It was really the large-caps that shined today with the Nasdaq 100, SP500 and SP100 finishing with gains of over 1%. Yet, the small- and mid-cap indexes finished up +0.50% and +0.63% respectively. IJH saw a LT Trend Model "Golden Cross" BUY signal as the 50-day EMA crossed back above the 200-day EMA. It was only about a week ago that it saw a "Death Cross" so this reversal is welcome.
Looking more closely at the chart we have a somewhat messy bullish triple-bottom pattern that is forming. The expectation is a breakout above $275 with an upside target that would take it well-above all-time highs. The chart is bullish, but I wouldn't bank on all-time highs. The RSI is positive and rising. The PMO is already on a crossover BUY signal and it is about to reach above the zero line. Stochastics are oscillating above 80 implying internal strength. I would like to see the OBV confirm with a higher high if the breakout occurs.
** IMPORTANT REMINDER **
I leave on vacation tomorrow with a flight from LAX to Amsterdam in the afternoon so the report will likely go out late. I will still be publishing the DP Alert while on vacation, but comments will be abbreviated and "lead" articles will likely be scant. You will get your DP Alert before market open the next day, but it may go out at irregular times.
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
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 still apply:
"Where did all the Leading sectors go? They have tumbled into the Weakening quadrant quickly. This is likely due to the recent rally in more of the growth-y areas of the market like Technology and Discretionary.
All sectors that have fallen into the Weakening quadrant have bearish southwest headings. We will want to see if they hook back around while in this quadrant as that would be very bullish.
XLP continues to be the weakest of all the sectors. It is headed in a near perfectly bearish southwest heading within Lagging.
XLC, XLK, XLY and XLF actually have the most bullish configuration as they move in the bullish northeast direction and head toward the Leading quadrant.
This leaves XLB. It is still in the Leading quadrant, but has hooked around and is moving toward Weakening quadrant. It isn't moving as quickly, so it could reverse itself to remain in the strongest quadrant of 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 rally continues on track. The next moment of truth will be at overhead resistance at $457. At this point, the RSI and PMO are looking bullish and suggest we will at least test that level. There is also a bullish double-bottom pattern. The upside target of the pattern would put price around $465.
Stochastics are oscillating above 80 telling us the SPY has internal strength. Two problems I see would be today's lack of Total Volume and the VIX hovering at the upper Bollinger Band on our inverted scale. Lack of volume could mean a possible lack of confidence or simply a form of complacency by investors as a whole. The VIX is certainly in line with the "complacency" thesis as readings move out of the higher fearful readings above 30.
Here is the latest recording:
Topic: DecisionPoint Trading Room
Start Time: Mar 21, 2022 09:00 AM
Meeting Recording Link.
Access Passcode: March@21
S&P 500 New 52-Week Highs/Lows: New Highs contracted even as price moved higher. The negative divergence compounds the problem.
Climax* Analysis: Not a climax day. All of our primary climax indicators do not have readings outside our climax thresholds.
*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 EXTREMELY OVERBOUGHT.
STOs are holding in extremely overbought territory. %Stocks > 20-day EMAs rose after tipping over yesterday. %PMOs Rising topped today. Both indicators are in overbought territory.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
Since the top at the beginning of the year, the ITBM/ITVM have been "overbought" when they close in on the zero line. This isn't to say they can't go higher, it is an observation that tells us we are still vulnerable in the intermediate term. We have very overbought readings on %PMO BUY signals and that indicator keeps rising.
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 market bias in the short term is bullish given %Stocks > 20/50-day EMAs are much higher than the SCI.
The intermediate term shows a bearish bias as the SCI is reading well below 70%. However, it is rising, so that tells us that the bearish bias is at least improving and moving toward Neutral.
The long-term bias is neutral to bearish. We have slightly higher percentage of stocks > 50/200-day EMAs compared to the GCI so we can't expect to see too much improvement on the GCI. The GCI is at a bearish reading of 54% and is mostly flat.
CONCLUSION: Participation is broader compared to prior bear market rallies. We have a bullish short-term bias alongside positive indicators like the RSI, PMO and Stochastics. The big problem I see is very overbought readings on all of our indicators in the short and intermediate terms. I also didn't like the lack of volume today. We are due for a pullback or at least a pause so keep your stops in play and monitor all positions in the short term. This could be the end of the bear market, but as I continue to say, the wrong headline could be a catalyst. There is a war ongoing and a strong escalation would see the majority of investors heading for the exits...quickly.
Given my vacation starts tomorrow, I've opted to keep my exposure at 15% because I can't manage those positions in the short term.
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Bitcoin appears to have found purchase on top of the 20/50-day EMAs. The indicators have firmed up with the RSI staying above net neutral (50) and the PMO angling higher. Stochastics are a little soft sitting below 80, but we are seeing them flatten somewhat and could reverse back above 80. I would look for Bitcoin to test the 200-day EMA soon.
Yields continue to fly higher. This will likely be the norm.
10-YEAR T-BOND YIELD
$TNX was up two basis points today. There is nothing on this chart that suggests they will lose this rising trend. It is getting overbought with the RSI now above 70 and price peeking above the already rising trend channel. $TNX is getting stretched out. However, the PMO and Stochastics suggest the move higher isn't over yet.
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 isn't sure what it wants to do. After forming a short-term bearish double-top, it is now consolidating above the confirmation line and the 20-day EMA. Indicators are mixed with a positive RSI accompanied by a now flat PMO and Stochastics. Stochastics are staying above net neutral (50) for now."
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold pulled back after it went parabolic. It did find support at the 50-day EMA. The RSI has now reached negative territory below net neutral (50). The PMO and Stochastics have been configured negatively for days. The one piece of good news is that these indicators are now unwinding with price only moving sideways over the last week.
GOLD Daily Chart: I also like on $GOLD that support is essentially holding above the May top. Additionally, discounts have pared back considerably suggesting investors are more bullish regarding Gold. That could fuel a new uptrend.
GOLD MINERS Golden and Silver Cross Indexes: GDX had a PMO crossover SELL signal today. However, the PMO is very flat and the margin is thin between it and its signal line. I wouldn't be surprised to see a whipsaw BUY signal by the end of the week (if we even have to wait that long). Participation is still very bullish for this industry group; even the GCI is about to reach a bullish 70% level. Once Gold reverses, GDX will have the wind at its back, for now it is churning, lying in wait.
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 pulled back over 1% today. That didn't stop the PMO from generating a crossover BUY signal. The indicators overall are positive given the RSI is above 50 and Stochastics are still rising. This appears to be a pause in the action not a reversal point.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: I'm actually going to start with a weekly chart so you can see where support actually might lie for TLT given its decimation as yields fly skyward. Today's decline dropped it below the early 2021 low. The next support level doesn't arrive until about $115 - $120.
The indicators remain very bearish with the RSI well below net neutral (50) and the PMO falling further into oversold territory.
Stochastics have topped below 20! At this point we are measuring internal weakness rather than internal strength.
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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