Today we saw quite a few signal changes. First, the Dow, NDX and SPY all generated new PMO SELL signals today. Second, XLI had an IT Trend Model "Dark Cross" Neutral Signal.
Let's start with XLI's "Dark Cross". A "Dark Cross" is when the 20EMA crosses down through the 50EMA, an intermediate-term event as opposed to the long-term Death Cross (50EMA crosses down through the 200EMA). When the cross takes place above the 200EMA, the signal changes from BUY to NEUTRAL. If it takes place below the 200-day EMA it is an IT Trend Model "Dark Cross" SELL signal.
As with most struggling sectors, the RSI is negative and the PMO is falling on a crossover SELL signal. Volume is clearly pouring out of XLI as well. Participation is absent. The Silver Cross Index (SCI) and Golden Cross Index (GCI) are below their signal lines and are reading well below 70%. %Stocks above their 20/50/200-day EMAs is well below the SCI/GCI percentages giving XLI a bearish bias in all three timeframes.
Below are the new PMO SELL signals. I'll talk more in-depth about the SPY/SPX later so the chart is not below. Both the Dow and NDX have similar charts with the exception of relative strength. Industrials are improving against the SPY relatively speaking while the NDX is being brutalized given the sinking relative strength.
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
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: The bullish sectors are obvious right now. Consumer Staples (XLP), Materials (XLB), Healthcare (XLV), Real Estate (XLRE) and Utilities (XLU) all have bullish northeast headings and reside in the Leading quadrant.
Communications Services (XLC) has entered the Leading quadrant, but be careful in this sector and gravitate toward the strongest relative performers among XLC's industry groups. It now has a more bearish southeast heading.
Financials (XLF) and Industrials (XLI) are moving north to northeast toward the Improving quadrant. Remember, that all are lagging relative to the SPY, so we need to be picky about our selections in those sectors.
Energy (XLE) make a quick reversal back into the Weakening quadrant. At this rate it should reenter the Leading quadrant soon given its strongly bullish northeast heading.
Aggressive sectors Technology (XLK) and Consumer Discretionary (XLY) are fading fast with bearish southwest headings. XLK is now in the Lagging quadrant with XLY moving toward it from Weakening.
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: The big news is the new PMO crossover SELL signal. This suggests more downside. However, we've annotated a bullish falling wedge in the short term. Price failed to break out of it today, but it remains within and is clinging to the 200-day EMA for support. Total Volume pulled back on today's decline which is positive.
The VIX has dipped below its moving average on our inverted scale, but it is getting close to puncturing the lower Bollinger Band on our inverted scale. Typically we will see an upside reversal after a lower Band puncture.
Here is the latest recording:
Topic: DecisionPoint Trading Room
Start Time: Apr 11, 2022 09:00 AM
Meeting Recording Link.
Access Passcode: April@11
S&P 500 New 52-Week Highs/Lows: Not surprisingly we saw a contraction in New Highs. New Lows remained at the same level. The 10-DMA of the High-Low Differential is falling and today began to accelerate downward. Not good.
Climax* Analysis: No climaxes 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.
STOs are technically falling but did put on the brakes today. However, participation continues to dwindle on %Stocks > 20-day EMA and %PMOs Rising.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERBOUGHT.
The ITBM and ITVM have continued to trend lower but are still in overbought territory. The index components continue to lose PMO BUY signals. Now only half of the SPX have PMO BUY signals. None of these indicators are 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 GCI and SCI have topped well below our 70% bullish threshold. Percent participation of stocks above their 20/50/200-day EMAs is lower than both the GCI and SCI. This gives us a bearish bias in all three timeframes.
CONCLUSION: The SPX lost price support but is still managing to stay above the 200-day EMA. Short-term indicators are somewhat oversold. Combined with the very short-term falling wedge, we do expect some sort of rebound here. If we don't get it, "Katie bar the door" as this could get very ugly very fast. Why? Intermediate-term indicators are falling from overbought territory and they can accommodate a lot more downside. Continue to use stops while you watch for downturns in the PMO, RSI and Stochastics. Those indicators will be your guide.
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BITCOIN
Bitcoin held its ground today. However, I still believe the bullish cup and handle chart pattern is breaking down. Indicators are all negative suggesting the decline is likely to resume.
INTEREST RATES
Interest rates fell today with long-term 20-year and 30-year rates only ticking low while others pulled back much further.
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.
Numerous inversions are noted on the yield curve. These inversions will many times come before a period of economic decline.
10-YEAR T-BOND YIELD
With today's top we also get a rising wedge pattern, which we normally expect to resolve downward. While we do expect the 10-year yield to move higher in the longer-term, it is now likely that we'll see a pullback, possibly to the first line of support just below.
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Yesterday's comments still apply:
"The Dollar is in a rising trend channel. Last week it broke out above overhead resistance at $26.60. I would look for the rally to continue. The RSI is positive and not overbought, the PMO is rising and Stochastics are oscillating above 80."
On the one-year chart we can see there is a longer-term rising trend channel. Price is now poking out above the pattern. While that is very bullish, we wonder if it can maintain this short-term vertical rise.
GOLD
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold broke out above short-term overhead resistance. We have another bearish filled black candlestick, but given price did close above prior resistance, I'm not overly worried. Indicators are improving with the RSI rising in positive territory and not overbought. The PMO is nearing a crossover BUY signal.
GOLD Daily Chart: We could be looking at a confirmation of the bullish cup with handle pattern. Stochastics are nearly above 80 and rising. Discounts pared back slightly today and continue to be very low suggesting investors are still fairly bullish on Gold.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"GDX broke above its symmetrical triangle, but closed beneath. It is a continuation pattern so we expect the breakout to stick eventually. The RSI is positive and Stochastics are nearly above 80. Participation continues to be strong. Both the SCI and GCI are above the 70% bullish threshold. %Stocks > 20/50/200-day EMAs are below the SCI which normally implies a neutral or bearish bias. However, percentages are all above the bullish 70% level. Gold Miners still look bullish."
Additionally I would say that the PMO is now about to trigger a crossover BUY signal, giving GDX and even more bullish appearance.
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 gapped up and closed above 5% today. It hasn't quite broken above the symmetrical triangle, but given the quick reversal of the RSI, PMO and Stochastics, we are expecting a breakout.
This looks a very large pennant on a flagpole. That is a bullish continuation pattern so this also suggests a nearing breakout.
BONDS (TLT)
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 had formed a bullish falling wedge, but price broke below it instead of the expected upside breakout. A bearish conclusion to a bullish chart pattern is especially bearish. It isn't surprising given TLT has been in a bear market for some time."
"All indicators are oversold, but also are pointed downward suggesting no relief ahead for Bonds."
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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