It wasn't long ago that all of the sectors had negative momentum (Price Momentum Oscillators (PMOs) falling). Now we have sectors showing new strength. In particular, Healthcare (XLV) and Utilities (XLU) are seeing favorable price patterns and improving participation. Both of these sectors are usually favorites during bear markets for their defensive positions. However, this bear market took out every sector with the exception of Energy (XLE). We are seeing signs of life again, particularly in XLV and XLU.
Today's PMO crossover BUY signal accompanied a breakout above the 20-day and 200-day EMAs. The RSI is positive and rising. Stochastics are rising and should reach above 80 soon. The Silver Cross Index (SCI) had a positive crossover today as well. Participation is improving given there are nearly 50% of stocks above their 20-day EMA. That reading is higher than the %Stocks > 50-day EMA. That tells us that participation is picking up in this sector. The GCI is flat, but if participation begins to improve further, that will change.
XLU's rally today was impressive. It was nice follow through on yesterday's small breakout above resistance. The RSI is positive and rising. Stochastics are now above 80. The SCI and GCI aren't rising yet, but participation is strong within this sector based on the high percentages of stocks above their key moving averages. In particular, like with XLV, we have more stocks with price above their 20-day EMAs than those above their 50-day EMAs. This suggests new strength.
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® Weekly Chart: XLE is the only sector that doesn't have a bearish heading. It is hard to tell, but XLE has moved up. It's barely bullish.
XLB and XLU are in the Leading quadrant. XLB should hit the Weakening and/or Lagging quadrant this week. It's very near the center of the RRG which basically tells us than in the last 5 weeks, it has made no headway. XLU is moving due south toward the Weakening quadrant as it loses strength.
XLV and XLP are sharing the Weakening quadrant with XLE. Both have bearish southwest headings.
The remainder of the sectors are in the Lagging quadrant. Given they all have bearish southwest headings, we believe the bear market is still in force.
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: Yesterday, numerous positive divergences, plus an upside initiation climax gave us a solid indication that the rally could have legs; however, today became just another instance where the bear market smothered the bullish promises. While the Dow closed slightly up, the Nasdaq Composite was down -2.35 and SPY was down -0.76%.
It didn't damage the indicators much with the exception of the RSI turning back down in negative territory.
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Topic: DecisionPoint Trading Room
Start Time: May 23, 2022 09:00 AM
Meeting Recording Link.
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S&P 500 New 52-Week Highs/Lows: We had an expansion in New Lows, but they aren't at oversold extremes yet. This is just one of many examples of failed positive divergences. On the bright side, the 10-DMA of the High-Low Differential is rising strongly.
Climax* Analysis: There were no climactic readings today.
*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 DOWN and the condition is NEUTRAL.
STOs turned down today after their brief rise yesterday. Here are four more examples of failed positive divergences.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
Again, more failed positive divergences, this time in the intermediate term timeframe. The ITBM/ITVM are in decline. We did see slightly more PMO BUY signals which is encouraging.
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.
Technically the short-term bias is improving given %Stocks > 20-day EMA is greater than %Stocks > 50-day EMAs. Many of the stocks' EMAs in the SPX are configured similarly with slowest EMA on top and faster on the bottom. Seeing more stocks above their 20-day EMA is constructive. More so when that percentage is higher than %Stocks above their 50-day EMA. We still read the short-term bias as somewhat bullish.
The IT bias is still bearish given the SCI is declining and is reading at a very low 22%.
The LT bias is also bearish. The GCI is falling and is at a low 39.6%.
CONCLUSION: Today's market decline erased all of the beautiful positive divergences that had lined up on the charts. Yesterday's upside initiation climax was also not fruitful. A rally isn't out of the question, but bear market forces are going to be hard to overcome as today's decline proved. There are some pockets of strength within the Utilities sector based on its current and improving participation; however, expanding exposure in this environment comes with plenty of risk. Remember the bear market rule that ALL positions should be managed in the short term.
Erin is 20% exposed with a 10% hedge in place.
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Support is still holding. Based on the reverse flag formation (with a "flag" that is a bearish descending triangle), if this level of support is lost the minimum downside target of the flag is 10,000.
Rates are still in a short-term declining trend.
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
Yesterday's comments still apply:
"Price confirmed the bearish head and shoulder pattern on Thursday when it broke below the red neckline. Price is still holding above support. Should it lose support, the pattern's minimum downside target is around 2.3%."
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Yesterday's comments still apply:
"The decline continues for the Dollar. Given the negative indicators, we would look for a failed test of the 50-day EMA at a minimum with a high likelihood of a breakdown to the $26.50 level."
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: GLD finally broke above resistance at the January high and 20-day EMA. The PMO is very close to a crossover BUY signal. The RSI is rising and could hit positive territory tomorrow.
GOLD Daily Chart: Stochastics are rising and have now reached positive territory. $GOLD's price pattern looks like a bullish "V" bottom. These patterns are very bullish. In this case, the upside potential is of the pattern would take price above resistance at $1900.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"Miners are seeing higher prices as Gold rises and the market begins to bottom again. The RSI is rising but is still negative. The PMO is rising again but has a lot of margin between it and its signal line. Participation is still very thin based on the SCI reading at 0% and only a slight amount of miners with price above their 20/200-day EMAs. Overhead resistance is arriving soon."
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: No breakout yet so yesterday's comments still apply:
"We've yet to see the breakout from the bullish ascending wedge, but last week's low never reached the rising bottoms trendline. That suggests that fifth time will be a charm and we'll get that breakout. The RSI and Stochastics are very favorable. The PMO is rather useless given its flat pattern."
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT is working very hard to breakout and it nearly did today. It did close above the 20-day EMA which is encouraging. Indicators are improving, very very slowly. With yields breaking down, we do believe we will see a possible test of the 50-day EMA in the short term.
Good Luck & Good Trading!
Erin and 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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