Today the Energy Sector (XLE) 20-day EMA crossed down through the 50-day EMA ("Dark Cross") changing the IT Trend Model signal from BUY to NEUTRAL. As of now, none of the 11 S&P Sectors are on an IT BUY.
Energy was a major topic of conversation in today's FREE DP Trading Room as viewers and participants wanted to know if this sector and their favorite Energy stocks are ready to rally. We see only TWO positives on this chart. First is the RSI turning up in oversold territory (although we can see how that worked out the last time it bottomed) and second, price bouncing off major support at the 200-day EMA and the support zone between $68 and $71. This looks encouraging, but there are problems under the surface.
After today's rally, we would've thought that some of the members of Energy would've seen a move above their 20/50-day EMAs. There were none. The sector technically has no heartbeat when you look at participation. The Silver Cross Index (SCI) is falling fast and based on the configuration of EMAs on XLE, I would guess more Dark Crosses will follow. Keep this sector on your radar. When it does reverse, there will be plenty of opportunities.
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.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
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: We are using $ONE as our benchmark so that the RRGs reflect overall performance rather than relative performance against the SPY.
Daily: This short-term rally is changing the look of the short-term RRG. Consumer Staples (XLP) is showing the best performance as it has reached the Improving quadrant.
XLE is clearly the weakest sector on the chart as it maintains its bearish southwest heading.
We now have a few sectors that have bullish northeast headings including XLP. XLRE and XLV look very strong as they will likely be the next to hit the Improving quadrant. XLK and XLY also have bullish northeast headings.
The remainder of the sectors are traveling north to northwest which is somewhat bullish given it is moving them toward the Improving quadrant, but without an easterly component, they cannot reach Leading.
Weekly: The weekly $ONE RRG has looked extraordinarily bearish, but we are starting to see some improvement in the longer term. None of the sectors have bullish northeast headings, but a few are beginning to travel northward toward the Improving quadrant (XLC, XLV and XLF). This RRG makes it clear that we are still in a bear market.
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: After Friday's upside exhaustion climax, we thought we could be looking at a blow-off event. It isn't particularly surprising to see a consolidation day. The consolidation took place almost entirely above the 20-day EMA. Additionally, we have a new PMO crossover BUY signal. Total volume was lacking on today's selling which is encouraging.
The RSI is still in negative territory. Stochastics are too, but they are rising strongly and should move into positive territory tomorrow barring any significant decline. The VIX is staying above its moving average on our inverted scale which is positive for the market. It is nowhere near the top Bollinger Band so we do see upside potential.
Here is the latest recording:
Topic: DecisionPoint Trading Room
Start Time: Jun 27, 2022 08:59 AM
Meeting Recording Link
Access Passcode: June#27th
S&P 500 New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential has turned back up in very oversold territory.
Climax* Analysis: There were no climax readings 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 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.
STOs are continuing higher which suggests the market will continue higher in the short term. However, we do note that they are getting overbought already. We like that there are 86% of stocks in the SPX with rising momentum. That can sustain a rally. However, these readings are very overbought based on readings since the January top.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
Our IT indicators are now in sync, rising together. We have 41% of stocks with crossover BUY signals now which can support more upside. Last time we had a bear market rally, these indicators topped and moved lower. If they reverse, we will need to pay attention. For now they are confirming the rally.
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.
Last week's rally improved participation. Today, on the decline, we didn't see an expansion in participation. It was more of a pause. Therefore our comments from Friday haven't changed much.
The short-term bias is bullish given the large percentage of stocks above their 20-day EMA versus the SCI reading.
The intermediate-term bias is still bearish. The SCI is flat and has a bearish reading of only 10%.
The long-term bias is bearish as the GCI is at a low 31% with %Stocks > 20/50-day EMAs being lower than the GCI reading.
CONCLUSION: The market paused today on very low volume. Our outlook from Friday hasn't really changed for that reason. Short-term indicators are getting overbought, but are still rising. The PMO triggered a crossover BUY signal on the SPX and Stochastics/RSI are rising. IT indicators are continuing to rise too. This suggests a rally continuation or more churn. Stay alert. In today's DecisionPoint Show Erin highlighted Industry Groups that have potential. This is a big change from a week ago when all but two industry groups had falling momentum. There are now pockets of strength that could fuel a rally or prevent a big decline. We remain cautiously optimistic.
Erin is 15% exposed to the market contemplating expansion to 25%.
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Bitcoin is clinging to support at $20,000. The indicators are firming up with a rising PMO nearing a crossover BUY signal and Stochastics rising out of oversold territory, but it hasn't resulted in much upside. It took Bitcoin over a month of consolidation above support at $28,000 before it broke down. We expect more sideways price action with a high likelihood of a breakdown coming soon.
Yields are rising again putting the pressure back on Bonds. Long-term rates haven't quite broken their declining trends out of the recent top, so a decline isn't out of the question.
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 opted to rebound off the bottom of the bearish rising wedge pattern and managed to peek above overhead resistance at the May top. The RSI rebounded in positive territory which is very bullish. The PMO is on a SELL signal, but is already flattening out in preparation for a whipsaw BUY signal. Stochastics also paused their decline. We believe there is a good chance that $TNX will test the top of this wedge pattern again. If $TNX tops out before hitting the upper bound of the wedge, that would imply a breakdown ahead. For now, it looks like it is on its way back up.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: We've scrapped the bullish cup with handle pattern in favor of the bearish rising wedge. UUP generated a PMO SELL signal today. Additionally, the RSI and Stochastics are nearing negative territory. We are bearish on the Dollar right now.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: If the Dollar does poorly, Gold is supposed to flourish. Despite the Dollar being in a declining trend, Gold has not taken advantage of the reverse correlation. We still remain optimistic about Gold in the intermediate to longer terms, but the short-term picture is less than enticing. The PMO is technically on a BUY signal, but is stagnant. Stochastics topped in negative territory and continue lower alongside the negative RSI.
GOLD Daily Chart: What is unfortunate is that a "Death Cross" of the 50/200-day EMAs is on tap if price doesn't get back above the 200-day EMA.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are testing strong support at $28. This seems an excellent time for a reversal, but the indicators aren't on board. The PMO is still falling on a SELL signal after topping well below the zero line. Participation is almost non-existent with no Miner having a 20-day EMA above the 50-day EMA, nor price above their 50-day EMA. We have a very faint pulse as a few stocks have gotten back above their 20-day EMA, but not nearly enough to get bullish. The short-term declining trend is still intact as well.
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 had another great day. The question is whether we will see a continuation. This looks very much like a textbook bear flag. Price hasn't gotten above short-term overhead resistance. The RSI and Stochastics are beginning to rise, but the PMO still isn't on board. Given this rally happened off the rising bottoms trendline and the late May low, this could be the end of the correction. We would tread carefully here.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With rates reversing higher, TLT lost its upside momentum. The breakout above the 20-day EMA was the last day of rally. Now the indicators are turning south again. We expect to see support tested at $107.50.
Good Luck & Good Trading!
Erin Swenlin and Carl 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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