We thought it worthwhile to bring Bitcoin to the top of today's article. A view off the long-term picture is important (so we can actually see support levels). We watched this weekend as Bitcoin began its sell-off. We texted each other on Saturday as we viewed the breathtaking breakdown. Bitcoin had lost major support.
How major is it? A support/resistance line is strengthened every time it is "touched". To find the best support/resistance levels or rising/falling trendlines, find the area or trendline that has the most "touches". In Bitcoin's case that is at $28,666. That level was brutally taken out. Indicators were already looking sickly, now they are far worse. Today saw a PMO crossover SELL signal and the RSI fell completely out of bed, dipping into oversold territory. Stochastics are in the basement. We could see a rally occurring on the next level of thin support at $20,000, but iff that level is lost, we'd look for Bitcoin at $12,000. Ouch.
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 daily RRG was already breaking down early last week, but it has now completely broken down with every sector holding bearish southwest headings.
The weekly RRG looks even worse with the majority of sectors in the Lagging quadrant holding bearish southwest headings. XLP and XLU, defensive sectors are on in the Weakening quadrant, but their heading tells us that no sector is going unscathed. XLE which has held clear leadership among the sectors, had been indecisive regarding its heading, now it has made up its mind and is joining everyone else with a 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: Two giant gap down days have shaken market participants. Today's was especially gruesome given short-term support was obliterated. For Pollyannas: we don't have a reversal, but should we get one, it could set-up a bullish double-bottom.
The PMO confirms that this isn't likely the end. It has topped well-below the zero line and today triggered a crossover SELL signal. Not surprisingly, the VIX skyrocketed. On our inverse scale that gives us a puncture of the lower Bollinger Band. Many times that leads to a reactionary bounce. We're not so sure.
Here is the latest recording:
Topic: DecisionPoint Trading Room
Start Time: Jun 13, 2022 09:00 AM ET
Meeting Recording Link
Access Passcode: June@17th
S&P 500 New 52-Week Highs/Lows: New Lows spiked. It's important to note that today's reading is even lower than in May. That is a confirmation of the decline.
It is noteworthy that the NYSE New Lows contracted versus the low reading in May. This could set up a positive divergence, but we still haven't bottomed on this indicator, nor on price.
Climax* Analysis: As could be expected, this was a climax day with a downside exhaustion climax. It is the third one in a row, but with price gapping down day after day, we're not so sure that exhaustion is upon us yet. The VIX puncture of the lower Band on our inverted scale is generally a good sign for the next day...but in this bear market it hasn't been particularly reliable.
*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 OVERSOLD.
While readings are overbought, we can tell you that they reached lows of -700 during the Covid crash. Note that only 1% of stocks have price above their 20-day EMA and 1% have rising PMOs. Doing the math, that is only FIVE stocks in the SP500 with price above their 20-day EMA or have rising momentum...FIVE. This is very oversold, but crippling for future rallies.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM/ITVM are no where near oversold. They can accommodate much more downside. There are still PMO BUY signals that need to be taken out before we can start talking about capitulation.
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.
We probably don't need to tell you, but the technicals back us up. There is a clear bearish bias in all three timeframes. Only 1% have price > 20-day EMA and only 5% have price > 50-day.
The Silver Cross Index has also tumbled, but isn't oversold yet when comparing it to the last May trough. The Golden Cross Index which had finally begun to rise, has now topped below its signal line.
CONCLUSION: Crypto is falling out of the sky, and talk is that the Fed may raise rates by 75 or 100 basis points tomorrow instead of 50 as previously expected. None of this is helping the market. We have another downside exhaustion climax, but we know how well bullish signals have been working out in this bear market. The best we can hope for is a reactionary bounce based on very oversold conditions or a digestion period. Of course, trading on "hope" isn't a good strategy.
Erin is 30% exposed with a 10% hedge. She is likely to add another hedge (inverse ETF or short) to buffer volatility ahead.
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We discussed long-term prospects for Bitcoin. The short-term picture shows tremendous selling volume. If this were a "bank", we're starting a see a "run on the bank" where everyone heads into the bank to withdraw funds. (Remember It's a Wonderful Life when everyone goes into the bank demanding their money from poor George Bailey?) We're considering this the end of crypto.
Interest rates blew overhead resistance away with huge upside moves.
In the longer term, that breakout is significant. The next level of signficant resistance is at 5%; however, we could see a pause at 4% based on the 2013/2014 highs.
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
A rising trend channel has developed. The RSI is overbought, but we just got a PMO crossover BUY signal today. The PMO is far from being overbought near term. Stochastics are back above 80. We would look for $TNX to test the top of the channel.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is accelerating higher. This is putting strong downward pressure on Gold. Considering this, Gold has held up fairly well (but we'll talk about Gold later). UUP broke above overhead resistance and doesn't look interested in falling. Indicators are confirming this rally. We would look for UUP to move even higher with a possible digestion period to follow.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold broke below its short-term trading range, but strong support is available at $167. We are bullish on Gold, but the short-term picture is still leaning bearish.
GOLD Daily Chart: The PMO topped on both GLD and $GOLD. The RSI is back in negative territory. We don't like the megaphone pattern that is developing as these have bearish implications. The pattern implies increased volatility and volatility is rarely a friend.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners were caught in the downdraft of both Gold and the market's watershed declines. The group had just begun to wake up with more stocks above their 20-day EMA. That fell apart today as we now see no stocks with price above their 20-day EMA and their 50-day EMA. The PMO has topped well below the zero line. If we're lucky, we will get a rebound soon that would set up a bullish double-bottom.
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 avoided the market tsunami today, closing up a little more than a quarter of a percent. Price held support at the March high. If it fails to hold this level and the 20-day EMA, there is still support to be had at about $82.
Indicators are solid with the RSI in positive territory, the PMO rising and Stochastics oscillating above 80. This could be a bull flag forming. Stay tuned.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With yields spiking, it is no surprise to see TLT breaking below support on high volume.
The PMO generated a crossover SELL signal well-below the zero line. The RSI is very negative and falling. Stochastics are oscillating below 20 which implies severe internal weakness. Bonds have further to fall.
Good Luck & Good Trading!
Erin Swenlin and 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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