The four indexes that we list "Scoreboard" signals for on StockCharts.com have all four triggered new Price Momentum Oscillator (PMO)--SPX, Dow 30, NDX and OEX. I'll cover the signal change on the SPX/SPY later in the report. Let's look at the other three.
All three have bearish double-tops. The Dow closed below its 200-day EMA and appears ready to test the support zone between 33,250 and 33600.
The NDX has spent most of its time below the 200-day EMA. The two attempts to rally there failed and now it also has a double-top. It's right at support and given the weak indicators, I don't think it will hold.
The OEX managed to close above the 200-day EMA...barely. Indicators are weak suggesting its support zone around $1950 will likely be tested soon.
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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: Short-term rotation is changing quickly. XLK managed to reach Leading only to be turned away. It is now traveling in the bearish southwest direction. XLY and XLV are showing strength. XLV which had been traveling south has now switched to a bullish northeast heading within Leading. XLC looks the most bearish as it pushes further into Lagging territory. All other sectors are hooking back around. XLRE has only just started to move northwest, but a weak market could turn that sector around quickly. I like XLF which has nearly entered Leading. XLP and XLU, defensive sectors, are both moving northwest which is an improvement. XLB and XLI are showing new strength but are still in the bearish Lagging quadrant. XLE continues to outperform and is starting to move back 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: NEUTRAL as of 1/21/2022
LT Trend Model: BUY as of 6/8/2020
SPY Daily Chart: The market celebrated Valentine's Day with lots of red. The SPY as well as the SPX lost their PMO BUY signals too. Like the indexes we looked at to begin this article, there is a bearish double-top visible in the short term. Price managed to hold above the 200-day EMA, but I would still consider $425 the strongest area of short-term support.
Indicators are bearish. The RSI is in negative territory, PMO SELL signal and declining Stochastics. The VIX also saw a higher reading. It put the VIX very close to its lower Bollinger Band on the inverted scale, but without a puncture, it isn't time to look for a price reversal. A puncture of the bottom Band generally leads to a very short-term upside reversal.
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.
Participation as represented by the SCI and GCI is moving lower. An SCI of less than 50% that is falling implies a bear market or at least a strong bearish bias. The GCI may hold a reading above 70% which we generally consider bullish, but it is falling quickly, especially for that indicator.
S&P 500 New 52-Week Highs/Lows: New Lows expanded today. Combined with few New Highs, we can see that the 10-DMA of the High-Low Differential has topped. It is almost always bad for the market when this indicator tops.
Climax* Analysis: We had a climax day again. It wasn't as strong as Friday's, but indicators were outside typical ranges. We read Friday's as a downside exhaustion climax. We believe this is also a downside exhaustion climax. Like Friday's, we don't think it will result in a big rally. If we are fortunate, we will see a pause.
*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.
STOs are falling, but not far enough to be considered oversold. They have plenty of territory to traverse before they're considered oversold. Notice the complete reversal on %Stocks > 20-day EMAs and %Stocks with PMOs rising. While those numbers are anemic, we've seen much lower.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The recent rally pulled these indicators out of oversold territory, but they are declining again. They are not oversold. In fact, if this is a bear market, these indicators can move much lower.
Bias Assessment: We already noted the bearish bias in the intermediate term and long term based on the declining SCI and GCI. Adding the other components of participation, we can see that the short-term bias is also quite bearish. We have lower percentages on Stocks > 20/50-EMAs than the SCI percentage. The long-term bias is deteriorating quickly given less than HALF of the SPX have price above their 200-EMAs. What's unfortunate is that none of the components of participation are oversold.
CONCLUSION: In the very short term, we do have a downside exhaustion climax. However, we saw how that turned out after Friday's exhaustion climax. Indicators are weak and getting weaker. Participation has faded but isn't oversold. If we're lucky, we will see a pause in this decline. We don't see volatility easing either given the VIX is still seeing higher readings. I am currently only 10% exposed to the market.
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Bitcoin is pulling back after hitting resistance at the 200-day EMA and the 45,000 level. There are two head and shoulders patterns here. First is the very large one with a rising neckline (left shoulder September top, head November top and right shoulder December high). This gives us a very bearish bias in the long term. However, Bitcoin has shed its 'bear market' status with a more than 20% rise.
The second head and shoulders is a reverse one in the short term. The left shoulder is at the mid-January low. The head is the January low. The right shoulder hasn't quite developed. Price will need to rebound here to form that right shoulder. Given the positive RSI, newly positive and rising PMO as well as the tick up in Stochastics, we should see that rebound.
Yields continue to press higher.
10-YEAR T-BOND YIELD
$TNX is traveling within a rising trend channel. The RSI is positive and Stochastics are staying above 80. The PMO isn't as bullish, but it is on a BUY signal. We could see rates pull back to the 20-day EMA and hold the rising trend.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar bounced off the short-term rising bottoms trendline. The RSI is now positive and both Stochastics and the PMO are rising out of oversold territory. In the short term, the Dollar looks bullish.
When we zoom out, we see that price is in a bearish rising wedge. While we may see more upside, overhead resistance looks strong at $26.
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: GLD is up against overhead resistance. With indicators looking very bullish, we expect to see a breakout here.
GOLD Daily Chart: Price has broken out of the symmetrical triangle. Notice that discounts pared back today. This tells us that investors are getting bullish on Gold. Look for that to move Gold prices higher. The next area of overhead resistance to watch will be at the June highs.
GOLD MINERS Golden and Silver Cross Indexes: GDX is also up against overhead resistance, but it should break out. The RSI is positive and not overbought. The PMO is now back above the zero line on a crossover BUY signal. What is most convincing is the increase in participation. 100% of Gold Miners have price above their 20-day EMA. That is well-above the SCI, giving us a strong bullish bias. We even have over 50% with price above their 200-day EMAs. We are looking for a test of the November high.
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 prices continue to press higher. USO is currently traveling within a bearish rising wedge. The RSI is very overbought and so is the PMO. Stochastics are oscillating above 80 so there is still internal strength. Given the strength of this bull market for Oil, we expect this rising trend to continue.
We can see on the longer-term daily chart that while the PMO appears very overbought, it has seen much higher readings. You'll also note that the RSI can stay overbought for some time.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds rebounded on Friday, but yields are again rising suggesting more downside ahead for Bonds. TLT has a negative RSI and falling PMO. Stochastics were attempting to rebound, but are now stuck below 20.
The longer-term chart suggests we will test $134, or more likely $132 at the March 2021 low.
Good luck and good trading!
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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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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Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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