I have alerts set up to tell me when the eleven S&P sectors have PMO crossovers to the upside or the downside. Materials (XLB) have been popping out PMO crossover signals for over a month. Do we trust this BUY signal right now? Maybe. There are bullish aspects to the chart. I spotted a bullish falling wedge pattern. It won't be confirmed until we get a breakout. I wouldn't trust a breakout unless we see price vault the 50-day EMA.
The RSI tells us that price is currently in the bottom of its two-week price range (reading below 50). Yet, we have the "Silver Cross Index" (%Stocks with a 20-day EMA > 50-day EMA) about to give us a positive crossover. We do note that the SCI is at a bearish 39%. Only half of the members have price above their 20-day EMA. The %Stocks > 20/50-day EMAs is higher than the SCI, suggesting a neutral to short-term bullish bias. The long-term bias is firmly bearish given that the %Stocks > 50/200-day EMAs is less than the "Golden Cross Index" (GCI) reading (GCI tells us the %Stocks with a 50-day EMA above the 200-day EMA. This tells us that we won't see an upside reversal on the GCI.
Bottom Line: I like Materials (XLB), but not all of the industry groups are contributing. Additionally, with Gold pulling back, Miners are also pulling back. I might consider a purchase of XLB if it does find purchase above the 50-day EMA which would also confirm the bullish falling wedge.
*** Working VACATION March 23rd to April 1st ***
I will be taking a trip to the Netherlands and Belgium to see the tulips! As always, I will post pictures and give you a brief diary of my adventures for those interested. Here is how publishing will be affected.
Schedule:
DP Alert - The DPA will be published each market day as usual, but comments will be abbreviated. You will get the latest charts, but if there are no significant changes, comments will be carried over.
DP Diamonds - Week of March 21st: Five picks on 3/21 and five picks on 3/22 - No Diamond Mine or Recap // Week of March 28th: No Diamonds Reports (You will be compensated with an additional week added to the end of your subscription)
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
SECTORS
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: Let's start with the bearish sectors. XLC is about to enter Lagging. This is no surprise as this sector has been beaten down and hasn't really resuscitated yet. XLK, XLY and XLF are in Lagging. XLF is at least moving in the bullish northeast direction, but XLY and XLK are still headed westward, further into Lagging.
Interestingly, XLP is in Weakening and could hit Lagging soon. This is a defensive sector and given the state of the market, I'm surprised it isn't showing more relative performance.
XLE has hooked back around, but it will probably take a bit longer before we see it move to Weakening. XLRE, XLU, XLV and XLI are well established in Leading, but have taken on a southerly heading.
The most bullish on the RRG would be XLB which is showing improved relative strength as it moves in the bullish northeast direction within 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: The symmetrical triangle continues to build. Today's big rally didn't give us a breakout and resistance is still very sturdy at the 20-day EMA and January lows.
Indicators are neutral to bearish. The RSI and PMO are both rising, but the RSI is in negative territory and the PMO is mostly flat.
Here is the latest 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: Not much to say about this chart. Given the big rally, it is surprising that we didn't see more New Highs, but that is a testament to this being a bear market.
Climax* Analysis: Today we got an upside initiation climax, but since the end of February we have had seven (7) initiation climaxes (up and down), and not one of them initiated any follow through price moves. This one may be diferent, but we'll believe it when we see it.
*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 are contracting and near zero. This looks very much like their reaction to the last bear market rally. I am pleased that we are seeing an improvement in participation of stocks above their 20-day EMA and %PMOs Rising. My main concern would be that %PMOs Rising is near-term overbought.
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 unfortunately, that indicator is NOT oversold.
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 some improvement. We would hope so given the over 2% rally today. The SCI did turn up and we now have a higher percentage of stocks > 20/50-day EMAs than the SCI. That gives us a more neutral to bullish bias, or better said, not a bearish bias. The long-term bias is still a problem. %Stocks > 50/200-day EMAs readings are well-below the GCI reading. We would read the short-term bias as neutral to bullish, the intermediate-term bias as neutral and the long-term bias as bearish.
CONCLUSION: It was a strong rally today. This improved participation, but not enough to change our mostly bearish outlook. There was an upside initiation climax that suggests higher prices over the next day or two, but most bullish expectations in this market have been dashed so we aren't getting too excited. There are still multiple levels of overhead resistance to deal with. If we see strong follow-through tomorrow, we can consider the possibility that a bear market rally is on tap. In the meantime, watch for false breakouts on beaten down stocks, particularly those in the more aggressive areas of the market. The last time Technology rallied, it fizzled out quickly.
I am 15% exposed to the market.
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BITCOIN
Yesterday's comments still apply:
"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
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
$TNX slowed its ascent slightly today with a less than one basis point move. The indicators are strong and everyone expects rates to start rising with inflation. More than likely the FOMC remarks are already baked in on yields.
DOLLAR (UUP)
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:
"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."
GOLD
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold broke the rising trend and fell below support at $182.50 and the 20-day EMA. The indicators are very negative. We will want to watch Stochastics closely. They are a very short-term gauge of internal strength. It may take longer for the PMO to reverse, Stochastics could give us an alert when a reversal is nearing.
GOLD Daily Chart: For now, we expect to see Gold continue to decline a bit more, but likely bounce off support at the November high.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"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: Crude Oil continued to pullback. We do not believe that Oil prices are done rising. This pullback could offer us an excellent opportunity to get in. I want to see one of two things. 1) The current rising trend to hold with a bounce off the 50-day EMA and $66 with rising Stochastics OR 2) a drop to $60 with a follow-through rebound and rising Stochastics.
BONDS (TLT)
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday's comments still apply:
"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 $131 which aligns with the March 2021 low."
Good Luck & Good Trading!
Erin Swenlin
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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