We know there is a "spoiler" in the title, but we wanted you to keep the upside exhaustion climax in mind as we look at the charts and indicators.
Looking at the 5-minute candlestick of the SPY we see it was choppy trading, but ultimately price is oscillating within a rising trend channel, not a bearish ascending wedge. It appeared price was ready to move back down to test the bottom of the channel, but instead we saw an upward thrust in the last 10 minutes of trading. This caused the 5-minute PMO to bottom above its signal line and it kept the 5-minute RSI in positive territory. We should remember that the final minutes of trading don't always predict which way the market will trade the next day, but it is interesting to see the effect this late day reversal had on the indicators which were looking like they would finish the day on a bearish note.
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
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® Weekly Chart ($ONE Benchmark): Interesting movement on the RRG today. Energy which has been showing excellent strength, continues in a bearish southwest direction, moving further into the Weakening quadrant. We still like this area of the market and expect it to hook back around toward the Leading quadrant.
XLB, XLV, XLP and XLU populate the Leading quadrant. XLB is spinning around but maintaining its position within the Leading quadrant. XLV and XLU are moving southward toward Weakening. XLV doesn't have as much ground to cover. XLP has a strong bullish northeast heading and has just reentered the Leading quadrant. This makes sense given its defensive posture.
XLRE hooked around and quickly entered the Lagging quadrant. Although a defensive sector, it has been losing ground likely due to mortgage rates rising parabolically. All other sectors within the Lagging quadrant are beginning to move up toward the Improving quadrant. They are still underperforming in the Lagging quadrant, but are looking less bearish.
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: SELL as of 5/5/2022
SPY Daily Chart: Price is headed up to test the top of the declining trend channel. A breakout here would be very bullish as it would put price above the 20-day EMA as well as break the short-term declining trend. The VIX continues to move higher above its SMA on our inverted scale suggesting internal strength is appearing. Remember that a puncture of the upper Band generally leads to a decline.
A breakout will not be easy given overhead resistance aligns with the February low and June 2021 lows. The RSI is still negative, but the PMO is beginning to turn back up. Stochastics have reached their highest levels since the demise of price in April. We did see a slight pick up in Total Volume, but looking at the SPY volume, we see less and less participation.
Here is the latest recording:
Topic: DecisionPoint Trading Room
Start Time: May 16, 2022 09:00 AM
Meeting Recording Link.
Access Passcode: MondayMay#16
S&P 500 New 52-Week Highs/Lows: There was a slight expansion in New Highs and the 10-DMA of the High-Low Differential is still mostly rising out of very oversold territory.
Climax* Analysis: There were climactic readings on all the indicators today. On Friday there was an upside initiation climax, so today's must be identified as an upside exhaustion 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 are at their core exhaustion events; however, at price pivots they can be seen to be initiating a change of trend.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
Both STOs hit positive territory today as they continue to rise along with price. We now have only 23% of the SPX with falling momentum. That is a big improvement and could provide the strength needed to keep price rising.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
We can now see a positive divergence on the ITBM and ITVM as their lows are rising while price lows are declining. Over one quarter of the SPX now have PMO crossover BUY signals. However, the lows are not in a positive divergence with price.
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 short-term bias is now looking less bearish. We want to see the %Stocks > 20-day EMA to be higher than %Stocks > 50-day EMA as it implies strength is building in the short term. Notice also that the SCI has turned up in response.
The intermediate-term bias is still bearish since we have fewer stocks above their 50-day EMAs than 200-day EMAs.
The long-term bias is still bearish as the GCI is falling and is well below our 70% bullish threshold.
CONCLUSION: The STOs are showing positive divergences with price and participation is beginning to broaden as more stocks see rising momentum. The short-term bias is improving as well. Unfortunately, we did see an upside exhaustion climax that suggests price will drop in the next day or two. If this climax doesn't result in downside price action as it implies and overhead resistance is penetrated, the short-term bias will be more convincingly bullish. If it does result in lower prices, we will know that bear market forces are still at work.
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Bitcoin is pausing the decline. It is now consolidating along long-term support. The RSI is improving somewhat but remains negative. The PMO has flattened as price pauses. Stochastics are rising but the advance is decelerating. This is looking like a bearish reverse flag. Bitcoin is clinging to life.
Yields are rising again after a pullback. We expect them to continue rising.
For those who believe rates won't rise much further, we invite you to look at the long-term yield array. The declining trend has been broken. That declining tops trendline forms the top of a long-term bullish falling wedge. We can see that rates have plenty of territory to move even higher.
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 held support at 28 and overcame resistance at the April high with ease. The RSI remained in positive territory and Stochastics are turning up before hitting deeply oversold territory. The PMO is still falling, but we believe that is very temporary.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: As the bearish rising wedge predicted, price declined. The PMO looks particularly bearish as it tops in overbought territory. The RSI is still positive but headed quickly toward negative territory below net neutral (50). Stochastics are also falling fast. We would expect price to test support at the May low.
A drop to that support level would mean a breach of the 20-day EMA so it will be particularly important for UUP to hold it.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Despite the sell-off on the Dollar, Gold could not muster a positive close. The RSI is still very negative and Stochastics can't seem to get above 20. The PMO is technically falling, but we are encouraged by its deceleration combined with a now falling Dollar.
GOLD Daily Chart: Discounts on PHYS spiked lower and are now at a high for the year. The last reading that was this high resulted in consolidation and a new rally. The stars haven't aligned for Gold, but they are getting close.
GOLD MINERS Golden and Silver Cross Indexes: GDX rallied slightly. It hasn't improved the indicators much, although the PMO is looking like it will bottom in oversold territory. The big issue is that we need to see more than 0% of stocks above their 20/50-day EMAs. When those numbers begin to come in, then we can trust any subsequent 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: The bullish ascending triangle pattern on USO began to resolve as expected on yesterday's breakout. Today price fell back within the triangle. The PMO has triggered a crossover BUY signal, the RSI is positive and Stochastics remain above 80. We are still expecting a breakout.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT fell today on rising yields. Yesterday's comments remain valid:
"TLT broke out of the falling wedge pattern as the formation suggested, but it failed as soon as it hit overhead resistance at the 20-day EMA. The RSI is negative and Stochastics have topped below net neutral (50) so despite last week's PMO crossover BUY signal, we would expect prices to continue lower."
Good Luck & 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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