We had a bad feeling about intermediate-term indicators topping yesterday and unfortunately our hunch was correct. Today's breakdown took out the Short-Term Trend Model BUY signals on both the Nasdaq 100 ($NDX) and S&P100 ($OEX); the result is two new ST Trend Model SELL signals. They would've been "neutral" signals had the crossover occurred above the 50-day EMA, but no such luck. Both the $SPX and Dow ($INDU) are likely to see the same signals tomorrow.
There is some short-term support at the earlier May low, but we would expect to see the NDX lose at least another -6.5%.
The OEX is vulnerable to a -5.7% decline. In all honesty, we'll be lucky if that's all these indexes lose.
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 $ONE Daily RRG chart.
We noted yesterday that the new southeast headings on nearly all of the sectors was a sign of a possible top. Today, the daily RRG turned very negative. All of the sectors have a somewhat bearish southeast heading or very bearish southwest heading (XLV, XLE and XLU--all defensive sectors).
No changes to weekly RRG so yesterday's comments still apply:
"The weekly $ONE RRG shows us that the bear market is still in force with nearly every sector holding a bearish southwest heading.
XLF is turning back up, but it has a large amount of ground to cover before it even reaches the Improving quadrant. Think of it as a little less bearish than its peers in the Lagging quadrant. XLE has moved is staying in Weakening with a heading that is indecisive."
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: Well, the market has stopped waiting. We had a bullish double-bottom breakout, followed by a too long consolidation. The bullish formation finally failed with today's breakdown. The bear market rides again. Adding to the negativity is the PMO, which topped below the zero line. SPX Total Volume was well below the 1-year daily average, but that's not good news. Fading volume undermines an advance, but declines do not need heavy volume to maintain downside momentum.
Remarkably, the VIX doesn't reflect a lot of panic yet. It is currently oscillating above its SMA on our inverted scale.
Here is the latest recording:
Topic: DecisionPoint Trading Room
Start Time: Jun 6, 2022 09:00 AM
Meeting Recording Link HERE.
Access Passcode: June@6th
S&P 500 New 52-Week Highs/Lows: New Lows expanded considerably which caused the 10-DMA of the High-Low Differential to top--not a good look.
Climax* Analysis: Since yesterday was a downside initiation climax, today must be labeled a downside exhaustion climax. Nevertheless, we're not so sure that the move is exhausted yet. We could be looking at confirmation/continuation of yesterday's downside initiation climax.
*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 SOMEWHAT OVERSOLD.
Short-term indicators took a nose dive today which put them in somewhat oversold territory already. We don't think they are done with the decline.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is SOMEWHAT OVERBOUGHT.
Yesterday these indicators topped, giving us the first sign of trouble ahead. They continue to decline out of overbought territory and they have a LONG way to go before reaching oversold conditions.
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 bearish. Overnight the bias moved from somewhat bullish to very bearish. We lost a huge percentage of stocks above their 20-day EMA. The damage to the participation of stocks above their 50-day EMA was sizable as well.
The intermediate-term bias is bearish. The SCI is topped today and with less than 24% of stocks above their 20/50-day EMAs, no improvement is likely.
The long-term bias is still bearish. The GCI is stagnant at a bearish 38.6% and we see a smaller percentage of stocks with price above their 200-day EMA compared to Golden Crosses. In order to have a Golden Cross, you need price above both the 50/200-day EMAs.
CONCLUSION: The short-term indicators and participation have crashed. As we noted yesterday, we should now expect more downside. The bear market downward pressure has won out so we should expect more downside, at least another 5%. Clearly inflation fears and the Fed rate hikes have scared investors away. Look out below.
Erin is 35% exposed to the market with an interest rate hedge (PFIX). With the breakdown she is not planning on expanding her portfolio and will reevaluate all of her positions.
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Bitcoin is range bound, but with the latest top being lower than the previous, we believe it is very vulnerable to a breakdown below major support at $28,666. Stochastics and the PMO were still rising yesterday, but today they have topped, joining a negative RSI. It is not looking good for Bitcoin.
Yields are climbing again after pulling back in May. The 20/30-year rates are nearing a breakout.
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
$TNX broke above resistance at the mid-May top. Next up is the early May top. A break above 3.2% and we see the highest rate since 2018. We see it breaking that resistance and moving even higher. The RSI is positive and the PMO is nearing a BUY signal.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP rallied strongly. The indicators are finally saying something and it is bullish. The RSI is positive, rising and not overbought. The PMO has turned up above the zero line and Stochastics have now reached positive territory. There was very high volume today on the buying. Look for the Dollar to continue higher.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold is still consolidating which is positive given the Dollar popped 0.73%. Gold managed to keep the loss to just -0.20% on $GOLD and -0.32% for GLD. The RSI is negative and the PMO is topping. Stochastics topped before reaching 80. We remain bullish on Gold in the long term, but it's looking bearish in the short term. Erin is waiting for a breakout to bolster her current holding.
GOLD Daily Chart: Discounts stayed about the same so investors are still bearish on Gold, just not as bearish as they were in mid-May.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners took a beating with the market breaking down and the Dollar rallying strongly. The technicals are completely ugly. Stay away.
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 was down, but the technicals remain strong. The RSI is positive and no longer overbought. From yesterday: "The PMO is moving higher with no problem and Stochastics remain above 80. Crude Oil is not "teflon", but it is about as close as you can get right now. With the summer travel season picking up and China unlocking, demand will go up. Supply will stay about the same. Basic economics, Oil prices will rise."
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT was able to move slightly higher, but the picture is still negative given rates are likely to continue their march higher. We don't expect this support level to hold.
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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