Today the Materials Sector (XLB) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model "Silver Cross" BUY Signal. Given we have 75% of stocks with price above the 20-day EMA and the Silver Cross Index (SCI) is only 50%, there is a clear bullish bias in the short term. It is possible that big things will happen hereafter, but this is the eighth 20/50-day EMA crossover in a year, so beware of the top of the trading range.
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
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 $ONE Daily RRG chart. Big news is that XLI, XLK and XLC have all made it to the Leading quadrant. XLK and XLI are maintaining their bullish northeast heading, but XLC is already rolling over and moving southeast toward the Weakening quadrant.
Besides XLK and XLI, XLY and XLP have bullish northeast headings. XLRE is nearing the Leading quadrant, but does have slight deterioration as the heading is southeast not northeast.
The remainder of the sectors reside in the Leading quadrant, but like XLC, they have neutral southeast headings versus a bullish northeast heading.
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: Once again the daily range remained within the range of the previous six candlesticks. It is beginning to look as though the market is waiting for something, and it is probably next week's Fed meeting, perhaps hoping that the Fed will ease the planned rate hike. Of course, there are the jobs report on Thursday and the Consumer Price Index (CPI) reports on Friday.
The indicators remain bullish. The RSI is in positive territory above net neutral (50). The PMO is rising out of oversold territory. Stochastics are pointed lower, but remain comfortably above 80. The VIX contracted today suggesting investors are less worried.
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 Highs are expanding but we also saw a slight increase in New Lows. That has flattened the 10-DMA of the High-Low Differential.
Climax* Analysis: We got an upside initiation climax today, but once again SPX Total Volume failed to confirm. Also, the NYSE UP/DOWN Volume Ratio did not quite make climax levels, so the climax activity was limited to the S&P 500. Considering that the five previous climaxes all proved to be exhaustion events, we should probably assume the same for this one, likely another day within the current trading range.
*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 NEUTRAL.
Good news! The STOs have turned up suggesting the current trading range will resolve to the upside. %PMOs Rising is a healthy 88% which should help to provide lift off eventually.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is SOMEWHAT OVERBOUGHT.
Yesterday's comments still apply:
"We say that indicators are somewhat overbought. The ITBM/ITVM are more neutral than overbought. However, combined with overbought %PMO BUY signals, we get a somewhat overbought condition. That indicator has topped which is generally bearish for the market in the intermediate term."
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 bullish. There are far more stocks with price above their 20-day EMAs than there are stocks above their 50-day EMAs. This suggests that the SCI will continue to rise.
The intermediate-term bias is neutral. The SCI is rising after an oversold crossover its signal line, but it remains at a
low 32.4%.
The long-term bias is still bearish. The GCI is stagnant at a bearish 38.4% and we do not see any more stocks with price above their 200-day EMA. In order to have a Golden Cross, you need price above both the 50/200-day EMAs.
CONCLUSION: Today's upside initiation climax paired with now rising STOs suggests to us that we will see an upside breakout from this trading range. There is also a short-term bullish bias in effect. We have three important economic events ahead that could help or hinder the market (Initial Jobless Claims, CPI and Fed remarks) so be prepared for this trading range to stick around. Given the bear market backdrop, temper expectations on the length of any follow-on rally if we get the breakout.
Erin is 35% exposed to the market with plans to bolster her Gold position and add one or two "Diamonds in the Rough" from the DP Diamonds reports where she presents stocks and ETFs she considers good enough for her own portfolio. A strong breakdown from the current SPY trading range will lead her to pare back exposure, not increase it.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact support@decisionpoint.com for more information!
BITCOIN
Bitcoin rallied strongly but didn't see any follow-through. It remains in a trading range between $27,500 and $32,500. We expect this trading range to become the new normal unless Bitcoin falls apart. Indicators are improving, but we don't see an extended breakout rally ahead.
INTEREST RATES
Yields are climbing again after pulling back in May. Long-term yields stumbled a bit today.
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 pulled back today but hasn't compromised the new short-term rising trend. Indicators are mostly positive. The RSI did tip over but remains in positive territory. The PMO flattened, but is still moving toward a crossover BUY signal. Stochastics are strong. We continue to look for yields to break out to new 52-week highs.
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP failed to hold the breakout above the early May low and the 20-day EMA. The Dollar is in consolidation mode and has formed a reverse flag in the short term. The PMO and RSI are not healthy, but Stochastics are still rising. Overall, we expect more sideways movement with a likely breakdown to follow.
GOLD
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Discounts continue to contract.
GOLD Daily Chart: Discounts continue to contract which indicates that investors continue to get less bearish on Gold. This is opening the door to a breakout; indicators just need to firm up.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners had a good day but the chart still needs improvement. There is a "death cross" waiting in the wings (50/200-day EMA negative crossover). The PMO is rising, but the RSI is still negative and Stochastics have topped below 80. Participation as far as the SCI and GCI is weak. We do see a bullish bias in the short term. There are far more stocks above the 20-day EMA which puts that percentage above the SCI. We still advise caution when plucking from 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: Crude Oil continues its march higher after breaking out of the bullish ascending triangle. The RSI is positive and so far is avoiding overbought territory above 70. The PMO is rising gently and Stochastics are oscillating above 80. We would look for higher prices to continue.
BONDS (TLT)
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT was able to reverse today on the drop in the 20-year yield. It doesn't improve the bearish outlook for Bonds. Indicators remain negative and you'll note low volume on today's buying. We expect to see support broken.
Good Luck & Good Trading!
Erin & 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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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