The Silver Cross Index (SCI) measures how many stocks have their 20-EMA > 50-EMA. It gives us insight into intermediate-term participation and bias. Today the SCI on the SPX (which had been improving) took a turn for the worse and fell below its signal line. In comparison to the Nasdaq and NYSE, the SCI reading is much higher for the SPX, but a 57% reading is hardly bullish. SCI readings for the Nasdaq and NYSE are very low, but we've seen them move even lower, so while these readings are oversold in the near-term, they are not oversold in the longer term.
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
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 holding court in the Leading quadrant. When defensive sectors outperform... they are the last to perform before a market correction. The two aggressive sectors XLY and XLK are the weakest based on their location and heading, with XLE close behind as it has just reached the Lagging quadrant as it continues in the bearish southwest direction. XLI now has a bearish heading, but is still sitting in Improving. The remainder are in improving and look as if they will stay there a bit longer. Although, XLB could hit the Leading quadrant next week.
Intermediate-Term RRG: XLC continues to get worse on the weekly RRG. In this case, the three weakest sectors on the daily RRG are the only ones in Leading on the weekly with XLK still looking healthy in the intermediate term. XLF also looks very bearish as it has made its way quickly into Lagging and continues moving in the bearish southwest direction. All others look bullish given their northeast headings.
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: Price dropped below the 20-EMA and is now testing the 50-EMA. This support is tenuous at best. The strongest support lies at the December low.
The RSI has now moved into negative territory below net neutral (50) and Stochastics have turned down. The VIX is still above its SMA on the inverted scale, but that hasn't prevented any price volatility. These readings are still high in the 20's. VIX readings can be considered "complacent" below 16.
SPY Weekly Chart: The rising wedge dominates the weekly chart. While the weekly RSI is still in positive territory, the weekly PMO has topped for the second time below its signal line--very bearish for the intermediate term.
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.
Interestingly, the GCI is on the rise and sitting at a bullish reading of about 78%. The SCI dropped below its signal line and is at a bearish reading of 57%.
New 52-Week Highs/Lows: New Highs contracted quite a bit which isn't surprising given today's decline. New Lows expanded and are not really oversold given what we saw in late November.
Climax Analysis: SPX Net A-D Volume, SPX DOWN/UP Volume Ratio, and SPX Total Volume all reached climactic levels today, so we conclude that it was a downside initiation climax (the first downside climax after a recent price top). Since today's volume was highly boosted by options expiration, and all the climactic readings have to do with volume, we should take this climax event with a grain of salt. That said, our expectation should be for the decline to continue.
*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 Neutral.
STOs both moved lower today but are in neutral territory. Note the deterioration and declining trend in participation of stocks > 20-EMA and rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is Neutral.
The ITBM/ITVM moved lower. The ITVM never even reached positive territory. Less than half of the SPX have crossover BUY signals.
Bias Assessment: As price began to rally to new all-time highs the bias was getting bullish. Given %Stocks > 20/50-EMAs are lower than the SCI reading, the short- and intermediate-term bias is bearish. Long-term we do have a bullish bias given the GCI is rising, but it is vulnerable given that %Stocks > 200-EMA is lower than the GCI.
CONCLUSION: Every indicator is in decline with the exception of the GCI, but even that could deteriorate since the %Stocks with price above their 50/200-EMAs are lower than the GCI reading. The downside initiation climax confirms that even in the very short term there is a bearish bias. All signs point to lower prices going into next week.
Erin is 10% exposed to the market with 90% in cash and available to trade.
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Bitcoin did not have a good week. There is a short-term declining trend and now price has broken below the symmetrical triangle. Expect a test of $42,500.
Interest rates have been moving mostly sideways. If investors decide to flee to Bonds again as the market waivers, rates will move lower.
10-YEAR T-BOND YIELD
So far support is holding at 13.5. The rounded top is still a concern. The indicators are negative. Stochastics have flattened in negative territory, the RSI is negative and the PMO is continuing lower below the zero line.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP is chopping around within a symmetrical triangle or pennant on the November flagpole. The PMO has turned up as have Stochastics. The expectation is a breakout.
UUP Weekly Chart: The flag is visible on the weekly chart. The weekly PMO is rising and isn't really overbought, but the RSI is overbought. The flag is bullish and although the RSI is overbought, it is still rising and could remain overbought if the Dollar breaks out of this flag as expected.
IT Trend Model: SELL as of 12/7/2021
LT Trend Model: SELL as of 12/3/2021
GOLD Daily Chart: Gold was up much of the day, but finished slightly lower on the close. It did log a higher high and higher low than yesterday so the chart still looks bullish. It may be struggling to overcome resistance at the October high, but with positive indicators, we do expect it to move higher.
The RSI is now positive and Stochastics are rising alongside the PMO. The Dollar does have bullish features, but we would expect it to at least test overhead resistance at the August/September highs given the bullish indicators.
GOLD Weekly Chart: This week price popped above the long-term declining trendline. We wouldn't call it a breakout given price really is just moving sideways and out of the declining trend. The weekly RSI is positive and the weekly PMO avoided a crossover SELL signal as well as negative territory. Discounts pared back somewhat so investors are slightly more bullish than in previous weeks. Gold should continue higher.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners had a nice rebound yesterday, but today GDX closed near its low and below the 20-EMA. We are encouraged by the rising PMO and Stochastics as well as a slight improvement in participation, but we still have %Stocks > 50-EMA lower than the SCI reading. While it could improve given the %Stocks > 20-EMA are higher than the SCI, it's still a neutral to bearish bias. Be careful here.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/30/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Yesterday price broke from the flag, but it immediately resumed the declining trend today. Still, the PMO did trigger a crossover BUY signal this week and Stochastics are now above 80. The RSI is still negative.
The 20-EMA and resistance at July highs are proving to be tough overhead resistance, but with the improvement on the PMO and Stochastics, we are optimistic.
USO/$WTIC Weekly Chart: USO turned back at gap resistance at $60. The weekly PMO has decelerated and the RSI is positive. Unfortunately both are deteriorating.
IT Trend Model: BUYas of 11/8/2021
LT Trend Model: BUYas of 11/5/2021
TLT Daily Chart: Bonds saw a gap up rally today. This isn't surprising given Bonds are the new safe haven when the market turns south. It seems to have usurped Gold in that regard. The PMO is flat, but the RSI is rising a somewhat positive. The problem indicator is Stochastics which are negative and still falling.
We do spot a tiny bullish double-bottom. The minimum upside target would put price at the closing high for December.
TLT Weekly Chart: The weekly PMO is rising and the weekly RSI is positive. We had a failed breakout, but if the market continues lower next week as we expect it to, Bonds will likely hold the next breakout.
Technical Analysis is a windsock, not a crystal ball.
-- Carl & 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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