We decided to move our comments on Bitcoin to the top of the article today. Cryptocurrencies are unraveling and today's breakdown is significant.
Bitcoin dropped below a support line today, continuing the decline implied by the head and shoulders breakdown earlier this year. But wait, you might ask, where did that support line come from? See the next chart below.
There, you see the line is drawn across a series of lows formed in 2021. This is an important support line that implies a retreat to the 2020 base at around 10,000. We heard today that 40% of Bitcoin holders are under water, so that decline could be rather accelerated as people rush to salvage some part of their stake. The only hope at this time is that the breakdown is not yet "decisive," meaning it is not yet 3% below the support line. Given Bitcoin has no problem declining over 5%...slim hope, indeed.
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
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.
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: Support at $395 has now been lost. We've annotated a bullish falling wedge, but it is very close to being a declining trend channel. Indicators are still looking terrible. The RSI is falling and negative. It is not yet oversold (see January). The PMO has stretched below the typical -2 to +2 range. However, it is still in decline and doesn't appear ready to switch gears.
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. The next level of support available is at $380. Price could hold this level and consolidate, but indicators suggest otherwise.
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 have been expanding as expected but were slightly lower today.
From yesterday but still notable:
"Below is a three-year daily chart. For context, we saw -300 reading on New Lows during the 2020 bear market. This is stretched, but certainly not oversold. Notice that the 10-DMA of the High-Low Differential dropped much lower as well before it was all over."
Climax* Analysis: There were climactic readings on SPX Net A-D Volume and the SPX UP/DOWN Volume Ratio, but SPX Net A-D and NYSE DOWN/UP Volume Ratio did not climax. SPX Total Volume was strong, so we think this give us a weak downside exhaustion climax. This allows for more churning, but with the way the market has been behaving, more decline seems more likely. The last downside exhaustion climax resulted in a that bearish filled black candlestick. It was a "rally", but not much of one.
*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.
We had noted possible positive divergences forming on the STOs, but today's heavy negative readings have all but erased the possibility. Only 6% of the SPX have rising momentum. Erin will only purchase stocks when they have positive momentum. That certainly slims the selection available.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
We've listed the IT indicators as being "oversold". However, given the strength of this bear market decline, we can consider these indicators as somewhat oversold. All of them can move lower, the ITBM/ITVM in particular.
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: The last downside exhaustion climax resulted in a small 0.25% rally on the SPX yesterday. Today's downside exhaustion climax is weak. Best case in our minds is some churn and chop, we don't expect it to result in much, if any, upside. Erin wrote yesterday that sentiment is bearish enough. If you listen to financial news, she's right. Talking heads refuse to give in which means many investors are being hard headed as well. As long as there are bulls squawking, there is no capitulation. Capitulation is key. Bitcoin is almost there. Continue to exercise extreme caution. We don't think this is over by a long shot.
Erin is 20% exposed with 15% in bear funds.
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See our opening article.
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 broke slightly below the bearish rising wedge. It is still holding above the 20-EMA and a bottom right here would change this rising wedge back into a rising trend channel. The PMO is falling and has topped beneath the signal line. The RSI and Stochastics are still in positive territory above net neutral (50). It appears we could see the 10-year yield drop back toward 2.6%, but so far the declining PMO hasn't been too damaging. This hints at internal strength.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar resumed its rally, but it is slow going. The indicators are favorable with the exception of an overbought RSI. The PMO and Stochastics are still rising. This "melt up" is likely to continue.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: GLD is so far holding onto the short-term rising trend drawn from the December low. Support at the January high is tenuous at best. The PMO and Stochastics are flattening in oversold territory and the RSI is rising again.
GOLD Daily Chart: If this support level doesn't hold (and looks like it won't), we would expect to see Gold prices to move to $1775. However, if Bitcoin falls completely apart, maybe Gold will have its day.
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 aren't on board yet, but the PMO and now positive RSI suggest this time we will see the breakout.
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 RSI and Stochastics are rising out of negative territory. The PMO is about to give us crossover BUY signal. We still believe yields will resume their march higher, but for now it appears we will see a continuation of this week's rally. However, the 20-day EMA should be formidable to overcome.
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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