Bitcoin ETF (GBTC) finished the strongest this week up 6.23%, but one of the runners-up was the Rare Earth Metals ETF (REMX) which was up 4.43%. The chart continues to look strong with one exception. First what's looking good. The RSI is positive, rising and not overbought. The PMO is rising and is also not overbought on its current BUY signal. Stochastics look fantastic given they are moving sideways well above 80. What's wrong? On-Balance Volume (OBV) has a strong negative divergence with price currently. Lower highs on the OBV are aligned with rising price tops. Rare earth metals will likely continue to rise simply due to the war given both country's large store of these materials. Technically, we would like to see more volume, but the technicals and fundamentals appear strong right now.
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
For the Week:
Each S&P 500 Index component stock is assigned to one, and only 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.
For the Week:
RRG® Daily Short-Term Chart: In the short term we can see that aggressive sectors, XLK and XLY are within the Leading quadrant, but are beginning to show signs of deterioration in their rotation. Materials (XLB) is now back in the Leading quadrant with a very bullish northeast heading.
XLE and XLU are headed back toward Leading with bullish northeast headings. This is very encouraging. XLRE and XLP may be in the Lagging quadrant, but they now have bullish northeast headings.
XLV and XLI are moving further into the Lagging quadrant with westward headings. XLF has fallen out of Improving and is now moving with a bearish southwest heading within the bearish Lagging quadrant.
XLC has been a slow mover within the Improving quadrant. It isn't particularly bullish as it has some distance to travel before reaching Leading and it has been stuck there for weeks.
Intermediate-Term (Weekly) RRG® Chart: XLC looks far less bullish in the intermediate-term timeframe. It has left the Improving quadrant and is now planted in Lagging. XLK and XLY are in the Lagging quadrant but are showing some bullish tendencies as they move toward Improving.
XLRE is in Weakening, but barely. It should hit the Leading quadrant next week unless that sector completely falls apart.
It is a little hard to make out, but the most bullish sectors within the Leading quadrant are XLB, XLU and XLV. XLB has the advantage as it is moving with a bullish northeast heading while XLV and XLU have a more southeast heading.
XLE is special case. It is highly bullish given its distance from the center of the graph. The center is the SPY, so it is performing much better than the SPY. However, it is now moving southward very quickly showing that strength is deteriorating, but hasn't disappeared.
All others are in the Leading quadrant (XLP, XLF and XLI) but have bearish southwest headings that could land them in the Weakening quadrant soon.
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 the buying exhaustion, price has continued to decline. Today was very encouraging given the higher close and formation of a hammer candlestick. That tells us that the bulls won the day as they pulled price back up toward the open.
The RSI is positive and tipped upward today. The PMO is rising but decelerated on this week's decline. Stochastics are above 80 but are about to move back below. The good news is that support is arriving at the 20/50-day EMAs.
SPY Weekly Chart: Price has executed the bullish falling wedge finishing higher for the third week in a row. The weekly PMO is now tilting upward and the weekly RSI hit positive territory. We got the 3%+ breakout from the wedge as the pattern suggests but price is now vulnerable again.
SPY Monthly Chart: The monthly PMO managed to avoid a crossover SELL signal again, but it is razor close and if price doesn't finish strongly next month, the signal will trigger. The monthly RSI is still positive and relatively safe from negative territory below net neutral (50).
New 52-Week Highs/Lows: New Highs contracted today but are still mostly healthy. The 10-DMA of the High-Low Differential is rising, but has started to decelerate slightly.
Climax Analysis: No climaxes today, but note that Net A-D Volume was negative, while Net A-D was positive. Not usual. We saw an upside exhaustion climax on Tuesday followed by a downside initiation climax yesterday. We saw some follow-through given the SPY finished higher, but set a lower high, leaving the declining trend intact.
*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 in decline and are not yet oversold suggesting more downside ahead. %Stocks indicators are also neutral even having ticked up today.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM is still rising, but the ITVM is deteriorating along with %PMO BUY Signals which is bearish, particularly since they are overbought.
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 following table summarizes participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation.
Short-term, we do see that %Stocks > 20/50-day EMAs is higher than the SCI which is somewhat bullish.
The SCI measures the IT bias and it is below 70% but rising which is neutral.
Long-term, the bias is more bearish given there is a lower percentage of stocks with price above the 200-day EMA than the GCI percentage.
CONCLUSION: The market is clearly deteriorating as of this week. Indicators have been overbought and are turning lower adding to the already neutral to bearish bias. Today's hammer candlestick suggests a possible advance on Monday, but as a 1-day pattern, that is all it says. We would suggest turning off your more aggressive positions are tightening their stops and manage the others in the short term with stops as possible.
Erin is 15% exposed to the market and as of now isn't looking to expand next week.
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Bitcoin broke out this week, but is now in a declining trend. Support is holding at the 20-day EMA and February/March highs for now. The PMO has decelerated but hasn't quite topped. The RSI is still positive, but Stochastics have turned down and are now below 80 which isn't encouraging.
Rate popped to finish the week with some continuing to make new highs.
The Yield Curve Chart from StockCharts.com gives us a different view of 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 broke down their steep rising trend this week but are still holding above 23. With the deterioration of the PMO and Stochastics, it is questionable whether that support will continue to hold.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount. As buying power shrinks, home prices will come under pressure.
This week the 30-year fixed mortgage rate rose from 4.42% to 4.67%, which is over two percentage points above the low of 2.65% just 15 months ago. Assuming a fixed monthly payment of $2,015, the mortgage that a buyer can afford is 20% lower than it was in January 2021. All the while home prices have been soaring (up +19% per https://realestatedecoded.com/case-shiller/), putting a double squeeze on buyers. But there are signs that this is about to change.
We have been commenting on this issue for several months, and this week we finally saw a report on Fox Business that reported on the problem of rising mortgage rates. Also, for a couple of weeks we have been hearing a local radio commercial that says after months of frantic real estate sales, now some homes are not selling. This could put pressure on buyers to lower prices. Won't this bring prices back into the range for average buyers? Maybe, but people whose buying enthusiasm bids home prices up, will become less enthusiastic about buying when prices are coming down. Falling real estate prices are not what they have been conditioned to expect from the HGTV House Hunter shows.
We keep hearing about a shortage of inventory. Where are people going to live? Well, they are living somewhere now. Maybe they want to move up, but if they can't, they won't.
Conclusion: Cheap money has created another real estate bubble (thank you Federal Reserve), and conditions are ripe for that bubble to be popped.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP continues to consolidate sideways above the 50-day EMA. Indicators are mostly neutral suggesting more of the same next week.
UUP Weekly Chart: The weekly chart shows a solid rising trend. Paired with a positive RSI and rising weekly PMO, we expect to see the rising trend hold. It is now due to test that rising trendline.
UUP Monthly Chart: The Dollar broke above the 2016 high this past week. The monthly RSI and PMO are looking strong and neither are overbought.
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GOLD Daily Chart: Like the Dollar, Gold has been moving mostly sideways above its 50-day EMA. It attempted to break from its short-term declining trend. Stochastics suggest we might see some higher prices, but the RSI and PMO are not on board yet.
We are seeing a large cup with handle, but given the mixed indicators, the handle might continue to form.
GOLD Weekly Chart: If Gold prices break down, there is a possible double-top in play. It's a bit early to call it and both the weekly RSI and weekly PMO are still technically positive.
GOLD Monthly Chart: The monthly chart is neutral. The monthly RSI is positive, but has tipped over and the monthly PMO is moving sideways on a SELL signal. With no correlation to the Dollar, it is free to move in either direction in the long term.
GOLD MINERS Golden and Silver Cross Indexes: GDX saw a breakout from a symmetrical triangle today. It also closed on it's high for the year. The PMO is technically on a SELL signal but is moving mostly sideways. All of the other indicators are very favorable with the RSI rising and not overbought and Stochastics moving above 80. Participation is very strong. We would look for higher prices.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO is now in a symmetrical triangle. They are continuation patterns and suggest an upside breakout ahead, but price isn't acting well and the indicators are not positive. The RSI is neutral but both the PMO and Stochastics are falling. We would expect support to hold at $70.50, but price is soft.
USO/$WTIC Weekly Chart: Price hit overhead resistance on the weekly chart and was turned away. The weekly PMO and RSI are still mostly positive, but are topping.
WTIC Monthly Chart: The monthly is positive, but we do see a failed breakout. With the monthly PMO still rising and the monthly RSI in positive territory, we do expect that breakout, but the other timeframes do tell us that it may take some time.
IT Trend Model: NEUTRAL as of 1/5/2022
LT Trend Model: SELLas of 1/19/2022
TLT Daily Chart: We see a bullish engulfing candlestick on TLT and a week of higher prices. The PMO is now on an oversold crossover BUY signal and Stochastics are rising nicely. The RSI is slowly rising but still in negative territory.
Overhead resistance is about to be tested and with yields beginning to rise again, we don't expect a sustained rally.
TLT Weekly Chart: Support was lost last week, but price is now righting the ship. However, with a negative weekly RSI and falling weekly PMO, we don't see price holding up much longer.
TLT Monthly Chart: The long-term rising trend is holding up but the monthly RSI and falling monthly PMO suggest that rising bottoms trendline is vulnerable.
Good luck and good trading!
Carl & 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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