Communication Services (XLC) has been struggling since it topped in September. The sector has been beat down, but it is now showing great improvement, particularly "under the hood". Price managed to close above both the 50/200-EMAs this week. The problem it could have is getting above resistance at the 50-EMA and April top/October lows. Given the improvement in participation, XLC is beginning to show relative strength against the SPY.
The RSI just hit positive territory and the PMO is on an oversold BUY signal. The Silver Cross Index (SCI) is flat right now, but given the unbelievable improvement in participation, that is going to change very soon. Notice that %Stocks > 20/50-EMAs are well above the SCI reading of 22%. Currently the long-term bias is neutral given the Golden Cross Index (GCI) is flat and %Stocks > 200-EMA has the same reading as the GCI. It might be time to start fishing in this sector as we know there are bottom fish that have room for incredible improvement.
One caveat... if the market turns back down, XLC, XLY and XLK should see damage given they have the most aggressive holdings.
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.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
MAJOR MARKET INDEXES
For the week:
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.
For the Week:
Short-term RRG: The defensive sectors are still the only sectors in Leading with XLRE and XLU beginning to turnover and head toward Weakening. XLC is making a comeback as it heads toward Leading out of Improving. XLY is turning the corner in Lagging, but still isn't moving in the bullish northeast direction. XLF, XLI and XLE don't look promising. There is hope for XLB which could hit Leading next week.
Intermediate-Term RRG: In the longer term, XLC is still Lagging, but it is at least righting the ship on the daily RRG. XLV, XLB, XLRE, XLP and XLU are traveling toward Leading out of Improving which is bullish. XLK is improving its position in Leading, while XLE and XLY have begun to move toward Weakening. XLI and XLF look the most bearish as they have a southwest heading.
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 SPY hit new all-time highs today so we will be able to look at many of our indicators to see if there are negative divergences brewing. The OBV on the SPY is showing a negative divergence already.
Total Volume was low which is indicative of holiday trading. Next week will probably perk up, but it is still considered holiday trading. The PMO triggered a crossover BUY signal on the SPY today. The RSI is positive and Stochastics are showing great improvement as they made it above 80 and are rising strongly.
Check out this week's recording!
Free DP Trading Room (12/20) RECORDING LINK:
Topic: DecisionPoint Trading Room
Start Time: Dec 20, 2021 09:00 AM
Meeting Recording Link.
Access Passcode: December@20
For best results, copy and paste the access code to avoid typos.
SPY Weekly Chart: The weekly chart is looking up as price managed to hold the long-term rising trend. We still have a bearish rising wedge that implies a breakdown will happen eventually. The weekly PMO is indecisive but the weekly RSI is positive.
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 had turned down, but this week it reversed and is rising again. The reading is still not bullish at 57% (we want a reading above 70%). The GCI climbed above its signal line, but it has flattened. The reading is 78.6% which is bullish for the long term. Negative divergences are visible on both indicators.
New 52-Week Highs/Lows: Today we had another upside climax. While New Highs expanded in response, there is a negative divergence in play as price hits new all-time highs.
Climax Analysis: Today SPX Total Volume was very low thanks to holiday trading. Nevertheless, we had climactic readings for the UP/DOWN Volume Ratios, and SPX Net A-D and SPX Net A-D Volume were close to climactic readings, so we're going to call it an upside exhaustion climax, the second in a row. The VIX is climbing and hasn't hit its upper Bollinger Band on the inverted scale so we could see the SPY eke out some more gains in spite of the exhaustion climax.
*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 NEUTRAL.
The STOs are rising which is bullish, but we see more negative divergences. Based on the location of the STOs, the condition can be read as neutral. However, participation of stocks > 20-EMA while bullish is approaching near-term overbought territory. Rising momentum is positive at 71%, but it is also getting near-term overbought.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
More rising indicators with more negative divergences visible. We are seeing more PMO BUY signals, but at 54% it is neutral at best.
Bias Assessment: A bullish short-term bias is now in play given %Stocks > 20/50-EMAs are greater than the SCI reading. The SCI reading itself is neutral, leaving us with a neutral intermediate-term bias. Long-term bias is mostly bullish, but we could see some damage to it given fewer stocks are above their 200-EMA.
CONCLUSION: Santa Claus has come to town as the SPY hit new all-time highs today. We received an extra gift for our stocking given the new PMO crossover BUY signal. We still remain cautious given the numerous negative divergences and today's upside exhaustion climax. With more holiday trading on the horizon and given the shortened week before New Year's, we wouldn't expect to see any big moves. However, given the plethora of climax events this month, volatility is still elevated and that generally isn't good for the markets. Of course, the day after Thanksgiving saw high volume and a big sell-off, so we certainly should not be complacent next week.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact firstname.lastname@example.org for more information!
Bitcoin had a good week. We saw a breakout from the short-term declining trend and now a breakout above the 200-EMA. The intermediate-term rising trend hasn't been recaptured and may not be. Strong resistance is ahead at the 50-EMA and September top. However, given the now positive RSI, new PMO crossover BUY signal and strongly rising Stochastics, it "should" breakout at 52,000.
Interest rates climbed this week, but most are moving sideways overall.
10-YEAR T-BOND YIELD
The 10-year yield was up almost 2.5 basis points today. $TNX closed above the 50-EMA for the first time since late November so while we have a topping formation, the indicators are very positive and suggest rates will break away from the rounded top.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP remains in a symmetrical triangle and is now testing the bottom of it. These patterns are continuations so the expectation is an upside breakout. The PMO isn't confirming that, nor are Stochastics. We would look for a test of support at the late November low and 50-EMA.
UUP Weekly Chart: The weekly chart is mostly positive. The RSI is no longer overbought and the weekly PMO is still rising. There is a small bull flag that would suggest an upside breakout, but given the not so bullish daily chart, don't expect it to confirm with a breakout above $26 just yet.
IT Trend Model: SELL as of 12/7/2021
LT Trend Model: SELL as of 12/3/2021
GOLD Daily Chart: Gold finished the week higher. There is a nice short-term rising trend. The RSI is positive and the PMO triggered a new crossover BUY signal yesterday. Stochastics are rising and are above 80 which is positive.
$GOLD also look bullish. Discounts are still high telling us that investors are bearish on Gold. Sentiment being contrarian, this is bullish for Gold prices. Just know that Gold usually rallies in fits and starts, so it could be frustrating as an investor.
GOLD Weekly Chart: The weekly chart is improving somewhat given the positive weekly RSI and rising weekly PMO on a BUY signal. However, there is still a long-term declining trend that will put downside pressure on Gold as it attempts to rally.
GOLD MINERS Golden and Silver Cross Indexes: This is the DP Diamonds "Industry Group to Watch" next week. Today, price closed above the 50-EMA. The PMO triggered a crossover BUY signal as well. What has impressed me most is the upward thrust in participation of stocks > 20/50-EMAs. Those readings are well above the Silver Cross Index (SCI) reading, which gives Gold Miners a very bullish bias going into next week. The RSI is now in positive territory. Stochastics are now above 80 and still rising strongly.
Gold Miners that are on my watch list: IAMGOLD (IAG), SSR Mining (SSRM), Newmont Corp (NEM) and Yamana Gold (AUY). Please note that IAG and AUY are priced very low, so position size wisely.
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 is breaking out again, but it still must deal with gap resistance and the low set on November 21st. The indicators look very favorable with a positive RSI, PMO rising on a BUY signal and Stochastics rising above 80.
There is a good chance we will see Crude Oil to continue to rally to $56 to close the gap.
USO/$WTIC Weekly Chart: The weekly chart shows a decelerating weekly PMO and positive weekly RSI. $60 seems a realistic target.
IT Trend Model: BUYas of 11/8/2021
LT Trend Model: BUYas of 11/5/2021
TLT Daily Chart: Bonds found favor in late November, but have been losing strength ever since. The short-term rising trend is intact but dangerously close to being broken.
The RSI has moved into negative territory and Stochastics are still falling. The PMO is declining on a SELL signal. It isn't likely that the current support level will hold.
TLT Weekly Chart: The weekly chart is showing some damage. The weekly RSI is positive but in decline and should hit negative territory soon. The weekly PMO is on a crossover BUY signal, but it is decelerating and could top next week. Look for price to test the 2019 high.
Wishing you and yours a wonderful Christmas and holiday weekend!
Technical Analysis is a windsock, not a crystal ball.
-- Carl & Erin Swenlin
(c) Copyright 2021 DecisionPoint.com
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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.