Why should we prepare for a SPY upcoming "Dark Cross"? Because today the SP500 ($SPX) generated an IT Trend Model "Dark Cross" Neutral Signal. Remember a "Dark Cross" means the 20-day EMA is below the 50-day EMA. This signal can be either a "Neutral" or a "SELL". In the case of the SPX today, the "dark cross" occurred ABOVE the 200-day EMA so it is a Neutral signal. Had the cross occurred below the 200-day EMA it would've been a SELL signal.
The SPX chart shows not only the "dark cross" signal, but it also reveals a breakdown at the 200-day EMA (the SPY closed above the 200-day EMA today). That is a big problem and suggests that price will continue toward support at 4250. The PMO is on a SELL signal and the RSI is negative as it sits below net neutral (50). Stochastics are very oversold, but haven't made a concerted effort to move higher. Overall the SPX looks very bearish.
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: The most bearish sector is Technology (XLK). It is not only in the Lagging quadrant, but it has a bearish southwest heading.
Communication Services (XLC) has a bearish southwest heading and appears ready to move into the Lagging quadrant soon.
The most bullish sectors are Energy (XLE) and Materials (XLB) given they are within the Leading quadrant and have a bullish northeast heading.
Financials (XLF) and Industrials (XLI) are about to enter the Improving quadrant and both have bullish northeast headings. They still have work to do, but the outlook is good.
Consumer Discretionary (XLY) is the only sector in the Weakening quadrant. It is moving toward the Lagging quadrant and therefore has a clear bearish bias.
The rest of the sectors are within the Leading quadrant and are beginning to curl toward the Weakening quadrant. However, they are firmly planted in the Leading quadrant so I consider them to have a bullish bias.
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 market may've closed higher today, but it didn't come close to having the expected upside breakout from the bullish falling wedge. Additionally, Total Volume was very low on this "rally". The VIX is still below its moving average on our inverted scale which implies internal weakness.
Price closed above the 200-day EMA, but given what we saw in the opening $SPX chart, I would expect the SPY to follow suit and close below the 200-day EMA very soon. The PMO is on a SELL signal and the RSI is negative. Stochastics are oversold but moving sideways.
Here is the latest recording (4/18):
Topic: DecisionPoint Trading Room
Start Time: Apr 18, 2022 09:00 AM PT
Meeting Recording Link.
Access Passcode: April#18th
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S&P 500 New 52-Week Highs/Lows: New Highs contracted and New Lows expanded on a "rally day". The 10-DMA of the High-Low Differential continues lower. We will want to see this indicator reverse before we look for a solid market bottom.
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.
The STOs were mixed today with the STO-B moving lower and the STO-V rising slightly again. They are both sitting in neutral territory. If the market decides to continue lower, these indicators are NOT oversold and can accommodate lower prices before reaching oversold territory. Only one-third of the SPX have rising momentum. It will be difficult to get a solid market bottom until we have better participation.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
These indicators continue to trend lower and are FAR from being oversold so they can definitely accommodate more downside in the intermediate term meaning a continuation of the bear market.
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 SCI is flat and remains above its signal line. There are far fewer stocks with price above their 20/50-day EMAs than those with Silver Crosses. This gives us a bearish bias in the short and intermediate terms.
The GCI continues to fall and is reading at a bearish 55%. There are fewer stocks above their 50/200-day EMAs so it is doubtful it will rise to the 70% bullish level we look for. This gives us a bearish bias in the long term.
CONCLUSION: Despite a positive close, the bullish falling wedge did not execute as expected with a breakout. Additionally, last week's upside initiation climax did not result in higher prices. These are bad signs in the short term, but they also have implications in the intermediate term. Major support was lost by the SPX at the 200-day EMA. Indicators are trending lower or are negative. The bias is bearish in all three timeframes. We expect even more downside, so consider possible hedges or at a minimum, tighten your stops.
I am 15% exposed to the market. I don't like to be exposed during bear market moves. However, I will be considering opening exposure within industry groups showing relative strength like Gold Miners and Miners in general.
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BITCOIN
Bitcoin has basically aborted the bullish cup with handle pattern, but we will give it a bit more rope. It appeared price was moving much lower, but it managed to claw back up and could finally fulfill this cup with handle with a break above the 20/50-day EMAs. The indicators are still negative, although Stochastics are considering a move out of oversold territory. The strongest level of short-term support is at $37,500.
INTEREST RATES
Yields continue to soar. We don't see any relief ahead.
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.
Don't miss Carl's take on interest rate inversions in today's recording of the DecisionPoint Show. Here is a link to the YouTube video.
10-YEAR T-BOND YIELD
$TNX didn't reach the top of its rising trend channel and that created a bearish rising wedge. However, given the current rising rate environment and still positive indicators, it doesn't seem likely we will get a breakdown.
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 continues to rally and should challenge the top of the short-term rising trend channel soon. The indicators are bullish so we don't have any reason to expect otherwise.
On the one-year chart we see a breakout from the longer-term rising trend channel. That is very bullish, but also implies price is extended. Again, indicators don't imply a major decline is on tap.
GOLD
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Last week Gold broke out above resistance at the late March high. It was up quite a bit earlier in the day, but bears pulled price down to close near the bottom of today's trading range, hence the filled black candlestick. We could see a decline tomorrow based on this candlestick pattern, but I would expect only a hiccup that would test support based on the new PMO crossover BUY signal, positive RSI and Stochastics oscillating above 80.
GOLD Daily Chart: The longer-term Gold chart suggests a bullish cup with handle pattern with the recent breakout executing the pattern. We expect Gold to test all-time highs in the intermediate-term timeframe.
GOLD MINERS Golden and Silver Cross Indexes: Miners continue to outperform. Like Gold, they pulled back to close at the lower end of today's trading range. However, the rising trend hasn't been compromised and participation is so strong, we would expect Miners to continue to rally.
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 broke out of the symmetrical triangle to the upside as expected. Symmetrical triangles are continuation patterns and given the prior trend was up, a breakout was the expectation. USO is reaching overhead resistance, but indicators are positive so we don't expect USO to have much trouble with that resistance level.
BONDS (TLT)
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds continue to languish. TLT broke down from a bullish falling wedge and indicators look very negative. With yields continuing higher, we don't expect much from 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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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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