Consumer Staples (XLP) has had the worst heading and placement on the daily Relative Rotation Graphs (RRGs) for over a week. The sector has been enjoying a rally but when we look at relative strength against the SPY, we know it has been moving higher much more slowly.
Today, the 20-day EMA crossed above the 50-day EMA for an IT Trend Model "Silver Cross" BUY signal. $76 looks like overhead resistance and if not there, $77 or a little further above at the all-time high. There really isn't anything terribly bearish about the chart. The RSI is positive and not overbought, the PMO has just moved into positive territory and Stochastics are reading near 100.
The Silver Cross Index (SCI) is at a bearish 40%, but it is rising and today had a positive crossover its signal line. The Golden Cross Index (GCI) is reading above 70% which is bullish. %Stocks > 20/50-day EMAs are reading higher than the SCI which gives us a short-term bullish bias. Long-term bias is mostly neutral given there are about the same percentage of stocks with price above 50/200-day EMAs as the GCI.
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.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
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: XLY and XLK are the only sectors in the Leading quadrant. XLY is hooking down, but certainly has plenty of room in the Leading quadrant. XLK has a mostly bullish heading taking it further into Leading.
XLF is in Improving but it has begun to travel in the bearish southwest direction. XLC is moving in the bullish northeast direction, but still has quite a bit of ground to cover before it reaches Leading.
Interestingly XLRE which triggered a new IT Trend Model Silver Cross BUY signal yesterday and XLI are in the Lagging quadrant. XLRE is it at least is traveling more northward while XLI is moving mostly westward further into Lagging.
XLP is just looking bearish despite its Silver Cross BUY signal today as it moves with slight northwest direction within the most bearish Lagging quadrant.
The other sectors are in the Weakening quadrant. XLE is moving in a more northward direction with the possibility of avoiding the Lagging quadrant altogether. While XLB is trying to reverse back into 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: Yesterday's upside exhaustion climax was somewhat prescient given today's pullback. This looks like a textbook pullback toward the breakout point. However, this has set up a negative divergence between price tops and OBV tops.
We have an IT Trend Model "Silver Cross" BUY signal. The RSI did turn down but is positive and the PMO is still rising and not overbought. Stochastics are still favorable as they remain above 80.
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 also have a negative divergence with price.
Climax* Analysis: Not a climax day.
*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 UP and the condition is OVERBOUGHT.
Yesterday's comments still apply:
"I find it positive that the STOs rose today, but we currently have negative divergences with price. We also note that %Stocks > 20-day EMA is clearly overbought. %PMO BUY signals is also overbought."
Intermediate-Term Market Indicators: IT indicators are overbought and rising. %PMO BUY signals is very overbought.
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 timeframes is neutral to bullish. It is bullish given %Stocks > 20/50/200-day EMAs is higher than both the SCI and GCI. The problem is that both the SCI and GCI are below 70% which is what we consider "bullish".
CONCLUSION: You can see from the ETF Tracker ChartList report that today's rally was led by areas of the market that we have been calling "war beneficiaries", i.e. Commodities, Miners, NatGas, Oil and Gold. I consider these to be "defensive" areas of the market right now. Generally when defensive sectors/groups lead the market, the market is preparing for a decline. At this time, the market is above support (prior resistance) and is positioned for a rally continuation. However, continue to consider all of your positions as "short-term". Stops are definitely not a bad idea given negative divergences and overbought indicators could be signaling an upcoming decline.
I'm presently 15% exposed to the market. I'm honestly sad that I couldn't (wouldn't) expand my exposure ahead of this rally, but being on vacation and the volatility of the market keep me on the sidelines.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact email@example.com for more information!
Yesterday's comments still apply:
"Bitcoin has broken out above 45,000 and the 200-day EMA. RSI is positive, but a bit overbought. Other than that the PMO and Stochastics suggest prices will eventually move higher."
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.
10-YEAR T-BOND YIELD
$TNX broke its rising trend, but it was very steep and not likely to hold much longer. This has taken the RSI out of overbought territory. However, as a consequence, the PMO is trying to top.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Yesterday's comments still apply:
"Why did I say that the Dollar was helping the exchange rate? The Dollar dropped back below the 20-day EMA. The PMO is now on a SELL signal and Stochastics are topping before reaching above 80. I exchange my Euros tomorrow so hoping it will hold above the 50-day EMA a few days longer, but it doesn't look good."
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold continued to rally, but was bounded by the 20-day EMA and bear flag. The PMO still looks negative. The RSI is positive, but staying mostly neutral. Stochastics aren't showing much interest in moving higher.
GOLD Daily Chart: The support zone between $1875 and $1910 is holding up. Additionally, the 50-day EMA looks fairly sturdy for support as well.
GOLD MINERS Golden and Silver Cross Indexes: We have a symmetrical triangle formation. These are continuation patterns. This means we should expect an upside breakout. The indicators are bullish enough to expect it soon.
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 bearish double-top is disintegrating and indicators are beginning to looks a bit more bullish. The RSI is staying in positive territory and the PMO is attempting to trigger a whipsaw BUY signal. Let's keep a close eye on Stochastics as they are currently flat but in positive territory above net neutral (50).
This rebound came at exactly the right time to keep the intermediate-term rising trend intact.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT has broken out of a bullish falling wedge. Today's candlestick is a "bullish engulfing" candlestick, a one-day pattern that suggests we will see more upside tomorrow.
Indicators are rising, but the RSI and Stochastics are still in negative territory and the PMO has not yet triggered a crossover BUY signal. I don't expect Bonds to move much past resistance at the February low.
Good Luck & Good Trading! I'll post pictures when I have a decent internet connection which means it might take until I get home...sadly in just TWO days :-(
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
(c) Copyright 2022 DecisionPoint.com
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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.