Today Consumer Staples (XLP) saw a negative 20/50-day EMA crossover. That triggered an IT Trend Model "Dark Cross" Neutral Signal. It was a "neutral" signal given the 50-day EMA is above the 200-day EMA or better said, it is in a bull market. The chart isn't pretty, but there are a few bright spots.
The two possible positives are price hitting major support at the 200-day EMA and November highs. This could mean an upside reversal is possible at that level. Second would be that the relative strength against the SPY has been rising since the beginning of last December. So are they really bright? Maybe so, but remember a stock or ETF can outperform the SPY by not going down as fast. The bias is bearish based on falling participation-- %Stocks > 20/50/200-EMAs are all below the Silver Cross Index (SCI) and Golden Cross Index (GCI) readings. We also have an RSI falling below net neutral (50) and the PMO is moving quickly lower below the zero line, we'd advise caution. Be very selective.
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, 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: Yesterday's Comments Apply with the exception that XLB is now in Weakening:
"Winners and Losers are clearly defined on the RRG. XLK, XLY and XLF couldn't get much more negative as they sail in the bearish southwest direction while residing in the worse quadrant of Lagging. XLC doesn't look that bad, but we know that is not an area of the market with much promise right now.
XLB could find itself in Weakening tomorrow. Metals and Mining are mostly holding up this sector with a few pockets of strength in Chemicals. The rest aren't doing well and are keeping the ETF moving lower.
All other sectors look bullish. XLP was moving south, but is trying to hook back around. I will caveat XLI. It is similar to Materials, portions of the industry groups are finding strength like Defense and Shipping, but the majority are relatively weak. Be careful with selections from that sector."
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 was all over the place today. It was solidly down early on, then mysteriously rallied when President Biden announced the ban on Russian oil imports (which seemed to us to be counter intuitive). Finally, the rally failed and the market closed down. Price is now flirting with support at last month's intraday low at about $410 for the SPY.
We again have the lowest "closing" price since last summer and we were in a bull market back then. The indicators remain bearish with the RSI below net neutral (50) and the PMO continuing to move lower. Stochastics look particularly bearish.
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S&P 500 New 52-Week Highs/Lows: There was hope that we might see a positive divergence develop on New Lows, but our hopes were dashed when today's reading for New Lows pushed down past the late February reading. The 10-DMA of the High-Low Differential had been rising, but has now turned down and is again in negative territory.
Climax* Analysis: Other than high SPX Total Volume, there were no climax indications today. This morning we weren't sure that yesterday's downside initiation climax would have follow-through, but as noted earlier, the market was unable to sustain its midday rally. We watch for penetrations of the lower Bollinger Band on the inverted VIX as that usually marks very short-term rallies. It isn't working right now as we are in a bear market and investors' fears simply aren't abating.
*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 turned up slightly today, likely a response to the midday rally. Participation indicators continue to decline.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The ITBM/ITVM continued to move lower and are seated in what normally is considered oversold territory. However, we do believe there is more downside to endure and based on the 2020 bear market, these indicators are far from oversold territory.
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 firmly bearish. Not only is the GCI reading well below 70%, it is declining. With only 37% of stocks above their 200-EMA, the GCI should continue to deteriorate.
The intermediate-term bias is also bearish. The SCI is at a low 34% reading and continues to fall.
The short-term bias is bearish too. %Stocks > 20/50-EMAs are lower than the SCI reading.
CONCLUSION: We called yesterday's climax a downside initiation. During trading today I was thinking maybe we got it wrong and it was a downside exhaustion. Reality set in and investors went back to selling so the downside initiation climax did see follow-through. This bear market isn't over by a long shot. All is not lost as I've been noting there are pockets of strength in this market. I hosted "The Pitch" today and my colleagues, Mary Ellen McGonagle, Mish Schneider and Danielle Shay shared the areas of the market and stock picks they see as beneficiaries of this volatile market and the war. You can watch it HERE on YouTube or find it on StockChartsTV or its app.
I will be 20% exposed to the market tomorrow as I'm expanding my exposure to take advantage of the strength in Utilities, Energy and Materials.
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Yesterday's comments still apply:
"Bitcoin failed at overhead resistance and lost support at the 20/50-EMAs. The RSI has moved negative and the PMO triggered a crossover SELL signal. I'm looking for a pullback to 30,000. At that time we can evaluate if it will be ripe for an upside reversal."
Yields continued higher, putting more downside pressure on Bond prices.
10-YEAR T-BOND YIELD
After testing strong support at 17.0, $TNX had rebounded forming a bullish double-bottom. Today it closed above its 20-day EMA and the RSI moved into positive territory above net neutral (50). The PMO is bottoming. Stochastics are still indecisive. Overhead resistance here looks strong, but that close above the 20-day EMA suggests to me that yields will continue higher.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is rising strongly as our currency finds international favor. The RSI is topping in overbought territory above 70, but the PMO is rising strongly and isn't overbought, and Stochastics are oscillating above 80. We should be on the lookout for a possible island reversal, but more than like this is a pause before UUP moves even higher.
Price broke out of a bearish rising wedge. A bullish resolution to a bearish pattern is especially bullish.
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold is in a nearly vertical rally right now. The Dollar may be finding international favor, but so is Gold. It has always been considered a safe haven in turbulent times; and lets face it, we are living in very turbulent times right now. The discounts on PHYS are very high, but that is likely related to the run-up on Gold prices. PHYS owns physical gold and gold is expensive right now. It makes sense that those purchasing this closed-end fund are paying a discount on what the gold in that fund is actually worth right now. Just a guess as it is hard to imagine that investors are still that bearish on gold.
GOLD Daily Chart: Discounts are still somewhat high right now telling us that investors are still fairly bearish on Gold. Since sentiment is contrarian, high discounts aren't a bad thing. It's not visible on this daily chart, but we know $2100 is the next level of overhead resistance. If it can get past there, we would be seeing all-time highs for Gold. Our best guess is that it will hit that level and breakout. Inflation and war are clearly influencing investors toward this metal in particular.
GOLD MINERS Golden and Silver Cross Indexes: The GDX chart looks a lot like Gold. GDX isn't always in lock step with Gold, but higher Gold prices do put the wind at the back of Gold Miners. GDX broke out above the May high on very strong volume. The RSI may be overbought, and the PMO for that matter, but GDX isn't likely to slow down here. 100% of the stocks in this group have price above their 20/50-day EMAs. 93% have a 20-day EMA above the 50-day EMA. I expect Gold Miners and Miners in general to continue to move higher.
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 continues to move higher. You can't call it parabolic as we simply switched from a gently rising trend to a very steep one. It is usually difficult for a steep or near vertical rising trend to hold, but I suspect Oil will be an exception, at least until production and imports are sorted out.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT lost support at the 20-day EMA after failing to overcome resistance at the 50-day EMA. The RSI has just moved into negative territory and the PMO might top well below the zero line. It could be that the flight to Bonds has ceased as more investors pile into Gold or other obvious beneficiaries of the current geopolitical environment.
Good Trading and Good Luck!
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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