I've been keeping an eye on Natural Gas (UNG) as I always do. After a lengthy decline out of the October high, it appears that UNG is bottoming.
Price does have overhead resistance to deal with, but this is the first PMO BUY signal we've had since it began its decline in October. The RSI just hit positive territory and Stochastics are rising and above 80. Volume is coming in and it is starting to outperform the SPY again. I presented this to my DP Diamonds subscribers today. I always put stop levels on "Diamonds in the Rough" when I bring them to the table. The stop is set below the 20-day EMA and support at the December tops.
The weekly chart is shaping up too. The weekly RSI is rising and the PMO has decelerated and appears ready to bottom. If price can reach the October high, that would be a 57% gain.
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 (Daily): The RRG is fairly easy to read. Strong bullish sectors are XLE, XLF, XLI, XLB and XLP. XLU was looking bullish given its reversal into a positive northeast heading out of Weakening but it has veered west. XLRE and XLV are about to approach the Lagging quadrant. XLK and XLC are both very bearish as they travel in the negative southwest direction within Lagging quadrant. XLY is an interesting case. While it is headed southerly, it is also angling a bit toward Leading.
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: Given the big recovery on high volume yesterday, we suspected that we would see higher prices today. We certainly got that with price now bouncing off the 50-day EMA and closing above the 20-day EMA.
The PMO has decelerated, but hasn't quite turned up. The RSI has moved back into positive territory and Stochastics are beginning to turn up just below net neutral (50).
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 and GCI diverged slightly today with the SCI ticking up 0.20% and the GCI dropping 0.20%. Both have bullish readings above 70%.
S&P 500 New 52-Week Highs/Lows: New Highs contracted today despite the rally. Additionally, the 10-DMA of the High-Low Differential has topped and is moving lower. This could be a problem in the intermediate term.
Climax* Analysis: We have climactic readings on SPX Net A-D Volume, SPX Total Volume, and the UP/DOWN Volume Ratios, particularly the NYSE Up/Down Ratio. With yesterday having hit a price low for the short decline, we have to call today's action an upside initiation climax. The VIX rose above its EMA which is also bullish in the very short term.
*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.
The STOs were mixed again. The ITBM is falling still and the ITVM turned up slightly. These indicators are in neutral territory so it could go either way. It is positive to see more stocks with rising momentum and price > 20-day EMAs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM and ITVM are also mixed today with the ITBM falling and the ITVM rising. We didn't see any improvement in %PMO BUY signals.
Bias Assessment: Participation ticked up slightly today. It wasn't enough to erase the short-term bearish bias as both %Stocks > 20/50-EMAs are lower than the SCI reading. Long-term the bias is mostly bullish, but it could deteriorate given %Stocks > 200-day EMAs is lower than the GCI reading and the GCI topped today.
CONCLUSION: Today's rally triggered an upside initiation climax which suggests we will see higher prices over the next day or two. Indicators are mixed in the short and intermediate terms. We expect to see the market move higher this week, but until we see a larger increase in participation, consider any rally very short-term. Earnings season is upon us so we will see how the market receives positive and negative reports. If positive earnings aren't rewarded, that will give us some excellent insight.
I am 15% exposed to the market with 85% in cash and readily available to trade. I will likely enter Natural Gas (UNG) this week and one other position which will likely bring my market exposure to 20-25%.
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Well, maybe I need to hire my 13-year old nephew who bought $5 in Bitcoin on Friday. Apparently he knows how to pick price bottoms. Bitcoin is starting to firm up on support at $40,000 and the indicators are beginning to look bullish again. The RSI is rising out of oversold territory and the PMO is about to turn back up. Stochastics have also turned back up in oversold territory.
Rates move slightly lower today, but with the FOMC prepared to raise rates, a rising rate environment will be the new normal.
10-YEAR T-BOND YIELD
$TNX dropped nearly two basis points today, bringing it back into the support zone between 17.0 and 18.0. It was overbought so this is helpful as it brought the RSI out of overbought territory. Stochastics turned over, but are still above 80 which is bullish. Look for support to be tested at 17.0.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The filled black candlestick was right on in predicting today's decline. Price closed beneath the 50-day EMA which sets up a likely decline toward support at the October high.
Indicators are bearish and getting more bearish.
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: SELL as of 12/3/2021
GLD Daily Chart: GLD rallied strongly. The PMO was able to avoid a negative crossover, preserving the current BUY signal. Stochastics have turned up and the RSI is back above net neutral (50). GLD missed a Long-Term Trend Model "Golden Cross" BUY signal by only a hundredth of a point.
GOLD Daily Chart: $GOLD did see a golden cross of the 50/200-day EMAs. Discounts on PHYS are quite elevated which means investors are very bearish on Gold still. Sentiment is contrarian so this is bullish. The stage is set for Gold to rally strongly given the Dollar has lost support at the 50-day EMA.
GOLD MINERS Golden and Silver Cross Indexes: With Gold rallying, the wind was at the back of Gold Miners. The participation picture changed overnight with %Stocks > 20/50-EMAs spiking above the SCI percentage. This caused the SCI to turn back up in oversold territory. The PMO has whipsawed back into a crossover BUY signal. The RSI just moved back into positive territory and Stochastics have bottomed. If Gold continues to rally as we suspect it will, this industry group will benefit greatly.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: We've redrawn the rising wedge on USO after today's strong rally. The indicators are very bullish so I'm not expecting a breakdown as the pattern calls for. However, it does remind us that overhead resistance at the October high is nearing and a pullback might be necessary before it can breakout.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: BUY as of 11/5/2021
TLT Daily Chart: TLT bounced off support at the October low as the 20-year yield topped. Overhead resistance is already nearing at the November lows. Indicators are still leaning bearish, but both Stochastics and the RSI are rising now out of oversold territory. I'm still not a fan of TLT as I believe yields will begin rising again very shortly.
Technical Analysis is a windsock, not a crystal ball.
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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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