Today the Nasdaq 100 ($NDX) saw the dreaded "Death Cross" of the 50/200-day EMAs. This is a serious development. We do not see these often on the indexes. The RSI has been negative almost this entire year and Stochastics haven't been above 80 since last year (oscillation above 80 on Stochastics implies short-term internal strength). The PMO did just trigger a BUY signal, but price has been unable to stay above the 20-day EMA and unlike the SPY it hasn't come close to even testing its 200-day EMA since mid-February. These are the largest-cap stocks out there mostly in growth areas like Technology. As I discussed yesterday, the war will likely pressure those with a global presence.
It's sister, the Nasdaq, saw its LT Trend Model Death Cross SELL signal a little over a week ago. We're still waiting for a Death Cross on the Dow Industrials, SP500 and SP100.
The SP400 (IJH) and SP600 (IJR) have rallied and may avoid the very bearish 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
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, XLY and XLF (just reached Lagging) are in Lagging with bearish southwest headings. XLE just hit Leading again and is moving even further away from the center which demonstrates that outperformance against the SPY is sizable.
XLC and XLRE look promising as they both have bullish northeast headings within Improving. XLB is still moving south toward Weakening, but we know there are pockets of strength within that sector worth pursuing.
Besides XLE, the most bullish sectors are XLU, XLI, XLV and XLP which are all traveling in the bullish northeast direction.
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: Well yesterday's upside initiation climax did result in a move above the 20-day EMA, but unfortunately it couldn't hold there and finished down and back in the trading range between $430 and $438. The PMO is trying to generate a crossover BUY signal, but the RSI is negative and falling.
Stochastics are flat and the VIX is oscillating below its moving average on the inverted scale. That suggests vulnerability and weakness.
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S&P 500 New 52-Week Highs/Lows: New Highs were about the same with a slight increase in New Lows from Tuesday. The 10-DMA of the High-Low Differential is about to top below the zero line which is quite bearish.
Climax* Analysis: No climax today. Total Volume is beginning to contract but remains above its annual average.
*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 NEUTRAL.
STOs look pretty good as they reach positive territory and continue to rise. However, we see less than half of the SPX with price above their 20-day EMA and %PMOs Rising ticking lower.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The ITBM/ITVM again contracted in oversold territory and we are seeing an expansion of BUY signals. Of course we have only half of the index on PMO BUY signals.
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 are lower than the GCI which will likely keep the GCI in decline.
The intermediate-term bias is bearish. The SCI is at a very low 37% and continues to fall.
The short-term bias is improving given there are a higher percentage of stocks greater than their 20/50-EMAs than stocks with silver crosses. However, we would read it as more neutral than bullish.
CONCLUSION: The market finished lower again and is struggling with resistance. The bright spot may be small- and mid-caps right now, but they aren't what you would call "strong". Our primary indicators, the STOs and ITBM/ITVM are rising, but our other primary indicator, Participation is seriously lacking. There are pockets of strength out there, but realize you're still taking on more risk than usual given we are in a bear market. Add to that we are at war with Russia. If things go bad, they are going to go REALLY bad. We aren't talking about a few difficult down days, we could be looking at some very serious drops in a VERY short timeframe. Protect yourself wherever you can with stops or constant supervision.
I am 10% exposed to the market.
I was asked about where you can read about "Bear Market Rules". Here is a link to my most recent article on the subject.
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Bitcoin took back some gains. The biggest issue is its failure to overcome resistance at the February high and 200-day EMA. The RSI took a beating, but is still positive. The PMO just hit positive territory and Stochastics are still above 80. I'm not that optimistic here despite the indicators. The most important piece of information is the failure to overcome resistance.
Yields took a pause today after a volatile week.
10-YEAR T-BOND YIELD
$TNX fell a little over one basis point which caused a failure to overcome resistance at the 20-day EMA and January top. The RSI topped beneath its signal line and the PMO is declining. Stochastics did bottom in oversold territory, but have plenty of room to fail on the way toward 80.
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:
"UUP is now testing the top of the bearish rising wedge. With the PMO rising on an oversold crossover BUY signal, the RSI positive and not overbought, and Stochastics rising again, we could see a bullish conclusion to this bearish pattern."
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: We see a symmetrical triangle building on GLD. These are continuation patterns meaning they break in the direction of the prior trend. The prior trend is up, so we expect and upside breakout.
(Full Disclosure: I own GLD)
GOLD Daily Chart: Yesterday's comments still apply:
"Discounts are contracting overall which suggests investors are getting more bullish on Gold. The RSI is positive, the PMO is still rising and Stochastics reversed in positive territory. We like Gold moving forward."
GOLD MINERS Golden and Silver Cross Indexes: GDX continues to look bullish. The indicators are very positive, as is participation. We would look for Gold Miners and Miners in general to continue to enjoy this rally.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO paused today with an over 1% decline. It makes sense given its run up that took it outside of the more gentle rising trend. The indicators are positive with the exception of the RSI which is very overbought and now declining on today's pause. I still like it going forward, but we may see consolidation of the rapid rally.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yields fell which helped TLT. The chart isn't great right now. We have a bearish megaphone pattern (suggests more and more volatility ahead). The RSI is negative. The PMO is flat and directionless. Worst is Stochastics which topped before getting above 80. Bonds are becoming a hide out and the more buyers of Bonds, the lower the yields will go.
Good Luck & Good Trading!
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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