The market finished higher today but a look at the intraday 5-minute candlestick chart warns us that the late day decline could lead to more downside on Monday. Notice that price hit overhead resistance and was instantly turned away. The selling was heavy the last hour of trading. This has the appearance of a "last gasp". The market broke from a declining trend which is bullish, but that late day sell-off is worrisome as is the 5-minute PMO's late day SELL signal.
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
For the Week:
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.
For the Week:
RRG® Daily Chart: Yesterday three sectors looked particularly bullish, but now we are down to only one sector traveling with a bullish northeast heading, Technology (XLK). Somewhat bullish is XLY, but it is Lagging and still quite far away from just the Improving quadrant. XLF is hooking around from Weakening which is bullish. All others are traveling southward or southwest, both are bearish headings.
Intermediate-Term (Weekly) RRG: When we take a longer-term view, most have bullish northeast headings with the exception of XLK, XLY and XLC which have all been beat down in the intermediate term. XLRE and XLB are losing steam in Leading. Intermediate term, XLI, XLF and XLV are nearing Leading which is very bullish in the longer term.
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 closed higher but failed to set a higher high than yesterday. We also see a lower low. Price did open and close above support at the December low. The PMO is rising again as are Stochastics and the RSI. The VIX finished lower on the day and closed above its moving average on our inverted scale which implies there is some internal strength in the short term.
Price basically hit the bottom of the prior rising trend and the 50-day EMA and balked. This doesn't look encouraging.
SPY Weekly Chart: The market did close up on the week as it did last week, but overhead resistance along the longer-term rising bottoms trendline and 17-week EMA held. The weekly PMO is still headed lower, but we do see the weekly RSI is slightly back above 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.
Despite the market closing higher on the day, the SCI and GCI continued lower. Both have topped below their signal lines which is especially bearish.
The following table summarizes participation for the major market indexes and sectors. We consider readings above 70% to be bullish. Note how few sectors and indexes there are with bullish readings.
New 52-Week Highs/Lows: New Lows expanded today. The 10-DMA of the High-Low Differential continues to rise gently. These lows usually followed by higher prices.
Climax Analysis: SPX Total Volume was above the one-year daily average, but no climaxes were registered. This week featured three climaxes all of which implied lower prices (two upside exhaustion climaxes and yesterday's downside initiation climax). Instead, the market did manage to close higher on the week.
*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 OVERBOUGHT.
With STOs backing off today, we would look for lower prices next week. Participation of stocks > 20-day EMA was down slightly despite the positive close. Normally we would expect to see more stocks with rising momentum after a positive close, but instead we saw fewer stocks with rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The ITBM/ITVM began contracting out of oversold conditions this week. They are still oversold and interestingly we are seeing more PMO BUY signals. Overall this chart still looks bullish.
Bias Assessment: We have a bearish bias in all three timeframes and it is getting worse. Participation of stocks > 20/50-day EMAs is below the SCI bearish 43% reading. Long term, the GCI reading is bullish at 74%, but it is declining and there are far fewer stocks with price > 200-day EMAs. This chart suggests further downside ahead.
CONCLUSION: The rally looked very promising but now price has been turned away at overhead resistance. Worse are the STOs turning lower with weakening participation in all three timeframes. At this point, we would look for price to test support at about 4300 for the SPX. The intermediate-term chart isn't really bearish yet so support at that low could hold, but more than likely intermediate-term indicators will turn bearish by that time. Erin is 15% exposed to the market.
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We added the bullish falling wedge annotation last week. It was confirmed today with the breakout in Bitcoin. This is a very strong area of overhead resistance. We were looking for a test of $30,000 before that resistance level would be broken. The breakout today suggests that might not need to happen. The RSI jumped into positive territory and the PMO accelerated higher on its oversold BUY signal. Stochastics are also very encouraging. The next resistance level is the 50-day EMA. As noted, indicators are positive and do suggest a breakout.
Yields soared today. This will likely be the norm this year.
10-YEAR T-BOND YIELD
After bouncing around in a support zone and just above, $TNX maintained its short-term rising trend. The PMO nearly triggered a crossover SELL signal, but today it turned back up. The RSI is positive and not yet overbought. Look for $TNX to continue higher.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP spent this week in free fall. Consequently the indicators have turned very negative with the PMO topping long before overbought territory was reached. Stochastics are negative and the RSI is negative and not yet oversold.
The original rising trend was breached earlier this month, but price managed to right itself. This week with the hurried decline, we don't expect the Dollar to rally again until it reaches the 200-day EMA at a minimum.
UUP Weekly Chart: It isn't completely surprising to see the Dollar fail here given this resistance line has multiple touches in 2019/2020. The weekly PMO has turned down suggesting more decline.
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GOLD Daily Chart: Considering the crash of the Dollar this week, we would expect to see more out of Gold this week. It did finish higher over 1%, but it continued to struggle with overhead resistance at the 20/50-day EMAs. Today's candlestick is a bullish engulfing so we should see this resistance overcome.
Interestingly discounts began to expand this week telling us that investors are growing more bearish on Gold. However, looking back, they are far more bullish than they were last month.
GOLD Weekly Chart: We have a symmetrical triangle chart pattern. These are continuation patterns and suggest that we should see an upside breakout given the primary trend before this formed was rising. We like Gold moving forward, particularly given the Dollar's demise.
GOLD MINERS Golden and Silver Cross Indexes: GDX is holding above support, but is trapped beneath the 20/50-day EMAs. The chart doesn't look that bearish, but participation is meager in all time frames. We need to see Gold perform, but even if it does, if the market in general struggles, GDX will find itself in a headwind.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: After pausing this week, Crude Oil gapped up today. It formed a bullish engulfing candlestick yesterday. Today's candle looks somewhat bearish given the long wick and close near the open. The indicators are bullish, although both the RSI and PMO are overbought. It doesn't look like that will be a problem as Oil is in a strong bull market so overbought conditions are likely to persist.
USO/$WTIC Weekly Chart: USO broke out along with $WTIC. USO is now working on closing the gap from 2020. The weekly RSI and PMO are overbought, but they are still rising bullishly.
IT Trend Model: NEUTRAL as of 1/5/2022
LT Trend Model: SELLas of 1/19/2022
TLT Daily Chart: With yields breaking out it should be no surprise that TLT failed to hold support. The PMO has turned down well below the zero line and triggered a crossover SELL signal. The RSI is firmly in negative territory. Stochastics are negative and not oversold.
If this level of support is lost at the April/May tops, we don't see strong support again until $134 or even $132.
TLT Weekly Chart: The long-term rising trend has now been broken on TLT. The weekly PMO just dropped below the zero line and the weekly RSI is negative and falling. The weekly chart suggests $130 is the next support level.
Technical Analysis is a windsock, not a crystal ball.
-- Carl & Erin Swenlin
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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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