Today the 20-EMA crossed below the 50-EMA (a "dark cross") which triggered an IT Trend Model Neutral signal. The signal is neutral because the dark cross is occurring above the 200-EMA. When we take a look "under the hood" this sector doesn't look THAT bearish. It has a Golden Cross Index (GCI) reading of 95%. Nearly all stocks within this sector have bullish long-term configurations. The Silver Cross Index (SCI) is at a respectable 60%. Participation of Stocks > 20/50-EMAs is still below 60% so the bias is bearish. It is bullish to see price reversing off support at the June high. This is pulling the PMO back up. The RSI is negative but rising. I believe XLF will benefit for any short-term rally in the market, but it still has to face overhead resistance at the 20/50-EMA.
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: Defensive sectors have taken over Leading. XLY and XLK have begun to weaken. XLE, XLF and XLV are in a bullish northeast heading. XLI and XLB are Lagging but traveling toward Improving. XLC is still moving west but at least it is trying to head toward Improving.
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: It looks like we are seeing a short-term pivot to the upside. The PMO and RSI are beginning to show improvement. Price closed above the 50-EMA but is still under resistance at the 20-EMA and early November low.
We haven't seen the VIX readings this high since January. The rising trend channel is intact. Stochastics are rising out of oversold territory suggesting we'll see some follow-through on today's rally.
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.
You can't see it, but the SCI ticked up for the first time since this decline began. A little over half of the index have 20-EMAs greater than the 50-EMA. This means that about 45% are still in correction mode. Long-term the GCI continues lower, but the reading of 77% tells us that only 23% have a bearish long-term bias.
New 52-Week Highs/Lows: New Highs expanded on today's upside climax, but we've certainly seen much higher readings. The 10-DMA of the High-Low Differential is beginning to turn back up. That is generally bullish for the market.
Climax Analysis: Today climax day based on Volume Ratios and Total Volume. This was also accompanied by elevated Net A-D and an oversold VIX that is rising on our inverted scale. Given our last climax was an upside "initiation" climax, today's climax is being identified as an upside "exhaustion" climax. We do not believe that price will fall out of the sky in the next day or two, we see this is as a lead into churn and chop. I continue to harken back to September's volatile trading and numerous climax days. That is likely a road map of future price action.
*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 contracting out of oversold territory. This is bullish. We now have 50% of the SPX holding rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
This is the chart that continues to give me heartburn. The ITBM/ITVM have been in decline and really aren't that oversold. However, today we did see the ITBM contract slightly, but the ITVM is still technically falling. The increase in PMO BUY signals is good coming out of oversold territory. I still don't think this chart is that bullish. Notice on most upside reversals, the PMO was already rising (with the exception of the bear market low on this chart). The PMO is still in decline.
Bias Assessment: We are starting to see a softening of the bearish bias in the short and intermediate terms as participation of stocks > 20/50-EMAs is rising and nearing the SCI reading. The long-term bias is still somewhat bearish given the percentage of stocks > 200-EMAs is lower than the GCI reading.
CONCLUSION: We finally experienced the price action we expected off last Thursday's upside initiation climax, but now we have an upside exhaustion climax. Oversold short-term indicators are improving so this appears to be a short-term market pivot point. Given today's exhaustion climax we aren't expecting a rally to all-time highs. It is more than likely signaling more churn and chop ahead. When the market gets weak, all of your positions should become "short-term". If we see follow through on today's rally, think of it as an opportunity to sell into strength.
Erin is 10% exposed to the market with 90% in cash and available to trade.
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BITCOIN
Bitcoin had a terrible Saturday, plunging below the 200-EMA and the rising bottoms trendline. Support appears to have been found at 42,500 and price is back above the 200-EMA. The PMO is decelerating and the RSI is beginning to rise out of oversold territory. Stochastics are also beginning to rise again. This appears to be a good reversal point, but I wouldn't get too bullish until price gets above resistance at 52,500 or the September high.
INTEREST RATES
Longer-term yields have broken support at their November lows.
10-YEAR T-BOND YIELD
$TNX stayed above 13.5, but it remains in a steep declining trend. A "dark cross" is about to trigger. Stochastics and the RSI have ticked up, but the PMO has just entered negative territory. 12.5 seems a more likely reversal point
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 continues to avoid a crossover SELL signal. Stochastics are headed lower, but both they and the RSI are in positive territory.
Price bounced off the 20-EMA which is bullish. We expect the Dollar to move sideways or slightly higher given the mixed indicators.
GOLD
IT Trend Model: BUY as of 10/28/2021
LT Trend Model: SELL as of 12/3/2021
GOLD Daily Chart: Gold appears to be reversing, but the indicators haven't moved bullish. Stochastics had begun to rise, but they are already flattening out.
The handle on this saucer shaped bottom extended further than we would like, but this does seem like an area we could get a rally. $1760 support line has plenty of "touches" by price tops and bottoms. As Carl often states Gold usually is characterized by "tortured" moves to the upside.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners popped and for now is holding onto support. I like price action, but I'm not a fan of the indicators. The PMO is in negative territory and falling. The SCI has fallen and shows us that 66% of Miners are correcting. Participation isn't increasing enough to banish the bearish bias. If Gold can make the turn here, Miners should continue higher.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/30/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: This looks like a solid reversal on Crude Oil. The PMO is turning back up. The RSI and Stochastics are rising.
This reversal is coming off support at $46. While it is vulnerable to a move to $43, we expect follow-through on today's strong rally. Resistance is near at the July tops, so we will know the veracity of this reversal soon.
BONDS (TLT)
IT Trend Model: BUY as of 11/8/2021
LT Trend Model: BUY as of 11/5/2021
TLT Daily Chart: TLT was lower on the day but it didn't damage support at the July/September/November tops. However, it is vulnerable given the top in Stochastics and the rebound in the 20-year yield.
There is an intermediate-term ascending triangle (rising bottoms, flat tops) that was confirmed with the breakout last week.
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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