formed a bullish falling wedge, but it hasn't been confirmed yet. Indicators are mixed. The PMO is rising alongside rising Stochastics, but the RSI remains solidly negative. The chart has a bullish bias and ultimately favors a breakout.
The prior falling wedge technically has executed, but given price drifted out of the pattern we don't consider it a confirmation. We'll wait to see if the wedge above is fully confirmed.
UUP Weekly Chart: The intermediate-term picture for the Dollar is very bearish. The weekly RSI is negative and the weekly PMO is falling vertically. Price was unable to close above the 43-week EMA. Short-term, the Dollar looks somewhat bullish, longer-term it is bearish.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: SELL as of 6/30/2022
GOLD Daily Chart: With the Dollar displaying a bullish falling wedge, it should be no surprise that Gold is sporting a bearish rising wedge. The PMO did have a negative crossover, but ultimately it is flat. The RSI and Stochastics are in positive territory, but we don't like how Stochastics turned before getting above 80. In the short term we expect a breakdown with support lying at about $162.
Discounts have been paring back suggesting traders are getting more bullish on Gold. They won't be considered fully bullish on Gold until we see a premium or at least much lower discounts. One other positive we didn't mention would be $GVZ holding above its moving average on the inverted scale. That does imply there is internal strength to be had.
GOLD Weekly Chart: The weekly chart is shaping up. The weekly RSI is positive and the weekly PMO is rising strongly. Longer-term we are bullish on Gold, we just see it stumbling in the near term.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners have held their own. Price has been moving mostly sideways. We are starting to regard the falling PMO as decompression rather than a statement of negative momentum. Part of the reason would be participation holding strong. The SCI isn't particularly bullish, but the GCI is rising, as are Stochastics. We still have trouble trusting this sector and would make sure you have stops in play. When GDX fails, it will often fail spectacularly.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/21/2022
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: This week USO began to rally in earnest. Crude Oil broke the declining tops trendline today. The RSI is positive and the PMO's oversold crossover BUY signal looks great. Stochastics are rising and should get above 80 momentarily. The OBV bottoms are confirming the new rising trend. $OVX remains above its moving average on the inverted scale suggesting internal strength. We believe the correction in Crude Oil prices has also come to an end.
USO/$WTIC Weekly Chart: The rally came in the nick of time as the long-term rising trend was about to be compromised. If price continues higher as we presume, it will form a double-bottom which is bullish. The weekly RSI is still negative, but the weekly PMO is beginning to turn back up. Our one concern would be $WTIC. It didn't reverse on a support level. This is one reason we aren't "all in" on Crude Oil.
BONDS (TLT)
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With the correction in interest rates coming to a close, it is time for Bonds to correct. TLT reinforced its declining trend this week. We have a negative/falling RSI and an overbought PMO SELL signal. Stochastics are firmly below 20. We see more downside for Bonds. One way to play this would be TBF which is the inverse (non-leveraged) ETF.
TLT Weekly Chart: TLT closed below long-term support on the week. The weekly RSI tells the story as it failed to reach positive territory on the prolonged rally. The weekly PMO will be slower to turn, but it is already decelerating.
Merry Christmas and Happy Holidays!
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
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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