It's been trending on social media that it is time for long-term yields to top. One of the charts in the DPA ChartList (available to you in the upper left-hand corner of the Blogs and Links page on DecisionPoint.com) is a long-term yield chart. The chart in the ChartList includes 1-yr yield on up to the 30-year yield, but we've trimmed it down to the 5/10/20/30-year yields.
Looking at the chart below it is hard to imagine we are going to see a major top in yields. Yes, they are up against overhead resistance from 2019, but this strong breakout from a declining trend channel that has been in place since the 1990's is troublesome. We would also point you to the period between 1978 and 1981. The economy was experiencing many of the same problems we have now. High inflation, high oil prices, housing prices moving higher, etc. We're not saying that we will see yields up to 16%, but what is occurring today is not an historic precedence.
Conclusion: We don't want to be "Debbie Downers", but we have to consider that rates could move much higher given the technical breakout and an economy that has many shared characteristics with the economy of 1979-1981. That period saw an unprecedented rise in yields.
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 $ONE Daily RRG chart.
We are beginning to see that the market is vulnerable to a top right now. The RRG suggests the same as all of the sectors with the exception of XLY and XLC are turning over.
Those in the Leading quadrant are now beginning to move toward the Weakening quadrant. Yet, two very aggressive areas of the market, XLY and XLC are holding up.
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: With the market basically standing still again, yesterday's comments still apply on this 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 reports on Thursday and the Consumer Price Index (CPI) reports on Friday."
The indicators honestly don't look that bad. The RSI is still positive, the PMO isn't really decelerating its advance and Stochastics are still moving higher above 80. The VIX is trending higher on our inverted scale (meaning readings are moving lower) and we still do not have a puncture of the upper Bollinger Band. However, more than a week in this trading range has us edgy about downside risk.
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 moved slightly lower. On the bright side we saw a very slight contraction of New Lows. The 10-DMA of the High-Low Differential is rising nicely and is above the zero line.
Climax* Analysis: Of the last 12 trading days, 10 have been climax days, and in the last eight days, there have have been three upside and four downside climaxes. Because of the rapid change in direction, five of those climaxes were initiation climaxes. But they have failed to initiate anything. Today's downside initiation climax is not backed up by SPX Total Volume, but that's not an issue in downside moves, particularly in a bear market.
*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.
The STOs are mixed. They were both rising yesterday, but now the STO-V has turned down (likely due to so many low volume moves). Participation is diminishing, but again, we aren't seeing extensive price damage.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is SOMEWHAT OVERBOUGHT.
We have included the thumbnail chart today to emphasize that the bottom three indicators have topped. This should get us thinking that the price consolidation of the last two weeks is about to come to an end and that the next leg could be down.
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, but deteriorating. There are still far more stocks with price above their 20-day EMAs than there are stocks above their 50-day EMAs. In particular, there are more stocks above their 20-day EMAs than there are Silver Crosses. This means the SCI should continue to move higher.
The intermediate-term bias is neutral. The SCI is rising after an oversold crossover its signal line, but it remains at a
The long-term bias is still bearish. The GCI is stagnant at a bearish 38.6% and we see a smaller percentage of stocks with price above their 200-day EMA than we have Golden Crosses. In order to have a Golden Cross, you need price above both the 50/200-day EMAs.
CONCLUSION: The short-term picture is still fairly bullish given little to no deterioration on the RSI, PMO and Stochastics. The 10-DMA of the High-Low Differential still looks bullish. A big "However," with intermediate-term indicators topping, we think the market is much more vulnerable to the downside than previously. Economic reports and the Fed Meeting next week could put serious downside pressure on the market. If the news is good, the breakout is likely. Ultimately price has not broken down yet and most of our indicators are positive... but if it tops, watch out!
Erin is 30% exposed to the market. With the market weak today, she opted not to expand her exposure.
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Bitcoin is range bound, but with the latest top being lower than the previous, we have a bearish descending triangle. Those patterns have declining tops and flat bottoms. The expectation of the pattern is a breakdown. We'd look for it to test the May intraday low, but a breakdown here could shake investors' confidence even more. Indicators don't look that bad, but the RSI has moved into negative territory.
Yields are climbing again after pulling back in May.
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 is testing overhead resistance at the mid-May top. The PMO hasn't made up its mind as to whether it will turn up, but both Stochastics and the RSI suggest the May high will be tested again.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP didn't move much, but it did close above the 20-day EMA. Stochastics and the RSI are improving, but the PMO is still in decline. Volume continues to dwindle. We expect mostly sideways churn.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold is going nowhere and indicators are moving sideways or in the case of Stochastics, falling. We are bullish on Gold in the longer term. Looks like we have to wait for a breakout to confirm our bullish stance as the indicators are very little help.
GOLD Daily Chart: Stochastics on $GOLD halted their decline and the PMO looks a bit more healthy. Discounts moved higher today, but overall they are contracting telling us investors are getting less bearish. With the Dollar in neutral, Gold has had an opportunity to move higher. Instead it is following lock step with the Dollar, only in reverse. Gold has the advantage of a possible bull flag while the Dollar looks like a reverse flag.
GOLD MINERS Golden and Silver Cross Indexes: With Gold and the market languishing and in neutral, Miners are following suit. The rising trend is holding up in the short term, but we have a likely "death cross" on the books for tomorrow. The RSI and Stochastics are not favorable. The PMO is bullish and participation isn't falling apart. The SCI is still anemic, but %Stocks > 20/50-day EMAs are larger than the SCI.
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, but slightly overbought. The PMO is moving higher with no problem and Stochastics remain above 80. Crude Oil is not "teflon", but it is about as close as you can get right now. With the summer travel season picking up and China unlocking, demand will go up. Supply will stay about the same. Basic economics, Oil prices will rise.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Indicators remain negative and yields don't look like they're coming down anytime soon so we expect a break below the May low.
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.
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