Today, the Dollar dropped about a half of a percent bringing price down to the 20-EMA. A PMO SELL signal triggered today to add insult to injury. This has put a bearish spin on the chart. We now spot a bearish double-top developing. The pattern will be confirmed should price drop below $25.60. The minimum downside target of the pattern would take price close to support at the March/August tops. The question is whether this has brightened the Gold chart. I'll cover that in the section on Gold.
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: Defensive sectors, XLU, XLRE and XLP are the only sectors in Leading. Staples are losing some ground as it has done an about face to the bearish southwest heading. XLE and XLV are the other bullish sectors as they travel northeast from Improving toward Leading. XLK also did an about face and should enter the Leading quadrant soon. Lagging sectors XLC, XLI and XLB are camped out in Lagging, but are making their way toward Improving. XLY appears ready to enter Lagging soon.
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 upside exhaustion climax from yesterday is still in force despite today rally in my opinion. Price is now up against overhead resistance at all-time highs. One of the reasons I am still cautious is that Total Volume continues to diminish even as price moves boldly higher. Yes, the PMO is rising and the RSI is positive, but I still don't like it.
Stochastics are still very positive as they rise into positive territory and we do have the VIX rising above its SMA on the inverted scale.
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 continues to move higher out of somewhat oversold territory, but the GCI continues lower. We consider a chart to have a bullish long-term bias when the 50-EMA is above the 200-EMA. We now have almost a quarter of the SPX with bearish configurations in the long term.
New 52-Week Highs/Lows: New Highs contracted despite today's rally. We are seeing the 10-DMA of the High-Low Differential rising again and that generally bodes well in the intermediate term. Although we had a similar configuration in late September and that didn't immediately bring price higher. In fact, it turned over shortly thereafter.
Climax Analysis: Not a climax day. As noted earlier, Total Volume is shrinking. The VIX is rising out of oversold territory and that is positive. Again, look back to the last September top, readings were similar when price failed.
*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 UP and the condition is OVERBOUGHT.
Three days and the STOs are in overbought territory. We actually saw %PMOs rising tick lower. That indicator along with %Stocks > 20-EMA are overbought.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM/ITVM are nearing positive territory and we are seeing marked improvement on %PMO BUY signals. None of these indicators are overbought so the intermediate-term picture is looking better.
Bias Assessment: Participation improved slightly with %Stocks > 20/50-EMAs still holding percentages higher than the SCI. This gives us a bullish bias in the short to intermediate terms. The %Stocks > 200-EMA is slightly lower than the GCI so the long-term bias is somewhat bearish.
CONCLUSION: Total Volume is shrinking as price moves higher. Conviction is fading. In my opinion, the upside exhaustion climax from yesterday is still valid and given price is now reaching all-time highs again, the market is vulnerable. Overbought short-term indicators also suggest we will see price pullback here. IT indicators are looking more bullish so I don't think we will see price break the intermediate-term rising bottoms trendline. We are likely in for some chop and churn as price works to set new all-time highs, but we should also consider taking some profits off the table. I'm not ready to expand my exposure yet.
Erin is 10% exposed to the market with 90% in cash and available to trade.
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Bitcoin made back above the 200-EMA but has yet to recapture the intermediate-term rising trend. Indicators are bearish with the RSI negative and the PMO falling below the zero line. Stochastics are rising, but are oscillating in negative territory.
Longer-term yields are now beginning to reverse and join short-term yields which have been trending higher since the end of November.
10-YEAR T-BOND YIELD
We still have a "Dark Cross" on $TNX, but the picture is brightening. Price could move out of the bearish rounded top soon. The PMO is rising and the RSI is about to hit positive territory. Stochastics also look encouraging as they rise out of oversold territory.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: I talked about the two black candlesticks on UUP yesterday and how we could see a reversal. The PMO is on an overbought crossover SELL signal and Stochastics have just entered negative territory and are accelerating lower. I addressed the bearish double-top in the introduction.
IT Trend Model: SELL as of 12/7/2021
LT Trend Model: SELL as of 12/3/2021
GOLD Daily Chart: As advertised yesterday, Gold is beginning its "tortured" advance after bottoming on support at the November low. Indicators are trying to improve, but remain flat overall.
If the Dollar continues lower as the chart implies, Gold should benefit given their reverse correlation. Discounts remain high, but are slowly paring back. Investors are still bearish on Gold but that is diminishing slightly.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"I like the continuation of yesterday's reversal. Indicators aren't on board yet and EMAs are configured negatively. Participation is anemic and the SCI continues to drop. Tread carefully if you're exposed to this industry group."
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/30/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Price has now made its way back above the 20-EMA and is attempting to close the gap from late November. Stochastics have just hit positive territory and the RSI isn't far behind. The PMO has turned up and is making its way toward the signal line.
Price has overcome strong resistance at the July tops. Given the positive indicators, I'm looking for Crude Oil to close the gap and possibly hit overhead resistance at the October high.
IT Trend Model: BUY as of 11/8/2021
LT Trend Model: BUY as of 11/5/2021
TLT Daily Chart: TLT hit the skids and dropped significantly below the 20-EMA. The RSI just entered negative territory and Stochastics are traveling quickly lower. The PMO has now topped. We expect yields to continue their rise and that would put more downward pressure on TLT.
Price is now testing support at the 50-EMA and the January low. I expect TLT to test the 200-EMA, but given Bonds are becoming the new safe haven, if we see the market fail at new all-time highs TLT might hold up at the 50-EMA.
Technical Analysis is a windsock, not a crystal ball.
-- Erin Swenlin
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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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