As they often say, "What a difference a day makes". Aggressive sectors like Technology (XLK), Communication Services (XLC) and Consumer Discretionary (XLY) took a big hit today finishing down -2.37%, -1.86% and -2.55% respectively. I had pointed out problems with bias and participation in yesterday's DP Alert, but I didn't expect a decline of this magnitude. We had an IT Trend Model SELL signal rather than a Neutral signal because the negative crossover of the 20/50-day EMAs occurred below the 200-day EMA. All indicators have turned lower and participation continues to shrink.
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
Each S&P 500 Index component stock is assigned to 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® Daily Chart: Today's drop didn't affect XLC's bullish northeast heading. It is moving more quickly toward the Leading quadrant.
XLK and XLY both have bearish southwest headings and are moving quickly toward the Weakening quadrant.
Bullish sectors are XLB, XLU and XLRE given bullish northeast heading within Leading. XLP also looks bullish as it leaps through Improving toward Leading. XLV is also somewhat bullish given its northeast heading, but it is still firmly in the Lagging quadrant.
XLF, XLI and XLE are very bearish as they as they head further into the Lagging quadrant.
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: Price gapped down today closing below the 20-day EMA and dipping briefly below the 50-day EMA. The RSI will likely leave positive territory tomorrow. The PMO has topped. We have a support line drawn at $440, but I believe the 200-day EMA is best case for support. The VIX dipped below its moving average on our inverted scale which suggests internal weakness.
I noted yesterday that this didn't look like a simple pullback and today that was confirmed. This decline also occurred on very heavy volume. Stochastics look terrible.
Here is the latest recording:
Topic: DecisionPoint Trading Room
Start Time: Apr 4, 2022 08:59 AM
Meeting Recording Link.
Access Passcode: April#4th
S&P 500 New 52-Week Highs/Lows: New Highs expanded slightly, but New Lows also expanded.
Climax* Analysis: No climax today.
*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.
The STOs continue to confirm the decline as they decline in negative territory. Only about half of the stocks in the SPX are above their 20-day EMA and now only 42% have rising momentum. None of these indicators are oversold.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
All of these indicators continue to fall out of very overbought territory.
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 bearish. %Stocks > 20/50-day EMAs are less than the SCI and are falling.
The SCI is still at a low 54% and has turned down. That gives us an intermediate-term bearish bias.
The long-term bias is bearish. The GCI is reading below 70% and has topped. %Stocks > 50/200-day EMAs are below the GCI percentage.
CONCLUSION: I don't usually finish my conclusion with "exit aggressive positions" as I did yesterday, but the bearish winds had clearly begun to blow. Indicators are in every way bearish with the possible exception of a slight expansion in New 52-week Highs. Yesterday's downside exhaustion climax was more of a downside initiation climax. Given the bearish bias in all three timeframes and bearish indicators, I expect more of the same tomorrow. Tight stops or limited exposure is likely the best strategy.
Thank you for your patience with odd publishing hours. My mom-in-law is still struggling, but may be finally turning a corner. Pray that is the case! Thanks for your support and especially prayers.
I am still 15% exposed. Under the current market environment, I've decided not to expand.
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Bitcoin lost support and is now testing the 50-day EMA. We could still be seeing a bullish cup and handle pattern developing, but given the downturn on the RSI, PMO and Stochastics, I would expect the decline to continue.
Rates are rising again overall which makes bond buying less attractive.
The Yield Curve Chart from StockCharts.com shows us the inversions taking place. The red line should move higher from left to right. Inversions are occurring where it moves downward.
10-YEAR T-BOND YIELD
Yesterday's comments still apply:
"I mentioned the possibility that $TNX was forming a bull flag. It was confirmed with today's strong rally. It is further confirmed by the positive RSI, PMO bottom above the signal line and Stochastics above 80."
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is in the process of breaking out above March highs. The indicators are favorable so I expect the rally to continue.
We have a long-term rising trend channel on the one-year daily chart so a trip to the top of that channel appears imminent.
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: GLD finished slightly higher. Gold is in neutral right now. Indicators are moving sideways with price. A rising Dollar could put pressure on Gold.
GOLD Daily Chart: It looks a little better on the one-year daily OHLC chart. It looks more like consolidation and a possible diamond reversal pattern. I note discounts are now beginning to expand meaning investors are getting bearish on Gold again. They aren't bearish enough to look for a reversal. We will see if this diamond pattern stays intact.
GOLD MINERS Golden and Silver Cross Indexes: GDX continued its decline alongside Gold. Participation is now starting to deteriorate, so the short-term bias is getting bearish. The RSI is still positive but nearing negative territory below net neutral (50). A 96% SCI and 76% GCI are considered bullish but they look shaky. The problem is stocks are beginning to lose support at 20-day and 50-day EMAs. The PMO is on a SELL signal and Stochastics are falling. Be careful with any metals and mining stocks.
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 is pulling back and is breaking down from the symmetrical triangle. Given the prior trend was up, it should be breaking out not down. Indicators look very negative so I expect to see more decline.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT failed to overcome the 20-day EMA. Indicators are very negative and with interest rates rising quickly, we expect more downside from TLT.
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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