Today the 50-day EMA crossed below the 200-day EMA on the S&P 400 ETF (IJH). This is commonly known as a "death cross". It confirms that a stock/index/ETF is in a bear market.
Looking at the indicators, we see a flat PMO (zero momentum), negative RSI (price in the lower half of its two-week price range) and Stochastics topping in negative territory (below 50=internal weakness).
The Silver Cross Index (SCI) measures how many of the members of IJH have a 20-day EMA above the 50-day EMA. Currently less than one-third of the index have "silver crosses". The Golden Cross Index (GCI) measures how many stocks are on a "golden cross" or have a 50-day EMA above the 200-day EMA. Less than half of the members of IJH have golden crosses. Unfortunately it's not going to get better given the %Stocks > 50/200-day EMAs are reading less than both the SCI and GCI percentages.
You'll also note that IJH is underperforming the SPY and has been since the beginning of February. The SPY is in a bear market and has been falling hard. The relative strength line tells us that IJH is moving down faster than the SPY.
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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: The most bullish sectors on the chart are XLB, XLRE and XLV. They reside in Leading and have the bullish northeast heading.
The runner-ups are XLE, XLU and XLI. While they reside in the bullish Leading quadrant, they are seeing some southerly movement.
XLK and XLY continue to look extremely bearish as they move in the bearish southwest direction while in the worse category, Lagging.
XLF is Lagging, but does have a northward heading that could eventually bring it into Improving.
XLC has been residing in Improving for weeks now. It had been traveling eastward toward Leading, but that faded fast and it is now headed into Lagging.
That leaves us with XLP. It isn't obvious, but XLP has moved from a bearish southwest heading to a northeast heading. It is looking like it could make a comeback into Leading which would be especially bullish.
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: One big problem that I have been monitoring is the ever increasing steepness of the declining trend. Each time price attempts to rally it is unable to tap the prior declining trendline, thus speeding up the angle of descent. We do see a symmetrical triangle forming. These are continuation patterns. This means that they 'continue' the prior trend. Well, folks, the prior trend was down so we would expect a break to the downside.
The RSI remains in negative territory below net neutral (50). This means that price has been residing in the bottom half of its 2-week trading range. The PMO continues lower and Stochastics topped in negative territory. Granted we see some support available at this level of $410. However, the strongest support lies at $400.
Here is the latest recording:
** IMPORTANT **
There were issues with screen sharing on video #1, you only need to watch the second video! For some reason Zoom wouldn't let us delete the first recording.**
Topic: DecisionPoint Trading Room
Start Time: Mar 14, 2022 09:01 AM
Meeting Recording Link.
Access Passcode: March@14
S&P 500 New 52-Week Highs/Lows: New Lows are expanding again, but until they move below their prior low, they could be setting up a positive divergence should price drop below the February low. I suspect if price were to drop below the February low that we will see a large expansion of New Lows, so it is highly doubtful we will see that positive divergence.
Climax* Analysis: No climax today. Total Volume was elevated on the decline, but Volume Ratios didn't move outside our threshold of 3.0. The VIX continues to travel below its moving average on the inverted scale. This means the market is internally weak. Friday's downside initiation climax is seeing follow-through. We can't seem to get follow-through on positive climaxes. This is indicative of a bear market.
*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 SOMEWHAT OVERSOLD.
Very interesting to see the STOs contract on today's big decline. I'm not reading too much into it. %Stocks > 20-EMA shows a sickly 28%. Only a little over a third of the index have rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
I can't remember the last time we saw a cluster of the same reading on the ITBM/ITVM for over a month. They are certainly oversold, but it hasn't resulted in a rally out of the intermediate-term declining trend. %PMO BUY signals is below 50% and moving lower. That indicator is NOT oversold. We need to see more PMO SELL 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.
Participation continues to dwindle. We now have %Stocks > 20/50/200-EMAs all reading below the SCI and GCI percentages. This tells us that there isn't any way for those two indicators to rise and improve. The bias is bearish in all three timeframes.
CONCLUSION: Friday's downside initiation climax saw follow-through today. Indicators are getting oversold, but most are not oversold enough. We're now testing support at $410 for the SPY and 4100 for the SPX. This support level doesn't look sturdy so I expect to see $400 tested. Given the market bias is firmly bearish in all three timeframes, we aren't looking for a reversal here. Stops should be "hard" and a regular review of your portfolio's charts is necessary while we are in a bear market. Certainly we will have a good day or two as we move forward, but overall it isn't a market that I want to be heavily exposed to which is why I am at 20% exposure right now.
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Bitcoin is working its way through a trading range between $32,500 and $45,000. Right now short-term support is holding at $37,500, but I would look for it to breakdown further and test the bottom of this trading range.
Interest rates are spiking ahead of the FOMC meeting minutes on Wednesday. This is likely the new normal for awhile.
10-YEAR T-BOND YIELD
After pulling back to support at 17.0, $TNX has been kicking it into gear. We now have a new annual high for the 10-year yield after a six+ basis point rally today. The PMO has only just given us a crossover BUY signal and the RSI is positive and not overbought. Stochastics are above 80. We could see some consolidation here, but ultimately we expect rates to move even 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 taking a break after breaking above the bearish rising wedge pattern. The indicators are very positive. The PMO is overbought, but it is still rising. We expect higher prices for UUP.
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold is now testing its rising trend and the 20-day EMA. The RSI is still positive, but the PMO has topped in overbought territory and Stochastics are falling.
GOLD Daily Chart: Strongest support lies at $1920. That would be an excellent area to consider for entering a position in Gold.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are pulling back with Gold. I would wait patiently for this pullback to reach $35 before getting into a Gold Miner as Stochastics the topping PMO suggest further downside. Participation under the surface remains strong so I don't expect the decline to move past $35.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: We're not exactly sure why Crude Oil has been hit so hard except to say it got very overbought and needed a cooling off period. $70 support appears it will hold given the bullish hammer candlestick.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds are getting hammered with the steeply rising rates. It has lost support at $134. The RSI is negative and not oversold, the PMO just triggered a crossover SELL signal and Stochastics are still in decline.
The next support level is at $130 which aligns with the March 2021 low.
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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