Today the Real Estate sector (XLRE) broke out from a trading range that began back in June and August. This is one of the most promising sectors based on the Silver Cross Index (SCI) and participation improvement. The RSI is positive and the PMO has reversed and is triggering a crossover BUY signal. Currently the SCI is reading at 86% and participation of stocks > 20/50-EMAs is higher at 90%. The Golden Cross Index (GCI) tells us that all of the stocks within this sector have a 50-EMA > 200-EMA. That is a strong foundation to build upon. Relative strength is also beginning to pick up. With the market looking weak, this defensive sector could offer some interesting rotation opportunities.
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.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
MAJOR MARKET INDEXES
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: The sectors that I liked best when I reviewed their charts were XLU, XLF and XLRE. They are all traveling with a bullish northeast heading on the short-term RRG. However, the daily RRG also shows positive movement by XLY and XLE. XLC, XLI and XLV have the most bearish looking headings and positions. XLB is only in Weakening, but it also has a bearish southwest heading. XLK had been traveling south, but today has curled back up. XLRE is headed toward Improving and based upon the chart I reviewed in the opening, it holds promise and should reach Improving soon.
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 10/18/2021
LT Trend Model: BUY as of 6/8/2020
SPY Daily Chart: While market rallied today, the double-top remains. We do see a bullish engulfing candlestick which would imply a positive close on Friday. Given it will be a half day, I very much doubt we will see new all-time highs or volatile trading. The PMO is still on the SELL signal it triggered yesterday. The VIX is configured positively (I'll discuss this in the climax indicator section).
Total Volume finished well-below the annual average which is in line with holiday trading today. While the RSI is positive, Stochastics are quite negative.
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 SCI and GCI are both falling. While the percentages are still in bullish territory, it isn't good to see them in decline.
S&P 500 New 52-Week Highs/Lows: New Highs expanded slightly today, but remain in a declining trend. The 10-DMA of the High-Low Differential is still declining as well which is generally bearish for the market. The readings are beginning to get oversold.
Climax* Analysis: Today was not a climax day. We saw the VIX rise and close above the lower Bollinger Band on our inverted scale. This is a good sign especially with a bullish engulfing candlestick today. However, both the VIX and the candlestick are very short-term patterns. Candlestick patterns are only good for the next trading day.
*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 either initiation or exhaustion.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERSOLD.
The STOs are beginning to climb out of oversold territory which is positive as many times a reversal on these indicators leads to higher prices. No real improvement on %Stocks with rising momentum which remains at a sickly 39%.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The decline continues on our intermediate-term indicators. The ITBM/ITVM are still somewhat overbought. We haven't seen the destruction of the intermediate-term rising trend, but given the low amount of rising momentum stocks and fewer PMO BUY signals, this timeframe is looking more bearish.
Bias Assessment: Yesterday we saw an increase in participation, today.. no such luck. The %Stocks > 20-EMA held steady today, but %Stocks > 50-EMA began to fall again. Given both percentages are lower than the SCI, there is a bearish short-term bias. The IT bias based on the reading of the SCI is somewhat bullish and the long-term bias is still bullish given the 80%+ reading on the GCI.
CONCLUSION: The SCI holds a high enough reading at 69% to consider the intermediate-term bias as bullish, but it is deteriorating and there are fewer stocks with price > 20/50-EMAs. The IT indicator chart is bearish. We should eke out at least one more day of higher prices if the VIX and bullish engulfing candlestick are right. Past that, we still have a double-top on the SPY, a PMO SELL signal and weakening Stochastics. I'm still playing defense with my portfolio with trailing stops and tighter hard stops. I want to take advantage of any short-term upside move, but the intermediate term is beginning to look shaky so I want to be protected.
My stops haven't triggered yet, so I am 75% exposed to the market with 25% being in cash and readily available to trade.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact email@example.com for more information!
Yesterday's comments still apply:
"Bitcoin attempted to recapture prior support at the late October low, but wasn't successful. Still this is a promising reversal, one that could set up a bullish double-bottom. The RSI remains negative. The PMO and Stochastics are in decline. The indicators suggest this resistance level will hold a bit longer, but the picture is at least getting somewhat brighter for Bitcoin."
Yields are reversing course from last week and remain in rising trends.
10-YEAR T-BOND YIELD
$TNX pulled back slightly but still it remains above the symmetrical triangle and declining trend. The indicators are very positive so I am expected rates to begin rising soon.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is continuing to rally higher and has formed a steep rising trend channel. These are hard to maintain. The RSI is now overbought so a reversal may be nearing. However, the PMO and Stochastics suggest otherwise. The PMO is rising strongly, but it is overbought like the RSI. Stochastics are oscillating bullishly above 80, but they are pointed downward right now. I expect the Dollar to remain in the rising trend channel for a little while longer.
IT Trend Model: BUY as of 10/28/2021
LT Trend Model: BUY as of 11/16/2021
GLD Daily Chart: GLD was lower on the day, but remains above the short-term rising bottoms trendline. The RSI has flattened out, but the negative PMO and Stochastics tell us this line of defense is weak and breakable.
(Full Disclosure: I own GLD as a "buy and hold" position.)
GOLD Daily Chart: $GOLD is also holding onto its short-term rising trend. Discounts expanded today suggesting investors are more bearish on Gold. Not surprising. We want these discounts to expand further as very bearish sentiment usually comes near upside reversals given sentiment is contrarian. We've seen much deeper discounts.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are holding their short-term rising trend. The RSI and PMO are very bearish and a topping SCI is also negative. Participation is falling quickly and that will tear down the SCI further. My gold miner position is still open, but the chart looks a bit better than this one. I would unload them if the rising trend is broken as that would imply price would likely test $30.50.
CRUDE OIL (USO)
IT Trend Model: BUY as of 9/3/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO was lower on the day and finished below the 20-EMA. The indicators are beginning to turn bullish but there are still questions about supply given President Biden is releasing some from our strategic reserves. However, OPEC and Russia have been obstinate and much of those reserves have to be processed abroad. I'd like to see lower prices at the pump, but I think the Crude Oil chart is positively configured given the positive RSI and flattening PMO with strongly rising Stochastics.
I believe we are looking at a bullish flag formation. The technicals point to higher prices.
IT Trend Model: BUY as of 11/8/2021
LT Trend Model: BUY as of 11/4/2021
TLT Daily Chart: With yields falling, TLT gobbled up +1.6% of gains today. The chart looks mostly neutral given the flat RSI and PMO. Stochastics are negative. A double-bottom could be forming here, but the yield charts look bullish so I'm not sure how much upside is possible here. Best case would be a test of resistance at $151.50.
Technical Analysis is a windsock, not a crystal ball.
(c) Copyright 2021 DecisionPoint.com
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.
Helpful DecisionPoint Links:
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.