Thoughts of inverse ETFs flew away on today's strong open. We have the 5-min candlestick chart of the last five days of trading below. The chart is sending out mixed messages. Thursday/Friday's trading turned into a bullish reverse island. Price gapped down to start trading on Thursday, but today gapped up, leaving price out on its own, like an "island". Today, price came up against a resistance zone and was unable to push above it. In the process it set up a bullish ascending triangle pattern. The expectation of these patterns is an upside breakout.
Unfortunately, price broke below the rising bottoms trendline. In the process, the 5-min RSI dropped into negative territory and the 5-min PMO whipsawed into a SELL signal. It's a very small breakdown, but certainly given the 5-min indicators, this could lead to a test of $374 or at gap support at $372 before we see prices move higher.
The DecisionPoint Alert Weekly Wrap presents an end-of-week assessment of the trend and condition of the Stock Market, the U.S. Dollar, Gold, Crude Oil, and Bonds. The DecisionPoint Alert daily report (Monday through Thursday) is abbreviated and gives updates on the Weekly Wrap assessments.
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MAJOR MARKET INDEXES
Each S&P 500 Index component stock is assigned to one of 11 major sectors. This is a snapshot of the Intermediate-Term (Silver Cross) and Long-Term (Golden Cross) Trend Model signal status for those sectors.
RRG® Charts with Benchmark ($ONE):
Daily: Despite today's rally, the daily RRG saw very little, if any improvement. All of the sectors are still firmly holding ground in the Lagging quadrant with mostly bearish southwest headings. XLE is in Weakening, but could move into Lagging with all of the other sectors soon. On the one hand this doesn't look encouraging, but on the other hand it does show us how oversold this market currently is. When we start to see those bearish headings disappear, we will feel more confident about an extended rally.
Weekly: The weekly version is worse given the steep southwest headings. XLK is showing some improvement in its heading, but overall this chart is very negative.
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 gap up rally was very encouraging coming off Thursday's downside exhaustion climax. The RSI is rising again, but has some distance to cover before reaching above net neutral (50). The PMO is decelerating, but is still declining. The VIX is oscillating beneath its EMA on the inverted scale, suggesting internal weakness.
We see Stochastics have turned up slightly, but they aren't that convincing yet.
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Start Time: Jun 21, 2022 09:00 AM
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S&P 500 New 52-Week Highs/Lows: New Lows continued to contract, but we didn't see any New Highs. The 10-DMA of the High-Low Differential did pause the decline, just as it did in May.
Climax* Analysis: Today we got an upside initiation climax, and it looks very much like the one last week. SPX Total Volume was respectable. In bull markets we look for higher prices. In this bear market we have to take bullish signals with a grain of salt. Still this is very encouraging.
*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.
STOs aren't that oversold anymore, but our participation indicators are. STOs are rising and that does suggest we will see some follow-through on today's rally. %PMOs Rising improved quite a bit today. Now almost 25% of the SPY have rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The ITBM/ITVM were mostly unchanged. %PMO BUY signals continues to move lower and is now extremely oversold. It will take more than one rally day to see new PMO BUY signals. Recall that these indicators were the first to signal that a breakdown was ahead. They could confirm a rally if they turn up.
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 bias is still bearish in all three timeframes. One day of rally didn't fix that.
In the short term, we have 8% of stocks above their 20-day EMA and only 7% above their 50-day EMA. While these are improving, it isn't enough to switch the bias from bearish.
In the intermediate term, the SCI is falling and is at a very low 11% which is bearish.
In the long-term, the GCI is falling and we have %Stocks > 50/200-day EMAs reading lower than the GCI. This means we won't see the GCI rising any time soon and that is bearish.
CONCLUSION: STOs are confirming this bottom as they have been rising for days. The IT indicators on the other hand have not turned around yet. If they begin to rise too, we'll have more confidence that this is the beginning of a bear market rally. We're cautiously optimistic right now. This rally could have legs, but we don't think they will be very long legs. Nevertheless, the market is coming off of very oversold levels, so something the size of the May rally is possible.
Erin is 20% exposed with a 10% hedge.
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Over the weekend, Bitcoin dropped below $20,000 which was another critical support level. It has righted the ship and is back above. The RSI and PMO are beginning to turn around, as are Stochastics, but none of them are bullish enough to start looking for a longer-term rally. We do expect price to continue a bit higher with the 20-day EMA likely to pose a problem.
Rates pulled back last week, but are resuming their rise.
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 bounced off support today, but the indicators haven't firmed up. The PMO is flat and Stochastics are falling, suggesting internal weakness. There is also a bearish rising wedge pattern that suggests rates will pull back again.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: We still have a bullish cup with handle pattern, but given we didn't see follow-through on Friday's rally, the pattern is slowly disintegrating. Like $TNX above, we have a bearish rising wedge formation in the longer term. The RSI is positive, but the PMO is looking flat and toppy. Stochastics are still in decline, but decelerating. Our sense is that UUP with test the rising bottoms trendline.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold is being Gold. It's had many opportunities to breakout and hasn't. Price failed to overcome the 20-day EMA and is now headed down to support. The Dollar looks soft which should help Gold. However, seeing the Dollar decline and Gold decline too doesn't inspire confidence.
GOLD Daily Chart: Discounts remain elevated which tells us that investors are still bearish. They aren't high enough to look for a reversal based on sentiment. At this point, plan for more sideways movement.
Full Disclosure: Erin owns GLD.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners rallied mildly. It wasn't enough to improve participation. The RSI is negative and the PMO is still on a SELL signal. It looks like a double-bottom may be forming, but it is too early to jump head first into this group.
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 saw a rebound off support at the prior tops and 50-day EMA. We expect to see it stay above this level of support, but given the RSI is negative and the PMO and Stochastics are in decline, Crude Oil is vulnerable to further downside. Be careful with your Energy positions and consider tight stops.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With interest rates back on the rise, TLT was unable to overcome resistance. Bonds were ready to breakout, but instead were turned away. The RSI is negative and the PMO is declining again. Stochastics have topped in negative territory. The rebound in Bonds appears over in the short term.
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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