A few days ago we asked the question as to whether sentiment was bearish enough. Today, we got an indication that it is getting there. The NAAIM Exposure Index dropped from last week's mid-fifties reading to 24.31 this week. AAII Bears (chart not shown) have contracted the second week in a row, but are still a very high 49.0. In spite of how bearish other indicators are looking, sentiment has us looking over our shoulder for a price bottom. Nevertheless, that bottom could still be some weeks away, if it unfolds like the 2020 Bear Market bottom which arrived a few weeks after the NAAIM low.
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® Chart: Below we have the RRG chart using the $ONE benchmark while the market is in decline. We are using the "Weekly" version as it is a better representation of the overall market strength versus the twitchy daily version.
Yesterday's comments still apply:
"Every sector except for Financials (XLF) have bearish southwest headings. Lagging stocks are getting even weaker. The three sectors left in the Leading quadrant, XLV, XLB and XLU, are moving toward the Weakening quadrant. Although, XLV and XLB could detour the Weakening quadrant and land in Lagging soon.
XLRE is clinging to its position in the Improving quadrant, but should hit Lagging by the end of the week.
XLE and XLP are in the Weakening quadrant, but have bearish headings. However, XLE has the benefit of being much further away from the Lagging quadrant.
If a sector is near the center point of the $ONE RRG, it means that it is seeing very little improvement, if any."
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: There is a bullish falling wedge on the 5-month SPY chart that implies an eventual upside breakout from the pattern. The VIX remains beneath is moving average on our inverted scale which implies internal weakness. The RSI is negative and the PMO continues its decline.
This next chart is normally a one-year daily, but we have added four months to it so we can locate upcoming support levels. You know it's bad when you can't find support levels on a one-year daily chart. We can see that support is arriving at $380. Stochastics are attempting to rise, but remain below 20 which suggests internal weakness (just like the VIX). Nevertheless, $380 might be where we see a bounce.
Here is the latest recording:
Topic: DecisionPoint Trading Room
Start Time: May 9, 2022 09:00 AM
Meeting Recording Link.
Access Passcode: May#on9th
S&P 500 New 52-Week Highs/Lows: New Lows expanded to levels we haven't seen in some time and the 10-DMA of the High-Low Differential has reached very low levels. You'll notice on the second chart that we are starting to see readings a bit closer to those from the 2020 bear market bottom.
Climax* Analysis: There were no climax readings today; however, the high SPX Total Volume reading could be considered evidence that today's selling was a blowout.
*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.
STOs are mixed and oversold. We did see a slight expansion in %PMOs Rising, but readings are still dismal.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
ITBM/ITVM continue lower in somewhat oversold territory. Readings are oversold in a bull market environment, but not nearly as oversold when compared to 2020 bear market lows.
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:
"The bias is bearish in all three timeframes. The SCI and GCI are falling and are well below our 70% bullish threshold. The %Stocks > 20/50/200-day EMAs are all below the SCI/GCI which tells us we shouldn't look for the SCI and GCI to rise anytime soon."
CONCLUSION: We noted yesterday that we had a "mild" downside exhaustion climax. It didn't result in higher prices--more evidence that we are in a bear market. Indicators continue to fall, but are at oversold levels. The SPY has support at $380 available. There is a bullish falling wedge in the short term. It's time for a relief rally, but we may have to wait until the $380 support line is actually tested.
Erin is 20% exposed with 15% in bear funds.
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Bitcoin is stubbornly holding at an extremely important support line at 28,666. It traded -11% below it today, but we can consider that the support is holding for now.
Just how important that line is can be seen on a longer-term chart. In our opinion, if that line does not hold, it will be the end for the crypto currencies. We can see support at 20,000, but if it gets that low, the base line support at about 12,000 will be the next logical target.
Yields continue to fall over all, but we would look for them to make the turn back up shortly.
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 lost over three basis points today, dropping it below the 20-day EMA. It appears support will be tested at 27. The PMO is accelerating lower and the RSI is about to enter negative territory below net neutral (50). Stochastic are pointed straight down and have also entered negative territory. We believe this is a short-term pullback and that support will be held.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Rising interest rates have made the dollar attractive, but one wonders if the recent pullback in rates will dampen enthusiasm soon.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: The strength of the dollar is killing gold. Support continues to be broken as Gold tumbles. The indicators are still negative. Stochastics may be flattening, but as long as they remain below 20, Gold is internally weak.
GOLD Daily Chart: $GOLD looks slightly better than GLD based on the rising RSI and flattening PMO. However, Stochastics are still declining. Overall we are bracing for further decline to $1775.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"GDX lost support at the 200-day EMA and horizontal support at $33.50. The indicators are bearish and getting worse. There are no Gold Miners with price above their 20/50-day EMAs and more are losing price support at their 200-day EMAs. Certainly we are at oversold levels, but that can persist for weeks. It isn't time to look for a reversal, it is time to look for support at $28.50."
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 rebounded off the rising bottoms trendline that forms the bottom of a bullish ascending triangle (flat tops, rising bottoms). Stochastics are finally rising and the PMO is turning back up too. The triangle formation should resolve to the upside as the pattern suggests.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds broke out as expected from the bullish falling wedge. The PMO triggered a crossover BUY signal today. Stochastics are rising out of negative territory. The RSI topped in negative territory and we have One a bearish shooting star candlestick. The rally may already be over.
Good Luck & Good Trading!
Erin & Carl 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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