It shouldn't be too surprising to see the GSG chart below. As we continue to move into an inflationary environment, one of the areas that usually benefits is commodities. GSG didn't fare well in November, but since its low it has rallied. Back at the end of December we saw an IT Trend Model "Silver Cross" BUY signal. That was preceded by an oversold PMO crossover BUY signal. The PMO is continuing to rise and isn't really overbought yet based on its high in October. The RSI is positive but somewhat overbought. However, we know when a stock is in a bull market that condition can persist. Volume has been pouring in. Stochastics are oscillating strongly above 80. Relative strength is shooting higher and higher. Today's gap up breakout bodes well.
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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: [[comments]]
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 is now sitting on support, but it is rather flimsy. The strongest area of support lies at September highs and December lows around $450. Indicators are getting uglier with the RSI moving further into negative territory and the PMO still pointed downward. Stochastics are falling quickly in negative territory and are not that oversold.
The rising trend channel is still intact, but a dip to $450 would begin to breach it.
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.
Today the SCI had a negative crossover its signal line. It is also now below 70% and can be considered bearish for the intermediate term. The GCI had already topped last week but hasn't quite crossed below its signal line. It is at a bullish 81%, but we can see that that long-term bullish bias is deteriorating.
S&P 500 New 52-Week Highs/Lows: New Highs contracted, but are still elevated enough to confirm today's climax.
Climax* Analysis: About mid-morning Carl and I were pretty sure that today would be a climax day, and ultimately every single indicator gave us a climax reading (the UP/DOWN Volume Ratio wouldn't be relevant on a down day). Since price has been in decline, we consider it to be a downside exhaustion climax. The VIX is confirming this given it has punctured the lower Bollinger Band on our inverted scale. A selling exhaustion doesn't mean we have an extended rally ahead, we could. More than likely we will see maybe a day or two of higher prices before it falls apart again. As I told Carl, it could resolve with buying in the morning, followed by some selling.
*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 to OVERBOUGHT.
Today the STOs traveled downward together. We've had quite a few mixed days where one was up and the other down. Seeing them in agreement and falling tells me any upside we see will likely not hold for long. Only one-quarter of the SPX have rising momentum. That's a lot of pressure on a select few stocks to prevent a meltdown. Note that %Stocks > 20-EMA and %PMOs Rising are not oversold yet. It could get worse and it probably will.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM and ITVM are both overbought and falling. Only 41% of stocks still hold PMO BUY signals, but given only 26% have rising momentum, that number will get much worse. It should, it is far from oversold right now.
Bias Assessment: The bias is now firmly bearish in the short and intermediate terms. Far fewer stocks have price above their 20/50-day EMAs than silver crosses. Long term has a bearish bias as well given their are fewer stocks above their 200-day EMA than have golden crosses. So while 81% is a bullish reading for the GCI, it is deteriorating and will likely deteriorate further.
CONCLUSION: Investors finally seem to waking to the possibility of longer-term inflation and rising rates. The technicals are still very ugly with the short and intermediate-term biases moving more bearish each day. We have one bright spot, the downside exhaustion climax. We should get some reprieve over the next day or two. We don't think it will last long. It could be as short as a positive morning followed by selling that finishes with the market down on the day. There are pockets of strength like Commodities, Coal, Pipelines and most everything in the Energy sector. I am 30% exposed, but looking to shrink that to at least 20% this week, if not more.
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Bitcoin failed at overhead resistance along the 20-day EMA and the December lows. This is clearly a strong support zone. The RSI is negative but flat and Stochastics are the same. The PMO is on a BUY signal which suggests to me that we should see this support level hold. If the PMO turns down, support will be very vulnerable here.
Rates soared today. We expect to see long-term rates hit May highs very soon.
10-YEAR T-BOND YIELD
Looks like a bull flag that resolved as expected to the upside. The indicators are very bullish although the RSI is overbought. Given we saw the RSI stay overbought in February and March for weeks, it's not a problem right now. We should see a digestion period soon like we did last week.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar has now rallied back above the 50-day EMA. The declining trend is still intact and the 20-day EMA has been a problem previously. Indicators are improving somewhat with the RSI rising and nearly above net neutral (50) and the PMO decelerating. Stochastics are also rising nicely. We could see this declining trend finally broken.
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold continued to pullback and now sits on the 20-day EMA. The RSI is still positive and the PMO is mostly flat. Short term, Stochastics are falling so we don't expect much of a bounce here. With the Dollar looking more bullish, Gold will likely continue sideways in the current trading range between $167 and $171.
Full Disclosure: I own GLD.
GOLD Daily Chart: Discounts are trending lower suggesting investors are more bullish on Gold, it just hasn't been reflected in price yet.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are failing, but support is near at $30. Unfortunately, participation has thinned considerably. The RSI is now negative and Stochastics have turned down before reaching 80. Given the PMO is still on a BUY signal, I'm looking for support to hold here, but the fragile participation tells us to be prepared if it doesn't.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Crude Oil remains the shining star in the darkness of a weak market. USO has broke to the upside from a bearish pattern and has now overcome resistance at the October high. The RSI is overbought now but I would point you to October where it remained so most of the month. The PMO is not yet overbought. Stochastics are moving sideways above 80 showing now short-term weakness.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: BUY as of 11/5/2021
TLT Daily Chart: TLT gapped down as the 20-year yield took off again today. The RSI is negative and falling.
The PMO is also falling and while it may look oversold on the chart above, it is far from oversold. Stochastics have turned down. Support is near at the April/May 2021 tops, but we don't expect yields to drop. TLT is in for more downside.
Technical Analysis is a windsock, not a crystal ball.
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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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