Today the Utilities Sector (XLU) 20-day EMA crossed down through the 50-day EMA, generating an IT Trend Model NEUTRAL signal. We can't help but notice that XLU is really coming apart, and it is questionable that the next support level at 64 will hold. It's rather surprising given this sector is a stalwart defensive sector where investors typically hide out in bad times. The PMO was already flashing trouble with its crossover SELL signal last week. Participation has completely disappeared. There are no stocks above their 20/50-day EMAs and that has put the Silver Cross Index (SCI) in free fall. Less than 7% have price above the 200-day EMA. That will quickly tear down the Golden Cross Index (GCI).
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. 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.
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 on 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 headings.
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 continued decline kept the RSI in negative territory. If we're very lucky, today and tomorrow's candlesticks could turn into a reverse island formation. The problem with those patterns is we don't know if they are islands until they confirm with a gap. If, big "if" we do see a reversal here it could set up a bullish double-bottom. A lot has to happen before we can come to that conclusion.
The PMO topped well beneath the signal line and now it has triggered a crossover SELL signal today. The VIX punctured the lower Bollinger Band on our inverted scale again today, but it closed within the Bands. This could set up a small rally.
Here is the latest recording:
Topic: DecisionPoint Trading Room
Start Time: Jun 13, 2022 09:00 AM ET
Meeting Recording Link
Access Passcode: June@17th
S&P 500 New 52-Week Highs/Lows: New Lows were very high again today but slightly less than yesterday. That technically sets up a positive divergence based on readings from yesterday and today.
Climax* Analysis: There were no climactic readings today, and SPX Total Volume contracted. Yesterday's downside exhaustion climax didn't amount to much more than a slight pause in the waterfall decline.
*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 moved into extremely oversold territory. %PMOs Rising and %Stocks > 20-day EMA are also extremely oversold.
This is a long-term look at the STOs. Note that there is a high potential for a rally when they reach the levels they did today. Based upon previous STO down spikes, one could speculate that we are close to the end of the bear market. We do not think that is the case.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
Unlike the STOs, the ITBM/ITVM are nowhere near oversold. They can accommodate much more downside. There are still PMO BUY signals that need to be taken out before we can start talking about capitulation.
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.
We probably don't need to tell you, but the technicals back us up. There is a clear bearish bias in all three timeframes. Only 2% have price > 20-day EMA and only 5% have price > 50-day.
The Silver Cross Index has also tumbled and while it is oversold, it was at 0% at the end of the 2020 bear market. The Golden Cross Index which had finally begun to rise, has now topped below its signal line and continues to move lower.
CONCLUSION: Given highly oversold short-term indicators, the VIX's puncture of the lower Bollinger Band and a small positive divergence on New Lows, we could see a small bounce. Intermediate-term indicators aren't oversold and the SCI has much more ground to cover before it hits 2020 oversold levels. The bear market isn't over, but we could see a small rally based on extremely oversold conditions.
Erin is 20% exposed with a 10% hedge.
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Bitcoin continues to fall and should hit $20,000 soon. Volume was lower than yesterday, but it was still near annual highs. The RSI is oversold but not exceedingly so. The PMO is very ugly with a top well below the zero line paired with a new crossover SELL signal.
Interest rates blew overhead resistance away with huge upside moves.
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
Yesterday's comments still apply:
"A rising trend channel has developed. The RSI is overbought, but we just got a PMO crossover BUY signal today. The PMO is far from being overbought near term. Stochastics are back above 80. We would look for $TNX to test the top of the channel."
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Yesterday's comments still apply:
"The Dollar is accelerating higher. This is putting strong downward pressure on Gold. Considering this, Gold has held up fairly well (but we'll talk about Gold later). UUP broke above overhead resistance and doesn't look interested in falling. Indicators are confirming this rally. We would look for UUP to move even higher with a possible digestion period to follow."
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold is now testing an important support zone. A rebound here would set up a double-bottom, but like the market, we don't want to get ahead of ourselves especially given the PMO SELL signal that will likely trigger tomorrow. The RSI and Stochastics are negative and falling.
GOLD Daily Chart: We annotated a megaphone pattern yesterday and remarked that it is a sign of increasing volatility. Volatility is rarely our friend and today saw the breakdown below the pattern as expected. We see price falling and testing the January/February lows.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"Gold Miners were caught in the downdraft of both Gold and the market's watershed declines. The group had just begun to wake up with more stocks above their 20-day EMA. That fell apart today as we now see no stocks with price above their 20-day EMA and their 50-day EMA. The PMO has topped well below the zero line. If we're lucky, we will get a rebound soon that would set up a bullish double-bottom."
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 was down heavily but held onto support. Today's bearish engulfing candlestick suggests we will see Crude fall again tomorrow. A test of support at the 50-day EMA and support at April/May highs seems likely given the RSI in decline and PMO topping. It doesn't help that Stochastics dropped below 80. We believe it will hold that level of support.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Nothing new to say on TLT. With yields spiking, we expect more downside for Bonds.
The PMO generated a crossover SELL signal yesterday well-below the zero line. The RSI is very negative and falling. Stochastics are oscillating below 20 and turned down again. You can see the breakout on the 20-year yield. Bonds are going to continue to languish.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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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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