During today's DecisionPoint Show, I pointed out the surge in Renewable Energy (no pun intended). I'd already been watching it last week, but didn't trust it yet. I don't know if I trust it now, but the chart has certainly "renewed" my interest (pun intended). In today's show I discussed the Solar ETF, TAN, but also gave a list of notable stocks in this space that have improving technicals.
Before I get too far, one of the problems is that TAN is in an extreme bear market. It's fallen over 44% since topping in November. The 50-day is well below the 200-day EMA. We have to temper out bullish expectations. Still, there is a bullish double-bottom that was confirmed with today's gap up breakout above the confirmation line. The RSI has moved swiftly positive and the PMO is now accelerating higher after an early February crossover BUY signal. While we don't have an actual OBV positive divergence because OBV lows are flat, I still find it favorable given lower lows in price. You'll notice that I included a stop level. If price drops that far, it will close today's gap and make the trade suspect.
The longer-term picture on the weekly chart is interesting. Right now the weekly RSI is about to hit positive territory and the weekly PMO is turning up. There is a positive OBV divergence on the weekly chart. Finally, there is a large bullish falling wedge that tells us to look for price to break above the pattern. I've annotated a possible upside target should the breakout occur.
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
SECTORS
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: XLK is the only sector in Lagging, but it has reversed into a bullish northeast heading. XLF has the most negative heading, southwest. XLY is showing some improvement with in the Improving quadrant given it is moving slightly eastward. Still I don't like the set-up. Defensive sector XLP has reversed and has a bearish southwest heading. XLV looks very bullish as it enters Leading. XLE is in Weakening and moving with a bearish heading; however, I don't believe this sector is bearish in the least. XLB is hooking and moving toward Weakening, but is still firmly in the bullish Leading quadrant. All other sectors have bullish northeast headings with XLI and XLU ready to hit the Leading quadrant soon.
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: Price finished lower on the day settling below the 200-day EMA. The RSI has flattened in negative territory. The PMO is still technically rising. Note the VIX penetrated the lower Bollinger Band on the inverted scale; that usually means an upside reversal.
Total Volume was elevated. Stochastics are rising, but haven't moved into positive territory above net neutral (50).
Recording Link for 2/28 Trading Room:
Topic: DecisionPoint Trading Room
Start Time: Feb 28, 2022 08:54 AM
Meeting Recording Link.
Access Passcode: Feb#28th
S&P 500 New 52-Week Highs/Lows: New Highs expanded despite the lower close. The 10-DMA of the High-Low Differential hasn't really turned up yet. It is very oversold and a solid bottom would add to a bullish bias.
Climax* Analysis: We had high total volume and a VIX puncture, but nothing else suggests today was a climax day. Last Friday's upside initiation climax resulted in churn rather than a rally.
*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 OVERSOLD.
STOs continue to contract which is bullish. More than half of the index have rising momentum which could get a bear market rally started.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
IT indicators are rising again out of oversold territory which bodes well. %PMO BUY signals is at an anemic 38%, but that number is beginning to improve.
PARTICIPATION and BIAS Assessment: 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 long-term bias is bearish given the GCI is below 70% and still falling. %Stocks > 200-day EMA is less than 50% now which will likely keep the GCI in decline.
The intermediate-term bias is neutral to bearish. The SCI is at a very low 38%, but it is rising.
The short-term bias is also neutral to bearish given %Stocks > 20/50-EMAs are about the same or slightly higher than the SCI. This should enable the SCI to continue to rise, but the percentages are so low, we can't say they are bullish.
CONCLUSION: We are expecting a bear market rally. Indicators seem to favor this conclusion. In particular, the STOs and ITBM/ITVM are rising out of oversold territory. The VIX penetrated the lower Bollinger Band on the inverted scale and that usually precedes higher prices. The market bias is still neutral to bearish, so for now, bear market rules apply. Proof is that we ended up with churn vs. a rally off downside initiation climaxes Thursday and Friday. We are looking for higher prices, but the war may thwart the technicals.
I remain comfortably exposed to the market at 8%. I'm contemplating expansion, but with so much uncertainty, I may just nibble. Areas of the market of interest? Cybersecurity, Gold, Specialty Chemicals, Defense and Crude Oil. Tomorrow in DecisionPoint Diamonds I will look at stocks that should benefit from global unrest.
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BITCOIN
Bitcoin is rallying strongly. Price has now overcome three areas of resistance today, the 20-day EMA, the 50-day EMA and $42,000. The indicators are bullish with the positive RSI, nearing PMO crossover BUY signal and rising Stochastics. The next resistance level is at the 200-day EMA and $45,000.
INTEREST RATES
Interest rates tumbled today as the flight to Bonds continues.
10-YEAR T-BOND YIELD
The technicals on $TNX have moved south quickly. It appeared the rising trend channel would remain mostly intact. Additionally support at was broken at 18.5. The 50-day EMA is nearby to provide support, but given the global economic situation, we could see rates fall even further.
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The rising wedge is alive and well on the Dollar chart. UUP finished higher but formed a bearish filled black candlestick. This means that while price closed higher than the prior day, it closed beneath its open suggesting bearish activity under the surface. The PMO is rising and the RSI is positive, but seeing internal strength failing as Stochastics decline, I expect to see price continue to churn within the ascending wedge.
GOLD
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Another filled black candlestick, but not nearly so ominous given the long tail on the candle. Price may've closed beneath the open, but it closed much higher than its lows on the day. The rising trend is intact and when price pulled back it held support and the PMO is accelerating higher on GLD.
GOLD Daily Chart: Like the Dollar, Stochastics are declining. The PMO for $GOLD topped and didn't accelerate higher, mainly because GLD finished higher than $GOLD. I still like Gold and investors are liking it better given the pullback in discounts.
GOLD MINERS Golden and Silver Cross Indexes: GDX paused today and closed beneath resistance at the November high. There are few cracks in the foundation in the short term. Stochastics are falling and %Stocks > 20-day EMA is trending lower. However, the SCI is now above 70% which is bullish and the GCI leapt higher last week. I like the group, but a pause in the Gold rally could pose a problem. If you own any Miners, I would consider tightening or setting hard stops.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: The rally in Crude Oil continues and with the sanctions on Russia, even higher prices are likely. This is one area of the market that should continue to perform well. The PMO is overbought, but is working on another crossover BUY signal. The RSI is very positive, but will hit overbought territory soon. I wouldn't be too worried about that given the RSI can stay overbought for weeks.
BONDS (TLT)
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds had a splendid day as yields tumbled. TLT vaulted the 20-day EMA but was stopped short at $140 level resistance. Given the improving indicators and investors' seeking out Bonds for their portfolios, I do think we will see TLT rally up to the 200-day EMA around $144.
Good Luck & Good Trading!
Erin Swenlin
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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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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