The SPY PMO has become very oversold, and today it crossed up through the signal line, generating a daily PMO BUY Signal. PMO signals carry various degrees of credibility depending on the configuration. This one has high credibility based upon its oversold level and the sharpness of the upturn. Note: The blue arrows are there to emphasize the intermediate-term down trend -- a top beneath a top, and a bottom beneath a bottom. In spite of how energetic this rally evolves, price would have to go quite a way before that pattern is disturbed.
This was not the only PMO BUY signal on the day. We also saw the Dow, SP400, XLB and XLK generate PMO BUY signals. You can see all of those charts in our Golden/Silver Cross Index ChartList on our website HERE (or go to the Blogs and Links page where you'll find all of our ChartLists in the upper lefthand corner).
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® Daily and Weekly Charts:
XLE is the only sector that doesn't have a bearish heading. It is hard to tell, but XLE has moved up.
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 that 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, at least in the intermediate term.
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: In addition to the PMO upside crossover, SPY has a double bottom setup. The confirmation line is drawn across last week's high. If the pattern executes by breaking above that line, the minimum upside target will be about 438.
The declining tops line on this one-year chart gives us a sense of how energetic this rally will have to be to break the bear trend. Since we are in a bear market, we should assume that is not going to happen.
Here is the latest recording:
Topic: DecisionPoint Trading Room
Start Time: May 23, 2022 09:00 AM
Meeting Recording Link.
Access Passcode: MayDP@23
S&P 500 New 52-Week Highs/Lows: New Highs expanded again today and for the first time in quite awhile, there were no New Lows.
Climax* Analysis: For the second day in a row we got an upside exhaustion climax, but again SPX Total Volume was a bit light for confirmation. Nevertheless, the elements of the climax were stronger today, and considering the double bottom setup discussed earlier, we're inclined to see it as bullish (short-term). Today also marked the first time in awhile that a bearish climax (yesterday's upside exhaustion climax) did not result in a bearish resolution.
*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: These indicators are becoming somewhat overbought, but the STOs have a few more days to run before they get too stretched. Since they typically top ahead of price, the short-term outlook is bullish.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM and ITVM continue to move up toward the zero line, and they are perfectly configured to accommodate the kind of rally discussed above before they become too overbought.
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 short-term bias is bullish. The "somewhat" bullish bias this week has improved greatly given %Stocks > 20-day EMA is greater than %Stocks > 50-day EMAs and the reading is at a fairly strong 64.4%.
The IT bias is looking less bearish given the SCI is now rising. The reading of 23.6% is still well-below our bullish 70% threshold.
The LT bias is still bearish. The GCI is falling and is at a low 39.4%.
CONCLUSION: The short-term bias is now solidly bullish. Indicators are moving higher off positive divergences and yesterday's bearish upside exhaustion climax had a bullish resolution with today's rally. For this reason, we believe that today's upside exhaustion climax could prove harmless. Today's PMO BUY signal and the bullish double-bottom pattern suggest a bear market rally is underway, but that won't really be confirmed until we get a 4th follow-through day to the upside.
Erin is 20% exposed with a 10% hedge in place.
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Support is still holding...barely. Price came close to dipping below support at $28,000. Based on the reverse flag formation (with a "flag" that is a bearish descending triangle), if this level of support is lost the minimum downside target of the flag is 10,000.
Rates are still in a short-term declining trend. The previous rising trends on longer-term yields are now being broken.
The Yield Curve Chart from StockCharts.com shows us the inversions taking place. The red line should move higher from left to right. Inversions are occurring where it moves downward.
10-YEAR T-BOND YIELD
Yesterday's comments still apply:
"$TNX confirmed the bearish head and shoulders 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: The Dollar declined today, but remains firmly above support at the 50-day EMA and $27 level. The RSI topped in negative territory and the PMO is still moving lower. Stochastics are attempting to bottom in oversold territory, but until we see positive momentum, we would expect price to chop around within the short-term trading range between $27 and $27.40.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Yesterday's comments still apply:
"Gold began to rally, but was easily turned away at overhead resistance. The RSI has now turned down in negative territory. The PMO and Stochastics are still somewhat favorable."
GOLD Daily Chart: Yesterday's comments still apply:
"Discounts are beginning to shrink as investors slowly turn back to Gold. We mentioned yesterday that $GOLD's price pattern looks like a bullish "V" bottom, so despite today's failure, we are still bullish on Gold. Right now it is fighting global favoritism of US currency given the war in Ukraine."
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners fell again today; however, the PMO did trigger a crossover BUY signal today. Stochastics are still rising. There are still problems. The RSI is negative and falling, price hasn't overcome resistance at the 20-day EMA and January high and participation is very thin and getting thinner. We don't trust this rally.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: FINALLY a breakout! Indicators are bullish with the RSI in positive territory and not overbought, Stochastics rising above 80 and the recent PMO crossover BUY signal. Now that we have the breakout alongside favorable indicators, we would look for the rally to continue.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT fell slightly today, but technically it remains above the 20-day EMA and and horizontal support at the April low. The PMO is rising, but today the RSI turned down in negative territory. Yet, Stochastics are still quite favorable. We expect Bonds to see a bit more upside, but ultimately we look for yields to resume their march higher which will put Bonds in all timeframes at a disadvantage.
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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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