As expected, Consumer Discretionary (XLY) triggered an IT Trend Model "Silver Cross" BUY signal. This occurred as the 20-day EMA crossed above the 50-day EMA today. Given today's failure to overcome resistance and deep decline, the PMO is already topping. I am also seeing a small double-top formation. Support needs to hold along the key moving averages. While participation is showing some improvement it is still paltry. Only 23% have a 20-day EMA above the 50-day EMA. Remember it should be 70% or greater to be considered bullish. Participation of stocks > 20/50-day EMAs is greater than the SCI, but it isn't really expanding and is still well below our 70% bullish standard. The RSI is positive as it sits above 50, but Stochastics are waning. Should price drop below the 20/50-day EMAs, the "silver cross" will be lost. This has been a leadership sector through most of March but it is fading now.
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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: XLK and XLY have new "silver cross" buy signals, but you can see that they are beginning to fade and trend toward the Weakening quadrant. XLB the only other resident of the Leading quadrant has a bullish northeast heading making it the strongest sector on the RRG.
Up and comers are XLP, XLC, XLRE and XLU. All have bullish northeast headings. XLRE and XLU should hit the Leading quadrant soon.
XLE is mostly neutral given it is only in the Weakening quadrant and isn't that close to Lagging yet. That leaves very bearish XLF, XLI and XLV which are traveling 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: After a constructive bounce, the SPY failed to sustain the two-day rally. While this has the appearance of a bull flag, we aren't confident that we will get a breakout. While the RSI is positive, it is fading toward negative territory. The PMO is clearly topping and think about it, we've only seen four major declines in the past few weeks and the PMO is topping.
The VIX is beginning to top in overbought territory which is bearish. Stochastics have now dropped below 80. This looks like more than a simple pullback.
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 far more than I would've expected on a decline of this magnitude. Not sure what to make of it, but I don't believe it overrides the problems I outlined above.
Climax* Analysis: This was an interesting day. We have a climax on the NYSE UP/DOWN Volume Ratio, and SPX Net A-D Volume approached climax levels. So we have to consider this a weak downside exhaustion climax. Given it is "weak", we don't really expect to see an upward thrust, more likely sideways churn.
*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 are confirming this current declining trend. Participation is showing no improvement, in fact it is getting much worse.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
All of these indicators are falling from 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 no longer bullish. It took one big decline to change that outlook. %Stocks > 20/50-day EMAs are less than the SCI and are falling.
The SCI is still at a low 55% but it is rising. I would consider the intermediate-term bias to be neutral given the contraction of stocks > 20/50/200-day EMAs.
The long-term bias is neutral to bearish. The GCI is reading below 70%, but we have a lower percentage of stocks above their 200-day EMA. This will prevent the GCI from rising very soon. It is positive to see the GCI crossover its signal line, but overall we still see a more bearish bias in the longer term.
CONCLUSION: Today's decline put a shadow on the short-term bullish bias that was visible over the past week. Indicators are falling in all timeframes. The expansion in New Highs and today's downside exhaustion climax could suggest some upside ahead, but it is overshadowed by bearish indicators. The bias is mostly bearish in all three timeframes now. Consider exiting aggressive positions or set stops more tightly as this could get ugly sooner rather than later.
Thank you for your patience with odd publishing hours. My mom-in-law took a turn for the worse and I'm dealing with all the issues associated. 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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Yesterday's comments still apply:
"We have a cup and handle pattern with the handle being formed by the consolidation and slight declining trend of price since breaking above the February/March highs. The RSI is positive, but the PMO is flattening. Stochastics are flattening again as well. I expect to see more sideways movement along the 200-day EMA."
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
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 broke out slightly today. Indicators are bullish and suggest a continuation of the rally.
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 formed a bearish engulfing candlestick today. The PMO is moving lower and the RSI is now in negative territory. The rally in the Dollar is putting downward 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 would not count on the pattern here given Stochastics have turned down in negative territory.
GOLD MINERS Golden and Silver Cross Indexes: GDX continued its decline today alongside Gold. Participation is now starting to deteriorate somewhat, so the short-term bias is beginning to get bearish. The RSI is still positive and a 96% SCI and 79% GCI are considered bullish. 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. Might be time to move out of Miners right now.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Yesterday's comments still apply:
"We have a symmetrical triangle on USO and given the prior trend was up, we expect an upside breakout soon. The RSI is positive and the PMO is turning up. Stochastics are still a problem so it may take another day or two before we see a breakout."
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:
"TLT is failing at the 20-day EMA. It didn't even make it to overhead resistance at the February low before turning down. The RSI is negative and with the 50-day EMA so far below the 200-day EMA, TLT is in a bear market."
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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