We finally saw a strong rally after Tuesday's downside exhaustion climax. Price was able to set a higher low today which gives us an official price bottom on the SPY. Below is the 5-minute candlestick chart. Interestingly, price gapped on the open but fell back to earth quickly. After rebounding off the prior day's close price rocketed higher. You'll note that price did turn down at resistance set last Friday and Monday. This caused the 5-minute PMO to top and trigger a crossover SELL signal.
Indicators are favorable for a continuation of this rally, but we note that Amazon (AMZN) posted disappointing earnings after the bell, pulling it down over 9% in after hours trading at time of publishing. This could have a ripple effect across the market which could dampen today's optimism.
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: XLK nearly hit the Improving quadrant today. We expect it to tomorrow given its bullish northeast heading.
XLC continues to disappoint as it moves further into the Lagging quadrant.
XLY, XLV and XLU have entered the Weakening quadrant with bearish southwest headings.
XLF is trying to improve its heading, but more than likely it will retreat to Lagging.
All other sectors are in the Leading category, but none of them have bullish northeast headings. XLI, XLRE and XLP look the most "bullish" as they should be able to stay in the Leading quadrant based on their location. XLB and XLE are breaking down and could hit the Weakening quadrant as soon as tomorrow.
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 bounce off strong support is encouraging. The PMO is attempting to reverse back up and the RSI is moving back toward positive territory above net neutral (50). The VIX has rebounded on the inverted scale and is back within the Bollinger Bands. Typically after a puncture of the lower Band, we see some upside movement.
Price didn't need to test $410 before reversing which is positive. Stochastics are turning up in oversold territory.
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 contracted slightly and are still in oversold territory. New Highs were negligible which is why the 10-DMA of the High-Low Differential is moving lower.
Climax* Analysis: Coming off yesterday's low we got solid climax readings and an upside initiation climax.
*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 UP and the condition is OVERSOLD.
STOs are suggesting this rally should see a continuation as they contract out of oversold territory. The improvement in %Stocks > 20-day and %PMOs Rising rebounded strongly out of oversold territory.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
IT indicators continue to trend lower and are not oversold yet.
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.
Yesterday's comments still apply:
"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: The market rebounded strongly, possibly due to Meta (FB) surging over 17% today. Now the market has the opposite problem, Amazon (AMZN) had poor earnings after the bell and is already down over 9%. That could dampen follow-through on today's rally. Today's upside initiation climax suggests we will see upside follow-through and short-term indicators are turning bullish again. Just remember, the bear market is still in force and will likely throw a wrench into this rally. Stay cautious.
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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
With today's rebound off the 20-day EMA, we have redrawn the rising bottoms trendline. It is part of a rising trend channel. The PMO did just trigger a crossover SELL signal, but Stochastics are already trying to turn up in positive territory. The RSI is also positive and rising. We expect yields to continue to rise, possibly with a hiccup now and then like we saw earlier in the week.
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 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 expect a pullback 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 held onto the support zone as price closed higher on the day. The PMO has not improved, but we are seeing some bullish indications from the RSI and Stochastics--both are rising.
GOLD Daily Chart: Discounts contracted somewhat today, sentiment is still bearish though given the reading is still elevated. If price doesn't hold this support level, we still see $1850 as a viable stopping point.
GOLD MINERS Golden and Silver Cross Indexes: GDX is testing the 200-day EMA. Participation is still very thin. Right now none of the Gold Miners have price above their 20-day EMA and only 7% have price above their 50-day EMA. This is a strong support level at the November high and 200-day EMA and the RSI and Stochastics are turning back up. Given the negative PMO and weak participation, don't count on this level of support to hold.
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 consolidating but did finish much higher today. The PMO is still flat, but the RSI is now positive and Stochastics are rising again. If the PMO starts to get healthy again, we can start considering a breakout ahead. For now, we expect a test of the top of the range.
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 slightly higher on the day. It did not improve the chart as a lower low and lower high were set. The RSI is very weak. The PMO is attempting a positive crossover and Stochastics are rising again. However, we don't believe there is much upside potential here.
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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