If you left early for lunch, you'd have left a market that was down, but consolidating and holding its own. When you came back, the market was in free fall. Of course a quick errand or meeting in the late afternoon and you'd have come back to a market on a vertical rally. Below is the five minute candlestick chart of the SPY which illustrates today's market whipsaw whiplash. There is a 5-minute PMO crossover BUY signal that signaled this lift off. In my trading rooms, I use a 5-minute candlestick chart to time entries and exits. The mechanical entry is on a PMO crossover BUY with a positive RSI (above net neutral (50)). That would've given you a pretty good entry today. On the reversal, a "V" shaped bottom developed. Once price retraces 1/3rd of the losses on the way up, the expectation is a breakout above the start of the "V". We got that, but now overhead resistance is looming.
After hours trading isn't always indicative of the next day's trading, but I wanted to show you that the PMO has had a negative crossover in after hours trading and price appears to be rounding off before reaching overhead resistance. It's not a bullish set up.
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: Problems abound on the RRG chart. Only one sector has a bullish heading and that is XLK. I don't trust this sector, yet it is the only one showing relative strength. The few rallies that we have seen have come off rallies in this and other aggressive sectors. This could be why XLC and XLK are rotating northward.
If the SPY is our benchmark and we see all other sectors with southward or southwest headings, it tells you there is NO strength. So while XLI, XLP and XLRE are in the Leading quadrant, they are quickly losing ground and will join its brethren in the Weakening quadrant.
Those in the Weakening quadrant have bearish southwest headings.
XLY and XLF are particularly weak. XLF had attempted to move toward the Leading quadrant, but it has lost steam and is headed toward the Lagging quadrant. XLY is very close the center of the graph which represents the benchmark SPY. A sector near the center means that it is performing almost in line with the benchmark, only it is headed away from the center. This tells us that it has been performing about as well as the SPY (not good), but is now beginning to underperform it by a great deal.
Using RRGs with a benchmark of $ONE was discussed as well as inverse ETFs during today's DecisionPoint Show. I plan to concentrate on inverse ETFs and short positions in DP Diamonds Reports given the complete lack of leadership and strength among the sectors.
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: BUY as of 6/8/2020
SPY Daily Chart: We have a hammer like candlestick today given the deep decline and subsequent recovery. Total Volume was elevated. I do see a very short-term OBV positive divergence. The VIX is still very elevated, but it closed above the lower Bollinger Band on our inverted scale.
It isn't visible on the 5-month chart above, but on the one-year chart we can see that the next line of support is at the May lows around $400. Stochastics have bottomed but are still well below net neutral (50). The RSI and PMO are both bearish.
Here is the latest recording:
Topic: FREE DecisionPoint Trading Room
Start Time: May 2, 2022 09:00 AM
Meeting Recording Link.
Access Passcode: May#the2nd
S&P 500 New 52-Week Highs/Lows: New Highs and New Lows are calculated in total for the day, not how many hit New Lows on the close. Therefore it shouldn't surprise us to see the large number of New Lows on a positive close. The 10-DMA of the High-Low Differential is below the zero line, but hasn't begun to turn back up.
Climax* Analysis: With trading being shared between bulls and bears today, the net result was low Volume Ratios and nearly unchanged Net Advances-Declines. No climax 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 indicate either initiation or exhaustion.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is OVERSOLD.
We are seeing a positive divergence between STOs and price. STO's are contracting out of oversold territory, but price is still trending lower. %Stocks > 20-day EMA and %PMOs Rising are clearly oversold, but today's rally did very little to move them higher.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is SOMEWHAT OVERSOLD.
Last week the ITBM/ITVM finally entered negative territory. However, they are not really that oversold, particularly when you look at readings from the 2020 bear market low. %PMO Buy Signals is oversold, but this year has seen lower readings.
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.
Participation continues to deteriorate. Today's rally did nothing to improve the current short-term bearish bias. Given there are far fewer stocks with price above their 20/50-day EMAs, the SCI will continue lower.
Intermediate-term, the SCI is falling and is not oversold. We read this as a bearish bias in the intermediate term.
Long-term, the GCI is still falling and shows only 51% of the SPX with Golden Crosses and less than that with price above their 200-day EMA. This gives us a bearish bias in the long term as well.
CONCLUSION: Today's whipsaw with an equal push and pull of bears and bulls caused most of the indicators to not move much at all. The Swenlin Trading Oscillators (STOs) and OBV positive divergence are hinting at higher prices. This is certainly a support level where price could reverse given the oversold level of many of our indicators. The biggest problem is lack of participation and all of this happening within the context of a bear market. With only 19% of the SPX showing rising momentum and none of the sectors showing rising momentum, it is hard to imagine we will see a bear market low or a strong bear market rally. With the FOMC weighing in on Wednesday, we would look for price to chop around the current support zone between $400 and $410 on the SPY...if we're lucky.
I am 15% exposed to the market and considering adding some inverse ETFs as a hedge.
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Bitcoin is hovering above support at the March lows, $37,500. Indicators are flat or somewhat negative so a bounce here doesn't seem likely. As with the overall market, look for price to stay above this level but not make much headway to the upside side.
Long-term yields broke out of their short-lived declining trends. With the FOMC raising the fed funds rate 50 basis points on Wednesday, we don't see any relief in sight.
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
After pulling back out of a bearish rising wedge, $TNX is back to traveling in a rising trend channel. The rising trend has softened somewhat, but remains steep. The PMO had given us an overbought crossover SELL signal, but it is beginning to decelerate. Stochastics are very positive and the RSI is only mildly overbought. Today's breakout above last month's high suggests more upside as well.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP only encountered three declines in April. Given indicators continue to look strong, we expect the rally will continue in May. The Dollar needs a breather right now so a little consolidation would be helpful.
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold dropped beneath the November highs, but managed to close above the 200-day EMA. It's at the bottom of a support zone between the November and January highs. We also see a rising bottoms trendline approaching. However, the RSI is negative and falling, the PMO just dropped beneath the zero line for the first time this year. Stochastics are flat. It seems more likely that price will have to drop to $165 on GLD.
GOLD Daily Chart: The one-year $GOLD chart displays support at about $1850. If that level is lost, we would expect prices to drop to at least $1750.
GOLD MINERS Golden and Silver Cross Indexes: Today's late day rally helped Gold Miners slightly as they closed down -1.26% versus Gold which closed down -2.52%. Still, an important support level is being damaged at the 200-day EMA at the late 2021 tops. GDX closed above it today, but it is very vulnerable; particularly given participation is nil. There are NO Gold Mining stocks with price above their 20-day EMA or their 50-day EMA. Indicators are still bearish with the PMO dropping below the zero line today.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Crude Oil continues to consolidate sideways, forming a symmetrical triangle. These are continuation patterns so we expect an upside breakout that would continue the prior rising trend. The RSI is positive and Stochastics are rising in positive territory. The PMO isn't revealing much as it moves sideways with price. Overall, we expect the upside breakout will occur sooner rather than later.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: There is now a bullish falling wedge on TLT. Remember that the prior falling wedge saw price break down from it. A bearish conclusion to a bullish chart pattern is especially bearish. So here we have another one. Given rising yields that aren't likely to let up, we aren't expecting a bullish resolution.
The PMO has topped beneath the signal line. Both the RSI and Stochastics are negative dropping. With the breakout in the 20-year yield, we expect TLT to continue its slide.
Good Luck & Good Trading!
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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Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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