Consumer Discretionary (XLY) was the only sector today that finished higher. The chart looks very encouraging and suggests this could be a place to fish if the bear market rally gets legs. The breakout above the 20-day EMA looked good on Friday and today saw follow-through that took price above the mid-May high. The PMO triggered a crossover BUY signal today. Participation is improving greatly as far as %Stocks > 20-day EMA. Seeing that bullish percentage is higher than %Stocks >50-day EMA which is higher than the %Stocks > 200-day EMA suggests this sector is improving quickly. The SCI is making its way toward the signal line but is still at a very bearish 5%. The GCI is mostly flat, but shows that 15% have bull market configurations. Stochastics are gaining ground and the RSI should get above net neutral (50) if we get another follow-through day on its bear market rally.
Remember, trading reversals is high risk in a bear market so positions will need constant supervision or hard stops set. Bear market rallies tend to come off beatdown stock reversals in the very short term. The March rally was a great example.
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 charts using the $ONE benchmark.
DAILY: We are seeing improvement within all sectors with most have bullish northeast headings. Those that do not are XLV, XLP and XLE. However, they still have northward components in their headings. XLE is in the Leading quadrant so there isn't much damage there. XLP is attempting a comeback and could reach the Improving quadrant soon, although we expect the "sexier" growth stocks will reap the most rewards if the market rally continues.
WEEKLY: The big picture RRG in the intermediate-term timeframe shows us that the bear market is still with us as all of the sectors have bearish southwest headings.
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 declined today. Likely a digestion of last week's rally. The key is that support was held at the confirmation line for the bullish double-bottom pattern. Based on the pattern, the minimum upside target would take us to about $438. Total Volume was incredibly high, possibly due to end-of-month activity (we've heard that big money is often reallocated in IRA/401K contributions at the end of the month).
Indicators are still positive despite today's decline. The RSI is still above net neutral (50) and the PMO is rising on a crossover BUY signal). Stochastics are rising strongly and have moved above 80. Stochastics oscillating above 80 generally means internal strength and higher prices.
Here is the latest recording:
Topic: DecisionPoint Trading Room
Start Time: May 31, 2022 09:00 AM PT
Meeting Recording Link.
Access Passcode: May#31st
S&P 500 New 52-Week Highs/Lows: Despite a lower close, we saw a slight expansion in New Highs and no New Lows.
Climax* Analysis: Today we got a downside initiation climax, but a few of the climax readings were marginal. SPX Total Volume, however, was 150% of the 1-year daily average. Frankly, we're not sure what to make of that. Normally, high volume confirms a climax, but in this case volume was excessive, more like blowout volume signifying the end of a decline. Volume Ratios weren't impressive and suggests more of a push and pull rather than a clear downside press. We think that the best bet is no bet. Let's wait to see how the market does tomorrow.
*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 may be initiating a change of trend.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
All of these indicators are overbought. STOs are showing slight damage as they turned lower today. Nearly every stock has rising momentum which is certainly enough to keep the rally going.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM/ITVM are still rising and are not overbought. We have a bullish 83% reading for %PMO BUY signals.
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 was flat today but was previously rising so that is a neutral bias for the intermediate-term.
However, in the short term, we have far more stocks with price above both the 20-day EMA and 50-day EMA which suggests the SCI will begin rising again soon. The short-term bias is bullish.
The GCI is flat at 38.6%. Given we only have 40.8% with price above the 200-day EMA, the GCI won't likely be rising much which gives us a long-term bias that is bearish.
CONCLUSION: We discussed today's climax and decided that it was a weak downside initiation climax. If we don't see follow-through on this bearish signal, it will speak volumes as it will be a bearish signal that actually fails. Bearish signals like this one have seen near perfect follow-through in this bear market. We still believe there will be more upside, but the market needs to digest last week's strong rally. Tomorrow we will have a better indication on whether this is digestion or indigestion. With support holding, an expansion in New Highs with no New Lows and prior positive divergences, we vote for digestion.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact firstname.lastname@example.org for more information!
Bitcoin rallied on Friday and was mostly unchanged today. Overhead resistance at the 50-day EMA and the January low are nearing. The RSI, Stochastics and the PMO suggest that resistance will be overcome.
Rates are switching gears with long-term rates getting ready to break their declining trends.
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
The head and shoulders formation is bearish, but yields are in a bull market. So even though the formation executed (the yield line crossed down through the neckline), we do not think that yield will reach any bearish downside objective. Potentially, the pullback in yields is finished.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is in consolidation mode. It is finding support, so far, at the 50-day EMA. Should that fail, there is still support available at the mid-April high. Consolidation and decline have taken indicators out of overbought territory. They are still configured bearishly. We expect more consolidation ahead, although we could be looking at a bear flag.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold failed to overcome resistance and is headed back down, likely to test support at $167.50 for GLD. The RSI never made it out of negative territory and the PMO's recent BUY signal is about to be history. Stochastics are topping below 80.
GOLD Daily Chart: Discounts are expanding again, indicating investors are getting more bearish on Gold. Stochastics and the PMO look more healthy on the $GOLD chart, but knowing GLD is seeing problems, $GOLD will likely see indicators turn over as well.
GOLD MINERS Golden and Silver Cross Indexes: The rally appears over for Gold Miners. Even if the market begins to rally, the pressure of falling Gold prices will likely take GDX with it. Like Gold, the PMO remains on a BUY signal but given dismal participation percentages and a negative RSI, more downside is likely ahead for Gold Miners.
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 hit overhead resistance at the intraday March high. Now we have a bearish filled black candlestick. This is flashing pullback tomorrow. Indicators remain very bullish so we wouldn't look for a major breakdown.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With yields turning back up, TLT failed to hold support. In the process, the RSI turned back down in negative territory and the PMO is beginning to top well-below the zero line. Stochastics have quickly turned down. It appears the bear market rally in Bonds is finished almost before it really began.
Good Luck & Good Trading!
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
(c) Copyright 2022 DecisionPoint.com
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.
Helpful DecisionPoint Links:
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.