The equal-weight SP500 ETF (RSP) set a new all-time high today, but the SPY did not. What does this mean? It is a clear representation of how mega-cap stock leadership is weakening. For now, the stocks within the SPX are holding up since RSP is hitting new all-time highs even as the SPY is not. However, this could be considered a warning because when the mega-cap stocks begin to correct, it drags the entire index down. Over time this phenomena causes RSP to decline by a higher percentage than the SPY in a correction.
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: XLF looked the most bearish on the RRG yesterday, but it has reversed course and now has a bullish northeast heading. Materials (XLB) is now the only sector residing in the Leading quadrant, but it is traveling in the bearish southwest direction and could land in Lagging even before it hits Weakening. Defensive sectors have now tumbled into the Weakening quadrant suggesting that defensive sector leadership is ending. Up and comers, XLY, XLE and XLI are now in Improving. They are traveling with a bullish northeast heading. XLK is working back toward Leading which is bullish. XLC still may hit Leading, but with the current southerly direction it isn't a given.
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 set a new intraday all-time high, but closed back within the consolidation zone. There is still a negative OBV divergence visible. Total Volume popped today setting up a possible climax. The VIX is seeing a squeezing of the Bollinger Bands. This could cause the VIX to puncture the upper Bollinger Band on our inverted scale. Punctures or downturns on the VIX lead into declines in price.
The RSI is positive and the PMO is rising on a crossover BUY signal. However, the PMO is flattening which means momentum is being lost as price consolidates. Stochastics are oscillating above 80 which suggests internal strength is still there.
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 has now risen above 70% which is bullish for the intermediate term. The GCI is at a bullish 80% and rising.
S&P 500 New 52-Week Highs/Lows: New Highs popped in climactic fashion today. The 10-day SMA of the High-Low Differential continues rising which is generally bullish.
Climax* Analysis: Yesterday's upside initiation climax didn't amount to much, but new intraday all-time highs were set and we had a higher intraday low than yesterday. Volume Ratios did not confirm the climactic Total Volume and New Highs, nor did breadth. Therefore we are considering today a NON 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 to OVERBOUGHT.
STOs continue to fall suggesting there could be problems ahead. So far the decline in these indicators has resulted in consolidation. Two thirds of the SPX have rising momentum and that did tick slightly higher today. However, we didn't see the same from %Stocks > 20-day EMAs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
As I predicted yesterday, with fewer stocks having rising momentum than stocks with PMO crossover BUY signals we saw that indicator fall today by 2%. The ITBM/ITVM are still rising which is bullish, but they are now in overbought territory, with the ITBM being extremely overbought. A downturn on those indicators will definitely worry me.
Bias Assessment: The short-term bullish bias continues given there are more stocks > 20/50-EMAs than there are "silver crosses", meaning the SCI could continue to rise. However, there are cracks beneath the surface given we are beginning to see fewer stocks > 20-day EMA. The bullish bias in the long term continues.
CONCLUSION: Yesterday's upside initiation climax didn't result in much and today we came very close to another climax given the elevated Total Volume and New Highs. If that had come to pass, I would be calling it an upside exhaustion, but alas, it didn't. Still I would keep that in the back of your mind. With STOs in decline, the ITBM/ITVM overbought, negative OBV divergence and deterioration of participation in the short term, I will continue to exercise caution.
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Yesterday's comments still apply:
"The reverse flag or pennant formation suggests that Bitcoin will breakdown. Indicators are in agreement--the RSI is negative, the PMO is headed for a crossover SELL signal well-below the zero line and Stochastics are flat, not rising."
Interest rates continued to fly higher with breakouts now above November highs.
10-YEAR T-BOND YIELD
The 10-year yield continued its flight higher but has now hit overhead resistance. Still, the RSI is positive and the PMO is rising bullishly alongside Stochastics. This resistance level could hold $TNX back, but with so many positive indicators, we expect a breakout that would have rates exceeding their March/April highs. Banks are benefiting right now and could continue to see higher prices even if the market reverses course.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar was mostly unchanged and kept its position above the 20-EMA. There is a positive OBV divergence which is bullish. The RSI is positive, but the PMO hasn't quite confirmed this recent rally back above the 20-day EMA. Stochastics are rising out of oversold territory. More than likely we will see more sideways movement out of the Dollar.
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: SELL as of 12/3/2021
GLD Daily Chart: We've adjusted the rising wedge annotations today to take into account yesterday low. That rising trendline held up with Gold's rally today. We are still looking at a negative OBV divergence and rising wedges are bearish chart patterns. We're still waiting on GLD to get a Golden Cross to match the one on $GOLD.
GOLD Daily Chart: Price is holding above the key moving averages and the short-term rising trend is intact. Indicators are somewhat mixed though. The RSI is positive, but the PMO is flat and not rising. The biggest problem for me are Stochastics. They are now falling and are below 80.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are still in a rising trend and today we saw the SCI reverse higher. Participation ticked up, but not impressively. Still readings are above the SCI and that gives us a short-term bullish bias. The RSI turned up just above net neutral (50). The PMO is flat and below zero, but still on a BUY signal. Stochastics are oscillating above 80 suggesting internal strength. As long as price holds above the 20/50-day EMAs, I'll continue to hold a positive outlook for Miners.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO rallied again today and closed above last week's high. Indicators are very bullish with a positive RSI and rising PMO. Stochastics are even rising again above 80. There is a lot of internal strength here so I would expect USO and the Energy sector in general to continue to rally.
IT Trend Model: BUY as of 11/8/2021
LT Trend Model: BUY as of 11/5/2021
TLT Daily Chart: TLT lost important support today. The PMO has now dipped into negative territory and the RSI is falling further into negative territory. Stochastics look terrible as they have turned down in very negative territory.
The intermediate-term rising trend was officially broken today. We don't see rates falling anytime soon so Bonds will continue to suffer. The next strongest level of support is at the October low and April tops.
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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