After the market made new rally highs on Tuesday, we have been looking for a pullback. Yesterday and most of today, the market showed little interest in fulfilling our expectations, but it broke down in the last hour of trading, closing near today's lows.
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 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® 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: It turns out that Tuesday's break above the line of resistance was a fakeout, and today's decline was confirmed by sharply expanding volume.
Here is the latest recording:
Topic: DecisionPoint Trading Room
Start Time: Mar 21, 2022 08:58 AM
Meeting Recording Link.
Access Passcode: March@21
S&P 500 New 52-Week Highs/Lows: New Highs expanded slightly today, but remember that the reading is based upon intraday highs. It is not likely that the reading was that high on a closing basis.
Climax* Analysis: It appears that Tuesday's upside exhaustion climax was prescient. Today saw unanimous climactic readings and an expansion of SPX Total Volume as confirmation for today's downside initiation climax. The climax is right where we would expect it to be -- two days off the recent price top -- and indicating a continued decline.
*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 retreating from OVERBOUGHT. We thought that the price top came a little later than implied by the STO peaks earlier this month.
Intermediate-Term Market Indicators: The intermediate-term market trend is turning DOWN and the condition is OVERBOUGHT. IT indicators have reached the top of the recent range, and the % PMO Xover BUY Signals indicator has topped.
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 bias in all three time frames is neutral to bullish. It is bullish given %Stocks > 20/50/200-day EMAs is higher than both the SCI and GCI; however, all three are headed downward. Another problem is that both the SCI and GCI are below the bullish 70% level and likely to turn down soon.
CONCLUSION: As of today's close, SPY is about 6.2% below the all-time highs, but the Silver Cross and Golden Cross Indexes are reading around 60%. This tells me that this month's rally has once again been carried by the large-cap stocks, with the smaller-cap stocks not participating -- a thoroughly unhealthy situation. I will go out on a limb and say that I think the bear market rally has ended, and, when I consider the number of times that the market has rallied big from itty-bitty pullbacks like this one, I will say that it is really windy out here.
Erin is presently 15% exposed to the market.
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The bearish head and shoulders pattern did execute, but it never reached the minimum downside projection (about 15,000). Now a bullish cup with handle has formed, albeit with not much of a handle yet.
Rates are continuing to pullback, but most are still in solid rising trends.
The Yield Curve Chart from StockCharts.com gives us a different view of the inversions taking place. The red line should move higher from left to right. Inversions are occurring where it move downward.
10-YEAR T-BOND YIELD
The steep rising trend line in March was basically parabolic and doomed to failure. We expect $TNX to continue upward once a less accelerated trend line is set.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: For the most part the dollar has been consolidating this month.
We can see a rising trend channel dominates the one-year daily chart.
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: We were looking at a reverse flag breakdown (not annotated), which implied lower prices ahead. Now we have a double bottom, which is bullish. The confirmation line is drawn across last week's top.
GOLD Daily Chart: The saucer with handle is still the dominant formation. The double bottom implies that the handle complete and that higher prices are ahead.
GOLD MINERS Golden and Silver Cross Indexes: The symmetrical triangle formation is a continuation pattern, and gold's positive picture should translate into more upside for the 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: As we discussed with gold, the symmetrical triangle formation implies higher prices ahead for crude. The administration's decision to release one million barrels per day from the strategic reserve is just a drop in the bucket, so to say. It will have minimum impact on increasing supply for the U.S. which uses 19,687,287 barrels per day, or for the world which uses 97,103,871 barrels per day. We should expect higher oil prices through a flurry of high volatility.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: While we expect price to break out of a falling wedge, which it did, it is most likely that bonds will remain in a long-term down trend.
The declining tops line drawn from the December top dominates the chart.
Good Luck & Good Trading! Erin will be back in command tomorrow.
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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