I decided to lead with the 30-Year Fixed Mortgage and I urge you to be sure to see our commentary in that section below.
Industrial Sector on IT Trend Model BUY Signal: The XLI 20EMA crossed up through the 50EMA, generating an ITTM BUY Signal.
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.
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:
RRG® Daily Chart: I like the look of RRG Charts -- clever and dynamic -- but I have never taken time to delve into them. With our in-house expert on vacation, I will just post the chart for you.
Intermediate-Term (Weekly) RRG® Chart:
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: We've been expecting a top, and while the market teased a top, it finished up nearly +3%. SPX Total Volume continues to contract, showing fading enthusiasm for the rally.
The VIX has been riding the upper Bollinger Band for over a week. Note how similar configurations preceded price tops.
SPY Weekly Chart: We got an upside breakout from the falling wedge formation, what we normally expect from that formation. The weekly PMO has turned up, and this is bullish.
New 52-Week Highs/Lows: New Highs expanded again, confirming the new rally highs.
Climax Analysis: We have close to a climax reading on the SPX UP/DOWN Volume Ratio, but none of the other indicators are even close. SPX Total Volume contracted again.
*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 ____ and the condition is ____.
The STOs continue to contract from their recent top, which we believe is a setup for a short-term pullback.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
We continue to view the ITBM/ITVM as being close to a top, and therefore overbought.
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.
This week there was almost unanimous improvement in participation in the intermediate- and long-term. The IT Bias remains negative.
SPX Participation: Has improved over the last two weeks, but most of that took place the last week.
CONCLUSION: It has been a good two weeks for the market. We thought we had a rally top mid-week, but the market finished the week at rally highs. Nevertheless, short-term indicators are overbought, and we expect a pullback, if not a resumption of the bear market.
Erin will remain 15% exposed to the market while she is in Holland/Belgium. It is important to be able to manage positions more closely right now and that is the most risk she is willing to take while unable to stay plugged into the market.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact firstname.lastname@example.org for more information!
The head and shoulders pattern executed (broke below the neckline) back in January, and the minimum downside target was 16,000. Obviously, that target is currently being held in abeyance, as Bitcoin consolidates sideways. If it breaks above 45,000, we can probably forget the head and shoulders projection.
Inversions! The 20-year yield moved above the 30-year yield in October. Recently, the 3-year and 5-year yields moved above the 10-year yield. It's not always easy to see relationships between the indexes on the chart, but the table in the upper left corner has yields arranged by duration, and the yield for each duration should be higher than the one below it. As you can see, that order is being disrupted.
10-YEAR T-BOND YIELD
We have been tracking the 10-year yield in relation to a rising trend channel, but today it broke out of that channel, and a very steep rising trend line is now the relevant structure. Trend lines that steep beg to be broken, but we only expect a less accelerated line to be set.
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.
The 30-year fixed mortgage rate is 4.42%, and the fixed payment of $2,015 will carry a mortgage amount that is almost -20% lower than at the historically low rate 2.65% in January 2021. A recent article I read stated that the same conditions that tanked the real estate market in 2007 (primarily fraud) do not exist today, so we shouldn't worry about a real estate crash. The problem with that conclusion is that it ignores the fact that real estate is still insanely overvalued (+150% higher than the 2005 top), and that rising rates are squeezing buyers out of the market. As of November 2021, home prices have increased by 18% since January 2021 (realestatedecoded.com/case-shiller/), and the mortgage for a fixed payment of $2,015 is -20% smaller than it was 15 months ago. I saw a headline on Fox Business this morning that this dynamic has begun to squeeze home prices. Maybe top is in for housing.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Price has been consolidating for about three weeks, and the trend is clearly up.
A broader perspective shows us that a rising trend has persisted for 10 months.
UUP Weekly Chart: Note that the current up trend grew out of a double bottom accompanied by a weekly PMO positive divergence.
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GOLD Daily Chart: Around the first week of this month gold went parabolic, a circumstance that often calls for a pullback. The correction happened, and a less accelerated, and more attainable, rising trend line has been set.
The saucer and handle formation is very bullish.
GOLD Weekly Chart: In this time frame we can see that a double top is in play, and that a two-year trading range has been set. All things considered, we expect to see gold breaking out of that range sooner than later.
GOLD MINERS Golden and Silver Cross Indexes: GDX is challenging overhead resistance for a second time this month. Breakout soon?
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: The fundamentals for crude seem to demand higher prices eventually. For now we have an Adam and Eve double top, which could be initiating a period of consolidation.
USO/$WTIC Weekly Chart: WTIC is making good progress higher. Keep in mind that the 2008 high was 148.
IT Trend Model: NEUTRAL as of 1/5/2022
LT Trend Model: SELLas of 1/19/2022
TLT Daily Chart: TLT is clearly in a down trend and is trying to break through the bottom of the trend channel.
TLT Weekly Chart: There is a longer-term down channel in this time frame. Note that horizontal support was violated this week.
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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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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