The Health Care sector (XLV) broke out from a strong resistance zone today. Better yet, we saw an IT Trend Model "Silver Cross" BUY signal as the 20-day EMA crossed above the 50-day EMA. There is a lot going for this sector right now. The RSI is positive and not overbought. The PMO is on a BUY signal and has now moved above the zero line.
Participation within this sector is getting stronger. First we look at the Silver Cross Index (SCI) which is rising after a recent crossover. It is still below our 70% bullish threshold, but it is rising. It will likely pick up speed given we have 89% of stocks above their 20-day EMA and 78% of stocks above their 50-day EMA. That gives us a bullish bias in the short term.
The Golden Cross Index (GCI) which measures how many stocks within XLV have a 50-day EMA above the 200-day EMA or stocks that have had golden crosses and are keeping them. It is flat and stands at 55% which is also below our 70% bullish threshold. This gives XLV a long-term bearish bias. However, given that 78% are above their 50-day EMA and 66% are above their 200-day EMA, it should improve soon.
If you review the industry group charts within Healthcare, you'll find that all have bullish configurations. I particularly like Medical Supplies. Note on the chart below that the RSI has just moved positive and the PMO has just generated a new PMO crossover BUY signal. We have a large double-bottom pattern that will be confirmed when price overcomes resistance at 1470. Volume is coming in and relative strength is improving. Stochastics are also rising in positive territory implying internal strength.
Conclusion: We are likely in the midst of a new bear market rally in the overall market that could turn into the end of the bear market. We won't go that far yet, but we are alert.
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
For the Week:
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.
For the Week:
Short-term (Daily) RRG:
XLE has entered Weakening quickly. The pullback in Crude Oil likely pushed it there more quickly. Bullish sectors may surprise you. XLC, XLF and XLY all are in Improving and have bullish northeast headings. XLK is moving in a bullish northeast direction, but is still residing in Lagging.
XLP lost ground, has entered Lagging and is continuing in the bearish southwest direction.
All other sectors are losing steam. They are situated in Leading so it isn't bearish yet, but we can see that in the short term investors have rotated into Technology, Discretionary and Financials this week. The question is whether those sectors can maintain their leadership.
Intermediate-Term (Weekly) RRG:
Aggressive sectors XLK and XLY remain in Lagging although they are seeing a slight move northward toward Improving. Intermediate-term they don't look good.
XLC is maintaining position right between Improving and Lagging. Not bullish but not that bearish. XLE is still showing major outperformance against the SPY. It is in Leading, but is beginning to see some deterioration as it has begun to move southward.
I've made a "magnified" image of the RRG that takes out the outlier XLE.
Magnified view without XLE:
Healthcare (XLV) is the only sector in Leading that has a bullish northeast heading. Given today's "Silver Cross" BUY signal this is very encouraging. The remainder in the Leading category (XLI, XLB, XLU, XLP and XLF) are seeing some deterioration of their headings. They are beginning to see south to southwest bearish headings.
XLRE has now entered Weakening and continues with a bearish southwest heading toward Lagging.
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 is a shining example of why Carl keeps track of the options expiration schedule. We got a strong up move in price, and very high SPX Total Volume. Observers might conclude that today was a blow-off or the opposite, a surge in confidence. But no. All that volume can only be attributed to end-of-quarter options expiration.
The breakout from the intermediate-term declining trend is quite bullish. It's the first time we've seen that since the bear market got going. Indicators are also improving. The RSI is positive and rising, the PMO is accelerating quickly after this week's BUY signal and Stochastics are now above 80 implying internal strength. In fact it is the highest Stochastics reading we've had since the decline began. The VIX closed above the upper Bollinger Band on our inverted scale. We could see the VIX calm even more next week which would stretch out the Bands.
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Start Time: Mar 14, 2022 09:00 AM
Meeting Recording Link.
Access Passcode: March@14
SPY Weekly Chart: The weekly chart is beginning to look more bullish. We saw the breakdown from the bearish rising wedge and now we are seeing a breakout from a bullish falling wedge. This breakout is accompanied by a now positive RSI and PMO that is attempting to bottom.
New 52-Week Highs/Lows: Given the strong rally this week it may be surprising to see New Highs muted. Our guess is that the rally was led by beat down stocks and sectors and given they are in bear markets, there's no way we would see them hit New Highs right now.
Climax Analysis: There was only one small climax indication today -- Net A-D Volume. The very high SPX Total Volume is attributed to end-of-quarter options expiration, not climactic activity. This week we had three climaxes. The first was an upside initiation climax and the last two were classified as upside exhaustion climaxes. The fact that those exhaustion climaxes didn't result in a pause in the rally or decline gives us a bullish short-term bias.
*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 OVERBOUGHT.
All of these indicators hit overbought territory this week with the STOs spiking higher today. Overbought conditions are suboptimal under bear market rules. We will monitor these closely to see how they react to these overbought conditions. They been higher at the end of December, but when they began to pullback, that was all she wrote.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
We listed the IT market trend as down despite the breakout because overall when you look at the chart you simply can't list it as UP yet. It is positive to see the ITBM/ITVM rising again. We haven't seen this many PMO BUY signals since the December top. The ground is fertile.
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 following table summarizes participation for the major market indexes and sectors.
As we would expect a positive week has resulted in SCI improvement for most SCIs. GCIs were stable. IT Bias remains negative for most market and sector indexes.
Looking at the biases on the chart below, we conclude that the short-term bias is bullish given the large percentage of stocks above their 20/50-day EMAs. Those percentages are also much higher than the SCI.
The intermediate-term bias is bearish given the SCI is at 35%, well below our 70% bullish threshold. However, the SCI turned up and had a positive crossover this week. That tempers the bear bias somewhat.
The long-term bias is bearish given the GCI is below our 70% threshold and it is flat, not really rising. We should see improvement soon as many more stocks have price above the 50/200-day EMAs.
CONCLUSION: It was a great rally for the market this week. It has pulled indicators to readings not seen since the start of this bear market. On the flip side, they are overbought in a bear market and that is a dangerous condition according to bear market rules. However, this rally looks far more promising than previous bear market rallies suggesting this one may stick around. As Erin noted yesterday, you can probably expand your exposure somewhat, but keep all positions on a tight leash. Negative forces of inflation, rising interest rates, war, mortgage rates, etc haven't gone away and when investors see more damage caused by these forces, things could collapse quickly.
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Bitcoin rallied this week too and has formed a very short-term double-bottom after the early March death drop. The pattern has yet to be confirmed, but given indicators are looking positive, we believe we will get the breakout here.
Yields finished higher on the week which didn't help Bonds performance.
10-YEAR T-BOND YIELD
$TNX broke back above resistance at the February high this week. They did pullback yesterday, but overall they remain in a rising trend. The RSI is positive and the PMO is on a BUY signal. Stochastics have topped but remain above 80 suggesting there is still internal strength.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount. As buying power shrinks, home prices will come under pressure.
Currently, the fixed payment will carry a mortgage amount that is 17.5% lower than at the historically low rate in January 2021.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: We have what looks like a small bearish double-top. It was nearly confirmed yesterday but we saw a rebound today. However, today finished as a filled black candlestick. This means that while it closed higher, bears won the day by bringing price down well below the open. The RSI is positive, but the rest of the indicators are bearish with a topping PMO and falling Stochastics. We would still look for a move lower.
UUP Weekly Chart: The weekly chart looks fairly healthy, but we can see possible reason why price did stop rising where it did. Long-term resistance lies at the 2019 high. The weekly PMO is still moving higher and weekly RSI is positive. More than likely we will see a test of the 17-week EMA and rising trend and then a resumption of the rally.
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GOLD Daily Chart: Gold had a bad week, but it did find purchase at the 50-day EMA. The indicators have gone south with the RSI moving into negative territory and the PMO on a crossover SELL signal. We also see declining tops on the OBV. Stochastics are oversold and they do look like they are going to reverse which is bullish. We are still bullish on Gold, but this pullback was necessary after the parabolic run up from earlier in the month.
Overall sentiment shows discounts declining. This means that investors are getting bullish on Gold. Gold should shine again, but may need some time to consolidate first.
GOLD Weekly Chart: Last week price nearly made a new all-time high above $2100, but it has pulled back sharply. It closed above support at the 2021 high, but it did dip below. Overall the weekly indicators are bullish.
GOLD MINERS Golden and Silver Cross Indexes: With Gold pulling back this week, so did Gold Miners. Looking under the hood, that pullback hasn't hurt participation. It has hurt the PMO which is nearing a crossover SELL signal and hurt Stochastics which have topped after what looked like a bottom above net neutral (50). We expect price to continue higher after consolidating.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Crude Oil started the week with a continuation of the pullback that began the previous week. Price stayed above the 50-day EMA and held the rising trend. The RSI is positive now and the PMO is bottoming along with Stochastics.
We would look for Crude Oil to resume its rally.
USO/$WTIC Weekly Chart: The weekly RSI has been very overbought so this pullback helped alleviate that somewhat. The weekly PMO is still rising strongly.
IT Trend Model: NEUTRAL as of 1/5/2022
LT Trend Model: SELLas of 1/19/2022
TLT Daily Chart: TLT gapped down to begin the week and then spent the rest of the time consolidating. Yields are likely not done rising and that leads us to believe this is a bear flag that will resolve downward.
However, we are starting to see some improvement on the indicators with the RSI and Stochastics rising again and the PMO beginning to flatten and possibly turn up.
TLT Weekly Chart: This could be a place for TLT to continue consolidating or reverse higher given it is a strong support level at the 2019 end of year lows and the low in 2021. However, the weekly RSI and PMO aren't in agreement with that thesis. The weekly RSI is negative and falling and the weekly PMO is falling on a SELL signal below the zero line.
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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