We'll address the market support issues below, but today the Materials Sector (XLB) 20-day EMA crossed down through the 50-day EMA, a dark cross changing the IT Trend Model from BUY to NEUTRAL. Had the dark cross occurred beneath the 200-day EMA, it would have been a SELL signal instead of a Neutral signal. The PMO has now dropped below the zero line. Participation isn't in the basement given both the Silver Cross Index (SCI) and Golden Cross Index (GCI) are at 50% or higher, but the %Stocks with price above their 20/50/200-day EMAs are well below those readings and are moving lower. This gives us a strong bearish bias on Materials.
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 the market is in decline.
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: The February low was successfully retested twice this month, but today it was decisively taken out. The SPY now rests upon another support level at the May 2021 lows, but that was compromised intraday. The RSI is negative, falling and not oversold yet. The PMO is oversold, but the typical range for the SPY's PMO is -2 to +2, so it can move much lower before reaching extremely oversold levels given it is at -1.81 now.
The VIX is oversold, but we did not see a puncture of the lower Bollinger Band on our inverted scale. Without a puncture, the VIX suggests lower prices in short term. Total Volume was elevated.
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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: Not surprisingly, New Lows expanded greatly.
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: Unanimous climax indications give us a downside exhaustion climax. SPX Total Volume was very high, but we're not sure that it reaches blowout levels. We should also recall that "bullish" climaxes haven't resulted in prolonged rallies.
*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 sitting in neutral and no where near oversold. %Stocks > 20-day EMAs and %PMOs Rising are at oversold levels, but we've seen readings that were even lower.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is SOMEWHAT OVERSOLD.
Given we are in a bear market, the ITBM/ITVM are barely oversold. %PMO BUY Signals turned down below the signal line. Notice we had zero PMO BUY signals at the end of the 2020 bear market so a 20% reading is barely oversold.
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 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 SPY lost important support today as did most of the indexes (if they hadn't lost it already). Indicators, while falling and bearish, are not as oversold as they can get. STOs and ITBM/ITVM have plenty of territory on the downside before they reach the same levels as the 2020 bear market bottom. Today's downside exhaustion climax suggests tomorrow won't look like today, but bullish expectations have to be tempered in a bear market. While we could see a strong upward thrust, we know how that turned out last week.
Erin is 20% exposed with 15% in bear funds.
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Bitcoin also lost strong support at the 2022 low. The RSI and Stochastics are oversold, but the PMO is not. With very strong volume to the downside today, it could be time for Bitcoin to consolidate on or around $27,500. Bottom fishing here isn't wise, at least until price finds some support.
Yields fell today but the longer-term rising trends haven't been compromised.
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
Despite a more than one basis point drop, $TNX is still in a strong rising trend. The RSI is positive and the PMO should trigger a crossover BUY signal soon. Stochastics are still looking strong as they oscillate above 80.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar continues to consolidate sideways. Indicators are still favorable so we expect a breakout.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold is not the safe haven it once was. It is holding support and the rising bottoms trendline, but today closed beneath the 200-day EMA. The RSI is negative and not oversold yet. Stochastics are oversold, but turned back down.
GOLD Daily Chart: The PMO is still falling. While it appears oversold, the typical PMO range is between -2 and +2...it can accommodate far more downside. If the Dollar breaks out, as we believe it will, already weak Gold will likely lose this support level. Sentiment isn't bearish enough to look for a reversal.
GOLD MINERS Golden and Silver Cross Indexes: 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: It was a terrible day for the Energy sector, much of that spurred on by the drop in Oil prices. USO has been consolidating sideways, but holding a rising bottoms trendline along the 50-day EMA. A flat top and rising bottoms form a bullish ascending triangle. If price rebounds off the 50-day EMA, we would expect to see a breakout.
The RSI has just entered negative territory and the PMO has turned down. Stochastics have also turned down. It was an over 6% decline so we would expect to see some damage.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bond rebounded somewhat today as yields dropped. We have a bullish falling wedge on TLT, but we've seen multiple bullish formations failed on the way down. The PMO is flat and the RSI is negative. Stochastics are moving lower in negative territory.
Certainly TLT is oversold, but we don't see any relief on rising rates. Despite a bullish chart pattern, TLT is deeply bearish so the likelihood of a lasting rally is extremely low.
Good Luck & Good Trading!
Erin & Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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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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