Today the Dow Jones Industrials ($INDU) saw a LT Trend Model SELL signal trigger on the "Death Cross" of the 50-day EMA and 200-day EMA.
We actually use DIA for our signal tables, so don't be confused if you still see a BUY signal in the table. Looking at the chart below, we can see DIA has margin between the 50/200-day EMAs so the LT Trend Model SELL signal may take a bit longer to show up on our Market Signal Scoreboard.
$INDU on the other hand shows the negative 50/200-day crossover that triggered the LT Trend Model SELL signal. The PMO has now moved below the zero line. The RSI is in negative territory below net neutral (50). Notice the outperformance of the Dow against the SPY. This is proof that just because a stock, ETF or index is "outperforming" the SPY or SPX, it doesn't mean it is rallying. It is simply moving lower at a slower pace. We did see a positive close, but not a bottom yet. We need to see higher lows tomorrow to form a price bottom. Stochastics did tick upward in oversold territory, but I don't see that as particularly positive yet given it is a "tick" higher.
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
SECTORS
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® Chart: XLK is moving northward toward Improving, but I don't see any real opportunities available in this sector. It is still in the lagging quadrant. XLC is the most negative on the chart with its bearish southwest heading within the Lagging quadrant.
XLI and XLY have now entered the Leading quadrant. I do need to remind you that this is based on "relative performance" against the SPY. None of the sectors currently have rising momentum. I am not a fan of XLY right now and XLI is shaky at best.
XLF has hooked back toward the Lagging quadrant with a bearish southwest heading.
XLV and XLU have now left the Leading quadrant with a bearish southwest heading. They are moving further into the Weakening quadrant.
All others reside in the Leading quadrant. With the exception of XLI and XLY, the remaining sectors all have a southward component in their headings. XLB and XLE are closest to leaving the Leading quadrant. XLP and XLRE will likely take a bit longer to reach the Weakening 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: We saw great gains in the morning, but ultimately price pulled back to the open, forming a doji candlestick. We will need to see a higher low tomorrow to call this a price bottom. Lows just keep getting lower, as do intraday highs.
Strong support is about to arrive at $410, but given the very negative configuration of the RSI, PMO and Stochastics, we should prepare for it not to hold. The VIX punctured the lower Bollinger Band on our inverted scale again, but so far these punctures haven't resulted in much upside.
Here is the latest recording:
Topic: DecisionPoint Trading Room
Start Time: Apr 25, 2022 09:00 AM
Meeting Recording Link.
Access Passcode: April@25
S&P 500 New 52-Week Highs/Lows: New Lows are now hitting somewhat oversold territory. The 10-DMA of the High-Low Differential is declining and could drop below zero once again. We want to see that indicator begin to bottom or at least decelerate. The good news it that when it reaches the zero line that tends to be a ripe time for a market bottom.
Climax* Analysis: With yesterday's downside exhaustion climax, today's pause was not unexpected. There were no climactic readings today. Since there was a pause instead of an upside climax, we think that more downside is ahead.
*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 OVERSOLD.
STOs have finally begun to get very oversold. Their continued decline still doesn't bode well for the market. %Stocks > 20-day EMA and %PMOs Rising are oversold and did tick up today which is somewhat encouraging.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The IT indicators are very bearish and they aren't at all oversold yet. The ITBM/ITVM have finally reached negative territory, but barely. %PMO Crossover BUY signals continue to drop quickly, but that indicator is not oversold.
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.
Both the SCI and GCI are at levels well below our bullish 70% threshold which tells us the bias in bearish in the intermediate and long terms.
Short-term is also bearish. Notice that there are fewer stocks above their 20-day EMA than above their 50-day EMA. In order to see improvement in the short term, we need more stocks above their 20-day EMA than the 50-day EMA. That implies possible new strength. Right now we don't have that condition so we see the short-term bias as bearish too.
CONCLUSION: We are seeing the SPY up +0.72% in after hours trading, probably due to after hours earnings reports being mostly positive which could fulfill yesterday's downside exhaustion climax tomorrow. We aren't expecting much follow-through should a small rally come to pass tomorrow given indicators are still bearish. Just don't forget that yesterday's downside exhaustion climax didn't result in much more than a pause today. Considering the VIX has been below its lower Bollinger Band the past few days, we would expect better follow-through... at least that is the expectation in a bull market environment. Poor follow-through on climaxes can be added as another piece of evidence that the bear market is in force and "Bear Market Rules" should be followed.
I am 15% exposed to the market with very tight stops.
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BITCOIN
Yesterday's comments still apply:
"We've been watching a bullish cup with handle chart pattern. It's now getting "long in the tooth" (too old) and we have a failed breakout from last week. The indicators are more neutral than bullish or bearish. The PMO is flat, RSI is negative and Stochastics are oscillating in negative territory below net neutral (50)."
INTEREST RATES
We note that 20/30-year yields have started trending downward given declining tops.
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
$TNX rebounded today off the 20-day EMA. The RSI remains positive, but the PMO is on a brand new SELL signal and Stochastics are falling fast. It might be time for $TNX to consolidate sideways.
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is now in a parabolic rally. Given the indicators are positive (albeit overbought), we expect the rally to continue. Vertical rallies are difficult to maintain so we would expect a pullback sometime soon. Just be aware, when a parabolic rally ends, it usually happens swiftly and painfully so a "pullback" could be deep.
GOLD
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold was unable to break its steep short-term declining trend. The RSI is negative and falling. The PMO is falling on a SELL signal. Stochastics are falling and are in negative territory below net neutral (50). Strong support is being tested at the November highs.
GOLD Daily Chart: Discounts continue to increase as investors get more and more bearish on Gold. Those readings are not oversold, so a continuation of higher discounts is not good for Gold. When discounts get to 2%, then we can consider an upside reversal based on bearish sentiment.
GOLD MINERS Golden and Silver Cross Indexes: GDX is now going to test the 200-day EMA. Participation is still very thin if even there. Right now none of the Gold Miners have price above their 20-day EMA and only 3% have price above their 50-day EMA. We aren't expecting price to hold above the 200-day EMA on GDX.
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 is in the process of consolidating sideways. Indicators are neutral so expect more of the same.
We've annotated a pennant formation on the one-year daily chart. There is a long flag pole the pennant is attached to. The expectation is a resumption of the rising trend and a breakout from the pennant.
BONDS (TLT)
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT was smacked down just as it began to recapture a place within the bullish falling wedge. The RSI remains negative, but the PMO and Stochastics are looking a tiny bit bullish. Rates have soared and declining trends are now visible on the 20/30-year yields. We could see some sideways consolidation, but I am not expected a breakout above the 20-day EMA just yet.
Good Luck & Good Trading!
Erin Swenlin
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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