We decided it was a great time to check in on our "breadth with depth" Silver Cross/Golden Cross Indexes on the Nasdaq and NYSE since we only concentrate on the SPX. On the Silver Cross Index (SCI) chart below we can see that all indexes are seeing improving/rising SCIs. They are coming out of oversold territory, although not as oversold as the end of the 2020 bear market. This is one of the reasons we see this as a bear market rally not a bottom to the current bear market.
Golden Cross Indexes (GCIs) are also beginning to rise from oversold conditions. We saw this in March, but it was cut short when the bear market resumed. We see a similar pattern right now. If we see all of the GCIs get positive crossovers their signal lines, we can start thinking about an end to the bear market. The big problem isn't the technicals, it is the economic environment. Most economists agree that the malaise of inflation and rising rates aren't behind us. This will put incredible downside pressure on the market.
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
SECTORS
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 charts using the $ONE benchmark.
DAILY: Currently all sectors with the exception of XLV have bullish northeast headings. XLV is in the Leading quadrant and has an easterly heading that will take it further into the Leading quadrant, not out of it.
WEEKLY: No changes to the big picture RRG in the intermediate-term timeframe. It shows us that the bear market is still with us as all of the sectors have 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: Today's candlestick is a bullish engulfing which suggests higher prices tomorrow. One concern is that while support continues to hold along the confirmation line of the double-bottom pattern, it was unable to break above the 50-day EMA, but that's a small complaint as it would've taken an even bigger rally than the already excellent 1.9% today.
The RSI ticked up today keeping it in positive territory above net neutral (50). The PMO continues to rise strongly out of oversold territory. The VIX is nearing the upper Bollinger Band on our inverted scale, but the Bands continue to stretch which could protect it from penetrating the upper Band (which would be bearish in the very short term). Stochastics turned up keeping them oscillating above 80 which suggests internal strength.
Here is the latest recording:
Topic: DecisionPoint Trading Room
Start Time: May 31, 2022 09:00 AM PT
Meeting Recording Link.
Access Passcode: May#31st
S&P 500 New 52-Week Highs/Lows: With SPY making a new rally high today, we should have seen an expansion of New Highs. No such luck, and not a good sign. On the bright side, the 10-DMA of the High-Low Differential turned up today.
Climax* Analysis: Of the eight trading days since the May low, seven have been climax days, and of those, five have been upside climaxes. Today we got an upside initiation climax. SPX Total Volume contracted again, which implies a lack of commitment to the advance. Nevertheless, based upon the preponderance of upside climaxes in the group, we think that the up trend will continue into next week.
*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 UP and the condition is OVERBOUGHT.
All of these indicators are retreating from overbought territory. While we do not like seeing these indicators moving lower, it does alleviate overbought conditions. A very healthy 88% of the SPX have rising momentum and more are coming in. That is enough to carry prices higher.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
All of these indicators are continuing to rise which does suggest higher prices are possible in the intermediate term. We note that 88% of stocks have PMO crossover BUY signals. This also can support higher prices.
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.
Long Term: The GCI finally turned up today and now we have %Stocks > 50/200-day EMAs that are higher than the GCI which implies it will continue to rise. It's not enough to change our outlook from bearish in the long term. A positive crossover by the GCI over its signal line might.
Intermediate Term: The SCI is rising and has had a positive crossover. While it is at an anemic 28.2%, it is rising after a positive crossover so we see the intermediate-term bias as neutral to bullish.
Short Term: This bias is bullish given there are 78.6% above their 20-day EMAs and 53.8% above their 50-day EMAs. Those percentages are far higher than the SCI.
CONCLUSION: Our only issue today would be the paltry Total Volume that contributed to today's +1.9% rally on the SPY. It could be that buyers are skittish about participating in a rally right now, but that's just a guess. Today's bullish engulfing candlestick paired with an upside initiation climax suggests higher prices tomorrow. The bias remains bullish in the short term. We expect more upside in the short term.
Erin has expanded her exposure to 30%.
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BITCOIN
It appears Bitcoin is establishing a new trading range between $27,500 and $32,000. Indicators are wishy washy. The RSI is rising but below net neutral (50). The PMO is rising, but Stochastics topped below 80. There is a short-term negative divergence between OBV tops and price tops. We don't see a breakout ahead, but we don't see a breakdown in the short term unless all of the indicators agree.
INTEREST RATES
Rates are switching gears with long-term rates breaking their declining trends.
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 paused to digest the recent rally out of the bearish head and shoulders. Stochastics are rising strongly and the RSI is positive so we will forgive the PMO for not turning up yet.
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is stuck in a trading range between the 20/50-day EMAs. It looks like a reverse flag formation which is bearish. The PMO is declining and the RSI remains negative. Stochastics are trying to top below 20. All bearish indications that will likely lead to a breakdown.
GOLD
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold rallied today but got hung up on the late May top. Price did hold above the 20/200-day EMAs and given the RSI just hit positive territory, Stochastics are rising and the PMO is on a BUY signal, we believe we will see higher prices on Gold.
GOLD Daily Chart: One issue is price hasn't overcome the 50-day EMA. However, investors are starting to get less bearish on Gold given Discounts are beginning to shrink. In the case of $GOLD, Stochastics have reached above 80 suggesting internal strength. We are looking for a breakout here.
GOLD MINERS Golden and Silver Cross Indexes: Big improvement for Gold Miners. Yesterday we said they were "iffy", today they look much more bullish. The RSI just reentered positive territory above net neutral (50). The PMO is rising on a BUY signal. Most importantly, the SCI has a pulse now (faint, but a pulse) with %Stocks > 20-day EMAs roaring higher. The longer term is still suspect. We will need to see better participation of stocks above their 50/200-day EMAs.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Two bearish filled black candlesticks did not deter Crude Oil from rallying strongly. The PMO and RSI are very bullish. Stochastics dropped below 80, but are already flattening in preparation for a move higher. The Energy sector is going to see more upside.
BONDS (TLT)
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yields backed off very slightly which gave TLT a positive close. TLT did form a bullish hammer candlestick, but the indicators aren't favoring higher prices for TLT. The RSI is negative and flat, the PMO is turning over and Stochastics have entered negative territory. We don't expect much from Bonds right now.
Good Luck & Good Trading!
Carl & Erin 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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