On Friday's for DP Diamonds Report readers, I search for what I call the "sector to watch" and "industry group to watch" to include in the Diamonds Recap. I actually do my "homework" in the Diamond Mine trading room. I show viewers how I do my in-depth sector review and uncover industry groups with potential.
Last Friday I noticed that Coal was beginning to bottom on the 200-EMA. We have new momentum as the PMO is now rising on a crossover BUY signal. Stochastics are rising and are in positive territory. The RSI hasn't caught up yet and remains in negative territory. You can see that the relative strength line is beginning to rise.
There are three coal stocks that I have on my watch list: Arch Coal (ARCH), Alpha Metallurgical Resources (AMR) and Warrior Met Coal (HCC). They all have very similar formations to the Dow Jones US Coal Total Stock Market Index ($DWCCOA).
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
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: [[comments]]
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: The decline continued in earnest today as price lost support at the 50-EMA and is headed to test support at the December low. Given the falling PMO (which topped a second time without triggering a crossover BUY signal), negative RSI and falling Stochastics, this decline is likely not over. However, we do have a hammer candlestick (sort of) and that would suggest at least a pause.
The intermediate-term rising trend channel is now vulnerable. There is a very good chance we will see this rising trend broken this time around given price never even tested the upper bounds of the channel.
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 is continuing lower and is now at a neutral reading of 55%. The GCI is still rising which is encouraging for the longer-term and could suggest the intermediate-term rising trend will remain intact.
S&P 500 New 52-Week Highs/Lows: New Highs contracted and nearly disappeared while we see New Lows staying about the same. The 10-DMA of the High-Low Differential has topped which is bearish.
Climax* Analysis: On Friday we had a downside initiation climax. Today we got a downside exhaustion climax. We could get a pause in the decline, or the decline could continue. It seems unlikely that a new advance will begin.
*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 SOMEWHAT OVERSOLD.
Even with this decline and the pullback on the STOs, short-term indicators are not oversold. They are getting oversold. There is plenty of territory for them to move even lower.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM is in neutral territory, the ITVM is somewhat oversold in the near term, but we've seen much lower readings that were associated with the late 2018 correction as well as the declines in 2019. Most ominous is the complete reversal of %Stocks with PMO crossover BUY signals which is far from being considered oversold.
Bias Assessment: Participation is dropping. We have only 30% of stocks > 20-EMA and only 41% of stocks > 50-EMA. Compare that to the 55% SCI reading and we have a bearish short-term and intermediate-term bias. The long-term bias is still somewhat bullish given the rising GCI, but with fewer stocks > 200-EMA, we look at the long-term bias as more neutral to bearish.
CONCLUSION: Today's climax indicators tell us we a downside exhaustion climax. Given the very negative indicators, most of which are not oversold, we don't expect this climax to result in a new rally to all-time highs. More than likely we will see a pause or a continuation to test December lows. Momentum is diminishing with the PMO not at all oversold. Santa may only come to town briefly. Let's hope he leaves some Coal in our stockings since that appears ready to rally.
I'm 10% exposed to the market with no plans to expand my portfolio this week and likely not next week either.
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Bitcoin continues to struggle. The PMO and RSI are trying to rise, but no such luck. Stochastics are very negative. At this point $45,000 is holding as support, but the strongest level is at $42,500. I wouldn't be surprised to see it test that level soon.
Long-term yields are moving sideways with shorter-term yields in a declining trend.
10-YEAR T-BOND YIELD
The 10-year yield closed above the 200-EMA. However, support looks tenuous given the declining PMO, negative RSI and topping Stochastics.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is moving sideways inside a symmetrical triangle. These patterns are continuations, so we should expect and upside breakout.
Stochastics do appear to be rising again and the RSI is positive. The PMO hasn't gotten on board, but overall the indicators do seem to suggest the pattern will eventually break to the upside.
IT Trend Model: SELL as of 12/7/2021
LT Trend Model: SELL as of 12/3/2021
GLD Daily Chart: Gold rallied last week, but price is pulling back after Friday's decline. Indicators are moving mostly sideways except for Stochastics which still look bullish.
GOLD Daily Chart: The PMO on $GOLD looks more encouraging as it nears a crossover BUY signal. The RSI is positive and Stochastics look particularly bullish on $GOLD v. GLD. We don't have updated sentiment, but discounts are high suggesting investors are bearish on Gold still. I'd like to see them get even more bearish. Sentiment is contrarian so very high discounts gives Gold a positive outlook.
GOLD MINERS Golden and Silver Cross Indexes: Miners pulled back slightly today, but held support. The PMO is rising toward a crossover BUY signal and Stochastics are rising strongly in positive territory. The RSI is still negative and price is below all three key moving averages. Participation is beginning to improve, but I don't see a bullish bias yet based on Stocks > 50-EMA being the same reading as the SCI.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/30/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO hit overhead resistance and rather than breaking out as the bull flag suggested it would, it fell away. Price is currently above the 200-EMA, but I would look for a test of the December low given the PMO's reversal, negative RSI and topping Stochastics.
IT Trend Model: BUY as of 11/8/2021
LT Trend Model: BUY as of 11/5/2021
TLT Daily Chart: We aren't seeing the flight to Bonds anymore as TLT has been in a consolidation zone for the past week and half. The PMO is on a crossover SELL signal, but is mostly flat given price is directionless. The RSI is positive, but also flat. Stochastics look promising. Overall, with flat price tops but rising bottoms, I see this as a short-term ascending triangle which does suggest and upside breakout above the September and November highs.
Technical Analysis is a windsock, not a crystal ball.
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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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Price Momentum Oscillator (PMO)
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