We had an excellent follow-through rally day. The rally was broad today with all sectors up. I am ready to look at this as a bear market rally in progress. But...the bear market is still in force so we do have to be cautious on entering new positions. Stops are a necessity now.
I apologize for the delay in tonight's report. My mother-in-law broke her arm. We are setting up home care to be in place before we leave for Europe, but until then it's my husband and I along with a close friend who will be needed there 24/7. Gotta love the "ships in the night" phrase as I've had maybe 10 minutes total "in person" time with my husband as we switch off from days to nights for past three days. I know that the majority of you understand. It's not anything new in life, it just happens; of course, you never expect it when the time comes. Things are pretty crazy right now which is why reports are going out so late. My comments will be brief tonight.
You'll note two new Price Momentum Oscillator (PMO) crossover BUY signals on both XLF and XLK. Participation has improved greatly, enough so that it provides a foundation for more rally. However... (always a "however or but"), XLK in particular is in a bear market and could even see a LT Trend Model "Death Cross" SELL signal. XLF has an SCI rising, but remains at a paltry 27%. We need to play it safe with stops until we see more stocks with price above their 50-day EMAs in both sectors.
*** Working VACATION March 23rd to April 1st ***
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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: We saw some interesting changes on the RRG. XLC, XLY and XLF have reversed into the bullish northeast direction. XLK is traveling northward toward Improving, but is also moving somewhat westward.
XLP is now the bearish sector as it travels in the bearish southwest direction. It should hit Lagging soon.
XLB is one of the more bullish given its northeast heading within Leading.
All other sectors are in Leading, but are starting to move toward Weakening.
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: Today's follow-through with a break from the longer-term declining trend and close above the 50-day EMA tell me at the very least we are likely looking at a bear market rally.
Stochastics are positive and rising and the PMO is rising on a crossover BUY signal. One issue is that the VIX has penetrated the upper Bollinger Band. Many times that will signal a downside reversal, but we do need to keep in mind that VIX is very elevated and in the grand scheme isn't really overbought.
Here is the latest recording:
Topic: DecisionPoint Trading Room
Start Time: Mar 14, 2022 09:01 AM
Meeting Recording Link.
Access Passcode: March@14
** There will be no free Trading Room on Monday 3/28 **
S&P 500 New 52-Week Highs/Lows: Today's expansion is New Highs looks good, but we aren't seeing them to the degree we did during the last bear market rally. As I said yesterday this could be due to the "beat down" nature of the stocks participating in the current rally.
Climax* Analysis: Once again, unanimous, but modest, climax readings for another upside exhaustion climax. SPX Total Volume contracted and the VIX hit the upper Bollinger Band. This could imply a pullback or pause.
*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 popped and are not overbought. %Stocks > 20-day EMA and %PMOs Rising are now getting overbought, particularly for a bear market.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
ITBM/ITVM are rising in a more meaningful way right now. Two-thirds of the SPX have PMO BUY signals which looks very promising.
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 is improving and that is changing the bias at least in the short term. We now have a much higher percentage of stocks above their 20/50-day EMAs than the SCI. We would read this as a short-term bullish bias.
The SCI is rising in oversold territory. It is still reading well below 70%. We like that it is rising, but we will keep the intermediate-term bias as neutral.
The GCI is still declining and is also below 70%. The percentage of stocks > 50/200-day EMAs is below the GCI reading so we will leave the long-term bias as bearish but improving.
CONCLUSION: I believe that today was confirmation that a bear market rally is here. However, we could see a stumble based on the upside exhaustion climax and VIX penetration of the upper Bollinger Band on our inverted scale. Indicators are rising and we see a marked improvement in participation. We also have a clear bullish bias in the short term. As noted in the opening, I believe that we can start nibbling again, but proceed with caution and stops.
I am 15% exposed to the market.
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Yesterday's comments apply:
"There is now a short-term double-bottom visible. The pattern isn't confirmed until we see a breakout at the confirmation drawn along the middle of the "W". If that pattern is confirmed, the minimum upside target would take price to $47,500. The indicators are looking more healthy with the RSI reaching positive territory above 50 and the PMO triggering a crossover BUY signal. The PMO has also reentered positive territory above the zero line. Stochastics are also rising and above 50."
Rates continue to trend upward.
10-YEAR T-BOND YIELD
The indicators look great with the positive and not overbought RSI and PMO as well as Stochastics oscillating above 80 suggesting internal strength. We expect all yields will begin rising further.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: We now have a bit of double-top forming on the Dollar. It won't confirm until price closes below the 20-day EMA and that hasn't happened yet. Paired with indicators that are deteriorating, there is a good chance we will see the Dollar take back more gains.
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold managed to recapture the 20-day EMA for support. The RSI has turned up and is in positive territory. The PMO and Stochastics are still bearish.
(Full Disclosure: I own GLD)
GOLD Daily Chart: I like this bounce off the 50-day EMA. Discounts on PHYS spiked a bit, but we are still seeing a declining trend in discounts which suggests investors are more bullish on Gold. That usually accompanies higher prices.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners rallied likely due to Gold's rise, but also in response to the market rally in general today. Participation is outstanding, reading above the bullish 70% threshold with the exception of the GCI. That should change given the %Stocks > 50/200-day EMAs are higher than the GCI. I like this group.
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 rallied above the 20-day EMA as the Energy sector ruled the roost today. The PMO and Stochastics are slowly turning back up and the RSI is back in positive territory. I expect to see higher prices here for a possible trade entry.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: A bearish reverse flag has formed which takes the shine off the bottoming Stochastics. The PMO and RSI are pretty much confirming the bear flag. I would expect to see a break downward from this price cluster.
The next support level is at $131 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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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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