Today the Health Care sector (XLV) 50-day EMA crossed down through the 200-day EMA, generating a LT Trend Model "Death Cross" SELL signal. While there have been many 20/50-day EMA crossovers in the last year, the 50/200-day EMA crossover hasn't happened since April 2020 as the market was coming out of the 2020 bear market. The PMO is oversold, but continuing lower. The RSI is negative and pointed lower. Participation is anemic given the Silver Cross Index (SCI) is showing only 15.6% of stocks with a 20-day EMA above the 50-day EMA. With %Stocks > 20/50-day EMAs are at 1.6% and 3.1% respectively, the SCI has nowhere to go but down. The GCI will likely continue to lose ground given so few stocks are above their 50/200-day EMAs. Relative strength is rising, but this is a great example of why relative strength against a failing index is useless.
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: Below we have the RRG chart using the $ONE benchmark.
Yesterday's comments still apply:
"We don't need to tell you that this is a very bearish RRG. The bear market isn't leaving any sector unscathed at this point. It will be interesting to see which sectors pull themselves out of bearish southwest headings."
"The weekly RRG confirms what we see on the daily RRG. It looks even worse with the majority of sectors in the Lagging quadrant holding bearish southwest headings. XLP and XLU, defensive sectors are 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 heading."
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: Price gapped down taking our bullish expectations with it. We saw very high volume on today's selling which suggests investors are panicking amid recession fears and rising inflation. According to media outlets after the FOMC comments, traders were satisfied with the Fed's 75 basis point increase. Apparently untrue.
The VIX has punctured the lower Bollinger Band on our inverted scale, but closed within. When the VIX oscillates below its moving average, we consider the market weak. Stochastics have turned back down well below 20 which is very bearish.
Here is the latest recording:
Topic: DecisionPoint Trading Room
Start Time: Jun 13, 2022 09:00 AM ET
Meeting Recording Link
Access Passcode: June@13th
S&P 500 New 52-Week Highs/Lows: The positive divergences we had previously melted away today. Time to update yesterday's free article.
Climax* Analysis: While we had to classify yesterday's climax as upside initiation, today's reversal proves that it was exhaustion. Today's climax is classified as a downside initiation climax; however, it could be exhaustion as well.
*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.
The STO positive divergences persisted through today's selling, so a short-term rally is still a possibility. However, with only 3% of stocks with rising PMOs, it will be difficult.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The ITBM and ITVM have reached the level that has qualified as oversold all this year, but the weak overbought readings we had earlier this month make us think that oversold will be lower still. And those indicators haven't bottomed yet.
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. %Stocks above their 20/50-day EMAs are still below the SCI.
The intermediate-term bias is bearish. The SCI is still declining and reading at a mere 13.6%.
The long-term bias is bearish. The GCI topped beneath its signal line and continues lower. Additionally we have much smaller percentages of stocks > 50/200-day EMAs than the GCI.
CONCLUSION: The indicators were very bullish yesterday, but that has all changed with today's crash. Today's downside initiation climax suggests more selling ahead, but with the STOs still holding on to their positive divergences, a small reaction rally is possible. Extreme caution is warranted. As they say, "Prepare for the worst and hope for the best."
Erin is 20% exposed with a 10% hedge. She will be increasing her hedge based on tomorrow's outcome.
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Yesterday's comments still apply:
"Bitcoin tested support at $20,000 today, but finished above. It has been a painful 71% decline since the top in November. The PMO suggests this support level will be lost. However the RSI is oversold and Stochastics are turning back up in oversold territory. We would look for some churn and flirtation with $20,000 as support. If that support level is lost, we would consider $12,000 to be the next support level."
After a strong few days of rally, yields continue to pullback toward support.
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
With this week's price top, there is now a rising wedge formation, which we expect to resolve downward. It is not a very tight wedge, so it may take some time before the pattern resolves as expected.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Rather than digestion of the prior rally, it dropped nearly 1% today, putting price on support at the 20-day EMA. This looks like a textbook cup with handle formation that suggests an upside breakout. However, if it doesn't rally here, the pattern will be busted.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold enjoyed a strong rally with the Dollar down. It remains range bound, but indicators are beginning to improve a great deal. The RSI will reach positive territory on any upside move. The PMO has whipsawed back into a BUY signal and continues to rise. Stochastics have turned up sharply. A test of the top of the range is highly likely and if indicators remain positive, we would look for a breakout.
GOLD Daily Chart: Discounts are reaching oversold territory which is good. We thought that Gold would need to test the May low, but instead it rallied. That is also a bullish sign.
GOLD MINERS Golden and Silver Cross Indexes: Despite a harsh decline in the market, Gold Miners weathered the storm. Interestingly Metals & Mining ETF (XME) was down over -4% today! Go figure. It does temper our bullish expectation within this group. While the PMO has turned up the other technicals on the chart are still very negative. The RSI is below net neutral (50). Stochastics are negative and participation is slim to none.
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 rallied, keeping it above the 20-day EMA. The RSI still is positive, but the PMO triggered a SELL signal and Stochastics hit negative territory. We don't think the pullback in Crude Oil is over yet.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT saw a bullish engulfing candlestick today suggesting higher prices. We have to admit that the chart is firming up. Yields appear ready for a pullback or correction so Bonds may see more interest, particularly if the bear market continues to decimate stocks. Although they aren't favorable given inflation, it is a place investors may choose to hide out. We prefer Gold.
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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