The market continued to climb this morning and stayed in positive territory until 12:30p ET. After hitting support at yesterday's late price low it did bounce. It began to form a bullish ascending triangle (flat tops, rising bottoms). It appeared the breakout at the end of the day would see success. The 5-minute PMO had just hit positive territory. However, the rally failed with a decline that prevented a positive close. Now the PMO has topped suggesting we could see lower prices at the open tomorrow.
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 are still in the Leading quadrant except for XLU which has now hit Weakening. XLB is the newcomer to the Leading quadrant and looks very bullish. XLC is still seeing some improvement and is headed toward Leading. XLF is also making its way toward Leading. Of interest are the reversals on XLI and XLE, but they remain in the Lagging quadrant. XLY is headed toward Improving, but be careful here.
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: A new intraday all-time high was hit, but as we know from the 5-minute chart, that level didn't hold into the afternoon. Holiday trading kept Total Volume very low.
Indicators in general remain positive with the exception of the OBV which shows a clear negative divergence with price.
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.
Both SCI and GCI moved slightly higher on the day, but the SCI still remains at a bearish 60% level and both indicators display negative divergences with price tops.
S&P 500 New 52-Week Highs/Lows: New Highs expanded to a level that removed the negative divergence; however, remember these are intraday New Highs. More than likely most of those were lost before the market closed.
Climax* Analysis: We got a breather from climactic readings. The last three days we classified the climaxes as upside exhaustions--we could be seeing this play out now, but seasonality suggests we won't see a big decline just yet. The Bollinger Bands on the VIX are beginning to contract. When the VIX reaches the upper Band on this inverted scale, that's typically when we see short-term price tops.
*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.
STOs were already overbought yesterday, but today they pushed toward levels we haven't seen in over a year. On the bright side, this did erase the negative divergences that were visible yesterday. %Stocks > 20-day EMA and %PMOs Rising are also at overbought levels.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
IT indicators are rising and are only in neutral territory. We have more PMO crossover BUY signals coming in. The problem with the chart are the negative divergences.
Bias Assessment: There is a strong bullish bias in the short term given the very high participation readings of stocks > 20/50-day EMAs are above the 59.8% SCI reading. The SCI can continue to move higher. Intermediate-term bias is neutral to bullish given the SCI is below 70%, but is rising. Long term, the GCI is at a healthy 78.6% giving us a bullish bias. We now have a higher percentage of stocks above their 200-day EMAs than the those with Golden Crosses (GCI = 79.6%), so that would keep the long-term bias as bullish.
CONCLUSION: Negative divergences are beginning to fade on some of our indicator charts. Now the problem is very overbought readings. I would look for sideways movement above new support at the November highs. Seasonality is still very bullish, but it does appear that after three upside exhaustion climaxes, the buying is subsiding. Be careful expanding your exposure as I expect a rocky January ahead.
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Bitcoin was finally beginning to look bullish as it had formed a short-term flag and was maintaining above the 20-day EMA. Add to that the positive indicators yesterday and I expected it to make a run at $52,500. Instead it plunged over 6%, causing the PMO to top beneath the zero line and preventing the RSI from reaching positive territory. It appears we will see a test of the December lows.
Rates are moving mostly sideways with a slight rising trend.
10-YEAR T-BOND YIELD
$TNX is still struggling to break and hold above the 50-day EMA. It is still within a large topping formation. The indicators are beginning to look better. The PMO had a crossover BUY signal and Stochastics are rising again in positive territory. Even the RSI managed to get above 50 (barely, but it did).
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is inside a symmetrical triangle. It is a continuation pattern that suggests and upside breakout ahead. The indicators aren't in agreement, but the PMO lags Stochastics and they have turned up. The RSI remains positive. I've still not bullish on the Dollar given the declining PMO and Stochastics, while rising, are still in negative territory as well.
IT Trend Model: SELL as of 12/7/2021
LT Trend Model: SELL as of 12/3/2021
GLD Daily Chart: Gold pulled back today. This caused the RSI to lose ground, but it is still in positive territory. The PMO is still technically rising and is now in positive territory. Stochastics are positive and appear ready to oscillate bullishly above 80.
GOLD Daily Chart: The next level of overhead resistance will be a challenge for Gold at $1840, but with positive indicators it should be successful.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners pulled back slightly today but haven't compromised the short-term rising trend. The PMO is rising on a BUY signal. The SCI had a positive crossover today. We did see fewer stocks > 20-day EMA, but the percentage is still well-above the SCI readings so this group is still holding a bullish short-term bias.
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 continued to rally. The indicators look excellent. Stochastics have turned down, but they had almost reached 100. It's a bounded indicator so as long as it stays above 80 like it did in September and October, there is still internal strength.
IT Trend Model: BUY as of 11/8/2021
LT Trend Model: BUY as of 11/5/2021
TLT Daily Chart: TLT finished lower and has formed a bearish engulfing candlestick (the body of today's candlestick covers up the candlestick body from yesterday) suggesting the rising trend is in jeopardy. Indicators are also pointing to an upcoming breakdown. The RSI is now negative, the PMO is falling on a SELL signal and Stochastics are moving lower in negative territory.
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"Technical Analysis is a windsock, not a crystal ball." -Carl Swenlin
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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