The Dow Industrials are the first of our "Scoreboard" indexes to lose its "Silver Cross" BUY signal. Price is on support at the 200-EMA and like the SPY, it bounced strongly. Price support is a bit lower at the September lows and the PMO is still moving swiftly lower so it is definitely vulnerable to more downside.
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 had begun to hesitate in the Leading category, today it fell out of bed and has a bearish southwest heading. XLK, XLU and XLRE are the strongest sectors relative to the SPY. XLU and XLRE should hit Leading soon. XLV, XLF and XLE have reversed course with XLV entering Improving today. XLC is the most bearish sector. XLI and XLB are beginning to hook around which is good. XLP is headed toward Lagging which is somewhat surprising given it is typically a defensive hideout.
RRG® charts show you the relative strength and momentum for a group of stocks. Stocks with strong relative strength and momentum appear in the green Leading quadrant. As relative momentum fades, they typically move into the yellow Weakening quadrant. If relative strength then fades, they move into the red Lagging quadrant. Finally, when momentum starts to pick up again, they shift into the blue Improving quadrant.
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: We missed a bearish engulfing candlestick by a hair, but it still looks ugly. Important support at the September top was lost. The short-term rising trend was also compromised.
The RSI is negative and still headed lower. The PMO is falling, but hasn't reached oversold territory yet. Stochastics did flatten slightly in oversold territory. The VIX closed at its highest reading since January.
PARTICIPATION: 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 SCI lost almost 4 percentage points today, but it isn't oversold yet. The GCI is still trending lower.
New 52-Week Highs/Lows: We have oversold New Low readings as far as the past year.
Climax Analysis: Today's upside climax is an "initiation", meaning we could start to see higher prices. I am reminded of Earth, Wind & Fire's song "September" when I look at this chart, only there were plenty of 'cloudy days' for the market. September is a touch point for what we are seeing now. Climaxes every other day and choppy trading. The readings today mimicked the two similar climaxes in September. While they did result in some upside, the ride was not over until October. The VIX is still oversold, but is rising. Still, harken back to September and you'll see the VIX did find opportunity to leave oversold conditions, but it didn't result in much upside.
*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 indicate either initiation or exhaustion.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is OVERSOLD.
STOs are mixed today with the STO-B contracting and the STO-V expanding. I think this is a good sign, but we need to have them in agreement. Again, look at the mess that was September. %Stocks > 20-EMA and %PMOs Rising did improve and are oversold which is a good sign.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
Yesterday's comments still apply:
"The ITBM/ITVM have hit negative territory, but unlike the STOs, they are far from being oversold. There are only 10% of SPX stocks with PMO BUY signals. It's a very oversold reading, but we did see lower in 2020."
Bias Assessment: The bearish bias remains in all three timeframes despite some improvement in participation of stocks > 20/50/200-EMAs. Those participation percentages are still well below the SCI and GCI.
CONCLUSION: September is a pretty good guide to of what to expect moving into December. There is some positive seasonality coming with Santa Claus, but we still think the technical picture is weak. Today's upside initiation climax suggests we will see some follow-through on this rally, but based on the climax behavior in September, it likely will only provide a little relief before it starts back down again. I'm only 15% exposed to the market, but I'm still considering paring that back on any strength that arrives. Most of my current positions are in rare earth materials and metals.
Erin is 15% exposed to the market with 85% in cash and available to trade.
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BITCOIN
Yesterday's comments still apply:
"Bitcoin has rebounded out of its low last week. Some are considering cryptocurrencies as a place to hide out. However, right now, price is struggling to overcome resistance. The RSI is still negative, but the PMO appears to be coming around and Stochastics are rising again. It is set up to breakout, but for now overhead resistance is holding price back."
INTEREST RATES
Longer-term yields have broken support at their November lows as the flight to safety to Bonds continues.
10-YEAR T-BOND YIELD
$TNX is holding support along the 200-EMA as well as price levels at the November low and August highs. This should provide sturdy support, but the indicators are very negative.
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The PMO is still technically falling on UUP, but we are seeing a bounce off the 20-EMA and the prior bearish falling wedge. The RSI is still positive, but Stochastics are not.
This does look like a topping formation. Should price lose the 20-EMA, we could see a test of the 50-EMA given the PMO will have had a negative crossover by then.
GOLD
IT Trend Model: BUY as of 10/28/2021
LT Trend Model: BUY as of 11/16/2021
GOLD Daily Chart: Gold continues to lose ground. Support is near at $164, but there was a Long-Term Trend Model "Death Cross" SELL signal today. It appears we'll have a "Dark Cross" on the 20/50-EMAs. The indicators are not bullish, although Stochastics have flattened out in oversold territory.
The saucer shaped bottom is disintegrating. It appears Gold will move to $1720.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners dropped below support today and appear headed back to the September low. With Gold tarnishing, Miners are likely to struggle. The indicators are negative and participation continues to fade away. The GCI is about to cross below its signal line.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/30/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Crude Oil rallied today, but set a lower low and a lower high. Price is still below resistance at the 200-EMA. The RSI is rising out of oversold territory. The PMO is now oversold, but it isn't changing direction yet.
Stochastics are reversing in oversold territory, but looking at the way price is acting, we expect support to be tested at the $43 level.
BONDS (TLT)
IT Trend Model: BUY as of 11/8/2021
LT Trend Model: BUY as of 11/5/2021
TLT Daily Chart: I do not like black filled candlesticks. Just look at where they have appeared on this chart and the subsequent price action. However, with this breakout above strong resistance and the very positive indicators, I'm not expecting a severe decline ahead.
There is an intermediate-term ascending triangle (rising bottoms, flat tops) in play. I like that price stayed completely above it.d
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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