Since breaking out of a bullish falling wedge, Bitcoin has pushed past two resistance levels, the September lows/June high and the 50-day EMA. The indicators look very favorable. Price is now right up against short-term resistance at the December lows and mid-January high. It did pause there and currently isn't trading above it. We could see a small pause here. Bitcoin isn't done with overhead resistance even if it pushes past the current level. The 200-day EMA is waiting for it, but given it had no trouble with previous resistance levels, I would look for more buyers to come in on Bitcoin. We'll look at the long-term chart in the section on Bitcoin.
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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: The RRG is looking very bearish in the short term. There are a few bright spots. XLK is moving toward Leading with a bullish northeast heading. XLF is working its way back to Leading out of Weakening which is very bullish. Julius de Kempenaer has said he likes those reversals. XLE is losing steam, but is still doing well against the SPY given its distance from the center. XLY is on its way to Improving, but I'd be careful in the aggressive groups with the market looking so weak. XLP and XLU are still performing, but like XLE, are moving in the bearish southwest direction in Weakening. All other sectors look especially bearish.
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: The 20-day EMA is still holding as overhead resistance. The PMO is still technically rising out of oversold territory, but the RSI is negative and Stochastics are decelerating.
The one-year chart shows us price's failure to recapture the intermediate-term rising trend and the subsequent decline that followed. The December lows aren't providing much support as price bounces above and below 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.
After topping below their signal lines both the SCI and GCI continue lower. A top below a signal line is especially bearish. The SCI is well-below our 70% bullish level. While the GCI is above that level, it is losing ground quickly and should be considered neutral to bearish.
S&P 500 New 52-Week Highs/Lows: New Lows are technically contracting which is positive, but New Highs are paring back again. The good news is that 10-DMA of the High-Low Differential is bottoming and typically that is good for the market.
Climax* Analysis: There was no climactic activity today. The VIX is perched above its SMA on the inverted scale. I would normally consider that a sign of internal strength, but it really isn't rising on that inverted scale either.
*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 SOMEWHAT OVERBOUGHT.
The STOs continue to move lower which is bearish for the short term, but I do note participation actually ticked higher today. A little over half of the SPX have rising momentum which is a good start, but until STOs turn back up, I'd prepare for more downside.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The current decline or pause isn't hurting our IT indicators as they continue to contract out of negative territory. Additionally, %PMO BUY signals is still rising quickly.
Bias Assessment: The short-term market bias is still neutral given participation readings are only slightly higher than the SCI. The SCI alone tells us the intermediate-term bias is bearish. Long term, the bias continues to deteriorate from neutral to bearish as we see %Stocks with price above their 200-day EMA is lower than the GCI reading.
CONCLUSION: Indicators are very mixed. The PMO is rising, but STOs are falling. Participation is improving, but the SCI and GCI are still falling. I trust my STOs to tell me short-term market direction and they are declining suggesting lower prices ahead. The ITBM/ITVM are rising, but the SCI is falling. I would tread very carefully. In today's free trading room, there were a lot of buyers. I am keeping my exposure low at 15% until my STOs at least turn back up.
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I showed you the short-term chart of Bitcoin to open so here is the longer-term chart. The feature that worries me is the very large double-top, but I will not argue with the break from the declining trend and breakout above the 50-day EMA. Previously, the 20/50-day EMAs held as resistance on the decline. Seeing a breakout above those moving averages after months of decline still keeps me in the bullish camp.
Rates paused today. After the big moves last week, it isn't that surprising.
10-YEAR T-BOND YIELD
Indicators are very positive on $TNX, including a brand new crossover BUY signal. We are in a rising rate environment and I don't see an end anytime soon.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP is clinging to its rising bottoms trendline. However, indicators are still very negative so we don't expect to see a rally yet.
In the longer-term, you can see a bearish rising wedge developing.
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold finally broke above key moving averages. Price dropped out of a bearish rising wedge and is now beginning to loosely form a rising trend channel. The RSI just hit positive territory and Stochastics are rising. The PMO turned up today.
GOLD Daily Chart: Given this rising trend and positive indicators, we expect to see Gold rally higher. The Dollar looks particularly weak and that will grease the wheels of Gold.
GOLD MINERS Golden and Silver Cross Indexes: Really nice breakout for Gold Miners today! Gold's rally helped, no doubt. The indicators are looking much better. The RSI is now positive and notice the huge increase in participation of stocks above their 20/50-day EMAs. That pushes them above the SCI reading, giving us a bullish bias in the short term.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: With USO topping today, we have adjusted our rising trend channel into a rising wedge. I am a bit worried that we are looking at a reverse island forming. That would imply a gap down soon. The RSI is very overbought. The PMO is very overbought, but it is still rising unlike the RSI. Stochastics are still very strong. I'm not yet looking for a breakdown of the rising trend, but USO is certainly vulnerable given the possible reverse island.
When we look at the longer-term USO chart (1-year + 1-month), we do see that the PMO has seen much higher readings, as has the RSI back in February. I still like Oil and Energy, but we could see a pause or decline. The RRG certainly suggested a loss of relative strength.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT finished slightly higher as the 20-year yield pulled back slightly. It did nothing for the indicators, not surprisingly. The RSI is still negative and the PMO is falling after topping and generating a crossover SELL signal well-below the zero line.
I don't think this support level will hold here. I would look for a decline to at least $134.
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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