Small-caps are beginning to outperform the SPY. I've brought the Golden Cross/Silver Cross Indexes chart of the S&P600 ETF (IJR). It allows us the look "under the hood" and quantify how much better the small-caps are performing in relation to the SPX.
Looking at the top indicator window, it confirms outperformance against the SPY. In general, IJR has been in a sideways trading range; whereas the SPY has been in a rising trend. The Silver Cross Index for IJR is rising, as is the Golden Cross Index. I've put the SPY chart below the IJR chart so you can make some comparisons.
The SCI and GCI for the SPX are both in decline, unlike IJR. There is a bullish bias on IJR given the SCI percentage (41.7%) is much lower than the %Stocks > 20/50-EMAs (59% and 54% respectively). We have well over half of the SP600 with their price above their 20/50-EMAs.
Compare that to the SPY. There is a bearish bias on the SPY given the participation percentages are much lower than the SCI reading. In fact, just a little over 1/3rd of the SPX have price above their 20/50-EMAs. Those participation numbers of 36% and 37% are far lower than what we have on IJR. Now we wait to see if the smaller-cap stocks can get the large-caps back in the game. With a strongly rising Dollar, there will be downside pressure on the larger cap stocks so it will take some effort.
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, and only 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.
RRG® Chart: XLY continues to lose relative strength, although it remains in the Leading quadrant. XLE, not surprisingly, is continuing to outpace the market. XLF has entered Leading and is continuing to outperform. XLI is looking interesting as it gains strength and moves toward the Leading quadrant. XLK is now in the Lagging category and moving in the very bearish southwest heading.
CLICK HERE for an animated version of the RRG chart.
CLICK HERE for Carl's annotated Sector charts.
THE MARKET (S&P 500)
IT Trend Model: BUY as of 5/8/2020
LT Trend Model: BUY as of 6/8/2020
SPY Daily Chart: The market closed slightly higher but finished lower than the open; hence the filled black candlestick. Support was held easily. The RSI has turned back up, but the PMO continues lower and has now reached negative territory.
The last time the PMO was in negative territory was at the October low. That marked a turning point for the market.
Participation: The following chart uses different methodologies for objectively showing the depth and trend of participation for intermediate- and long-term time frames.
- The Silver Cross Index (SCI) shows the percentage of SPX stocks on IT Trend Model BUY signals (20-EMA > 50-EMA).
- The Golden Cross Index (GCI) shows the percentage of SPX stocks on LT Trend Model BUY signals (50-EMA > 200-EMA).
- The Bullish Percent Index (BPI) shows the percentage of SPX stocks on Point & Figure BUY signals.
Both indicators are moving lower. The SCI tells us that just over half of the SPX stocks have a 20-EMA > 50-EMA. Definitely oversold, but not out of the question that it will move much lower if support is lost here.
Participation ticked slightly higher but remains anemic and oversold.
Climax Analysis: Not a climax day. Yesterday's downside initiation climax appears to have signaled a pause. However, it still has a day or two to mature. The VIX was higher, but is below its EMA suggesting internal weakness. Not good when you're sitting precariously on support.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is OVERBOUGHT.
The STOs tipped over today which leaves me concerned that short-term support won't hold.
Intermediate-Term Market Indicators: The intermediate-term rising market trend has been BROKEN and the condition is OVERSOLD.
The ITBM moved lower in oversold territory. The ITVM has begun to rise out of oversold territory. Given they are mixed, I consider the intermediate-term picture neutral.
Bias Assessment: It occurred to us that one of the ways we can measure market bias is to compare the SCI to the percent of stocks above their 20/50-EMAs. When the percentages are lower than the SCI, the market bias is bearish and if they are higher, it is bullish. Any "mechanical" signal requires additional analysis to confirm the numbers.
The market bias is still bearish. The SCI percentage is higher than participation among %Stocks > 20/50-EMAs. If price is below the 20/50-EMAs, those EMAs will downward and prevent a silver cross from occurring.
CONCLUSION: Yesterday's downside initiation climax could resolve in the form of sideways consolidation or churn, but the STOs turned down which is worrisome. On the flip side, IT indicators are mixed and oversold and that leaves me less worried about an extended decline. A strong bull market move needs participation and that is completely lacking in the SPX; however, small-caps are seeing improved participation and a bullish bias. More than likely we are going to continue to see a bifurcated market with small-caps continuing to gain strength while tech and large-caps weaken further.
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BITCOIN
Yesterday's comments still apply:
"Bitcoin's large rounded top is looking more ominous as price struggles to hold above the 200-EMA and January/July tops. It's lost its "silver cross" as the 20-EMA dipped below the 50-EMA. The PMO has now entered negative territory and the RSI is firmly planted in negative territory. Best case would be more sideways churn."
INTEREST RATES
Yields are breaking out which will favor Financials but decimate Bonds.
10-YEAR T-BOND YIELD
Yesterday's comments still apply:
"We have a bullish 10-year yield chart. The only negative on this chart would be the RSI which is getting overbought. Overhead resistance doesn't really arrive until it hits 1.75%."
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP rallied strongly above overhead resistance. The RSI is now overbought, but not significantly. The PMO is very healthy, rising out of oversold territory on a BUY signal.
It appears the large double-bottom is finally seeing results with price soaring above the confirmation line. We could see a pause, but overall look for the Dollar to rise even higher.
GOLD
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GLD Daily Chart: Yesterday's comments still apply:
"Gold is working its way back to the August low. Given the falling, negative PMO and RSI, we don't expect that support level to hold."
(Full disclosure: I own GLD as a long-term buy and hold position.)
GOLD Daily Chart: Yesterday's comments still apply:
"Discounts are high, but not high enough to look for a bottom in Gold. Sentiment can get far more bearish as we saw at the November and March lows. We expect Gold to test March lows."
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"Gold Miners are now testing the bottom of the bullish falling wedge. If it falls out of the pattern, we will see a declining trend channel and not a bullish pattern. Gold's demise has done little to help Miners recuperate. Bulls can still cling to an oversold RSI and an oversold PMO as a possibly setting up a reversal, but so far on 3% are above their 20-EMAs. We need to find a pulse, but so far there is none."
CRUDE OIL (USO)
IT Trend Model: BUY as of 9/7/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO is basically taking a break after last week's strong rally. This is good. The RSI is staying out of overbought territory and the PMO is still rising. We expect prices to continue higher.
BONDS (TLT)
IT Trend Model: BUY as of 6/10/2021
LT Trend Model: BUY as of 8/10/2021
TLT Daily Chart: The 20-year yield fell slightly and helped TLT to stanch the bleeding. While this is an interesting support level at the July low, I don't believe it will hold. The negative RSI and now negative PMO are in agreement.
Technical Analysis is a windsock, not a crystal ball.
--Erin 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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