Today the Materials Sector (XLB) fell over 1%. Price was already well-below the 20/50-day EMAs so it was only a matter of time before a "dark cross" occurred. A Dark Cross is a negative 20/50-day EMA crossover. If the crossover occurs above the 200-day EMA, it generates an IT Trend Model "Dark Cross" Neutral Signal. Had the crossover occurred below the 200-day EMA, it would've been a SELL signal.
None of the sectors except possibly Energy have been unaffected by the current correction. XLB now has an oversold RSI, but it is still declining. The PMO is falling and isn't oversold yet. The Silver Cross Index (SCI) tells us that only half of the sector have a 20-day EMA > 50-day EMA. Participation percentages are much lower which gives us a bearish bias in the short and intermediate terms. The Golden Cross Index (GCI) is still at a bullish 89%, but only 49% have price above their 200-day EMA and that gives us a long-term bearish bias. Stochastics have turned up out of oversold territory, but remain in negative territory.
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: XLE still has the best relative strength against the SPY which is no surprise. XLU and XLP have the most bullish configuration as they travel in a bullish northeast heading, moving further into Leading. XLB and XLF dropped into Weakening and haven't turned around. XLK is trying to reach Improving, but overall it is still a Lagging sector. XLY is moving further into Lagging, holding the weakest position on the RRG. XLRE and XLV are beginning to show relative strength and have moved into Improving. XLC is still in Leading but has a very negative southwest heading. XLI is still in Leading, but is mostly directionless right now.
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: Neutral as of 1/21/2022
LT Trend Model: BUY as of 6/8/2020
SPY Daily Chart: It was another interesting trading day with the market up to start the day. Fed Chairman Powell's remarks today clearly unsettled investors as the market began to drop in earnest after they were made. The FOMC is still being cagey about their future actions and that didn't make investors happy. We can see that the rising trend was broken as the market collapsed into the close. On the bright side, the 5-minute PMO is looking bullish and the 5-minute RSI is rising out of oversold territory.
The RSI on the SPY is oversold but not making a move higher yet. The PMO is still falling and isn't oversold yet. The typical range for the SPY's PMO is between -2 and +2. It's only at -1.16. Total Volume was again elevated with most of it coming in on the late afternoon sell-off. Stochastics are rising which is positive, but they remain solidly in negative territory.
This certainly is a viable area of support and with price managing to stay above, there is a chance we could see price pause the decline here... not end 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.
The SCI is now starting to look slightly oversold in the near term, but we will likely need to see more damage before it recovers. The GCI is picking up speed on its decline, but remains at a bullish 77%.
S&P 500 New 52-Week Highs/Lows: We have annotated a positive divergence between New Lows and price lows.
However, the more diverse NYSE Composite New Lows confirmed the recent price lows.
Climax* Analysis: No climax today. The VIX closed back within the Bollinger Bands today, but it was still higher than yesterday's close. This could mark an area for a small bounce, but I'd like to see the VIX not only close within the Bands, but also finish at a lower reading than the prior day. It's a lukewarm signal at best.
*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 EXTREMELY OVERSOLD.
The STOs both moved slightly higher which is encouraging given how oversold both of them are. We are still seeing fewer stocks > 20-day EMA and with only 7% of stocks with rising momentum, it will be difficult to fuel a lasting rally.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The ITBM and ITVM can be considered oversold now. However, they aren't as oversold as they need to be. Notice also that the PMO while it appears oversold on the 1-year daily chart, on this longer-term chart, it shows that it is at the lowest reading we've seen since the bear market in 2020.
Bias Assessment: Yesterday's comments still apply:
"There is still a strong bearish bias in the short and intermediate terms. Participation of stocks > 20/50-day EMAs is far lower than the SCI. This means the SCI will continue to see damage. The long term has a bullish bias based on the GCI being above 70%, but we know there are fewer with price > 200-day EMA. This means the GCI will continue to move lower. That is what is causing the long-term bias to be bearish."
CONCLUSION: The market is still internally weak, but with short and intermediate-term indicators in oversold territory, we could see price hold at this level. I wouldn't count on this as the end of the current correction because we know IT indicators can get much more oversold. I expect a pause since the STOs are moving back up out of oversold territory. It doesn't mean it will be quiet are less volatile, it means that I don't expect a huge leg down just yet. It is not the time to expand your exposure. In fact, I have now pulled it back to 10%.
I'm 10% exposed to the market.
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Yesterday's comments still apply:
"Bitcoin is trying to bottom before hitting strong support at $30,000. Indicators are improving, but the PMO is still technically in decline. I am watching for a bottom here, I just think it will need to hit that $30,000 number first. When it does, that is when I expect to see a Bitcoin recovery as bottom fishers reenter." This current rally doesn't look solid.
Yields moved higher today and based on the FOMC, we could see them move higher in the coming months. The 30-year yield is now challenging its October highs.
10-YEAR T-BOND YIELD
Another strong rally for $TNX. It nearly reached last week's high. The PMO has bottomed above its signal line which is especially bullish. The RSI is rising and is positive. Stochastics held up at net neutral (50) and are beginning to rise on a positive crossover the signal line. Look for yields to move higher.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: I wasn't that bullish on UUP yesterday given two filled black candlesticks, but today it continued to rally. Now we have a PMO crossover BUY signal and a positive, rising RSI. Stochastics have moved above 80. Unfortunately for Gold, the Dollar looks like it will test the November high.
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: GLD confirmed the bearish rising wedge with today's breakdown. It is technically in a rising trend channel like $GOLD below. However, it appears that price is now going to test the bottom of the channel and the 200-day EMA. The PMO is already topping and the RSI almost hit negative territory.
Full Disclosure: I own GLD.
GOLD Daily Chart: $GOLD also has a rising trend channel and of course, like GLD, it appears ready to test the bottom of the channel. Stochastics are still mostly positive as they are above 80. Interestingly, discounts pared back today which suggests that investors are more bullish on Gold. It is certainly primed to move higher, it just seems to need a test of key moving averages first.
GOLD MINERS Golden and Silver Cross Indexes: GDX took on the chin given Gold's decline and the market's decline. It is now reaching support and is testing the rising bottoms trendline. This looks like a sturdy support level, but the RSI and Stochastics are negative. Participation continues to weaken as well. I expect to see support hold, but "under the hood" there is a bearish bias.
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 continues higher. Some of this could be attributed to unrest with Russia and Ukraine. There is a big unknown as to whether Russia will tighten its supply to Europe. That concern could mean continued higher prices for Crude Oil and possibly Natural Gas as well.
Indicators are very positive with positive RSI, rising and not overbought PMO, and rising/positive Stochastics.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELLas of 1/19/2022
TLT Daily Chart: With yields pressing higher, TLT fell heavily. We do not expect this area of support to hold. The RSI is negative. The PMO has topped below its signal line and is below the zero line. Stochastics turned down before it hit positive territory.
If this level of support is broken, the next area of strong support doesn't really arrive until $134. We would honestly look at $132 as a target.
Technical Analysis is a windsock, not a crystal ball. --Carl 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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