It has been a very rough few weeks for the Energy sector. Whether it is due to President Biden's announcement to crack down on "profiteering" by Oil companies or possible increases in supply abroad-- the technicals have crumbled on XLE.
Price is now hitting major support at the March/April lows and the 200-day EMA, but participation has tanked (no pun intended). It wasn't long ago that we saw 100% of stocks with price above their 20/50/200-day EMAs. Now we have no stocks with price above their 20/50-day EMAs. The Silver Cross Index (SCI) is dropping fast and if we don't see stocks getting back above their 20/50-day EMAs, it will continue to fall quickly. Today's drop caused the RSI to top in negative territory. The PMO is now close to the zero line and declining. The one positive would be Stochastics bottoming, but they are far from looking bullish. This area of support is "make or break" for this sector.
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® Charts with Benchmark ($ONE):
Daily: The RRG is ugly. No other way to describe it given all of the sectors are now in the Lagging quadrant. We do see that XLV and XLP are beginning to come out of their bearish southwest heading, but barely.
Weekly: The weekly version also looks very bearish. In this case, XLK is beginning to show some improvement in its heading, but not enough to get excited about it.
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 market action qualifies as a consolidation of yesterday's rally. Volume was adequate, but not especially encouraging regarding a continuation of the rally. Overhead resistance now has to be contended with.
Indicators are seeing some improvement with the PMO beginning to decelerate in oversold territory and Stochastics rising out of oversold territory. However, the RSI topped in negative territory. The VIX continues to oscillate beneath its moving average on our inverted scale signaling internal weakness.
Here is the latest recording:
Topic: DecisionPoint Trading Room
Start Time: Jun 21, 2022 09:00 AM
Meeting Recording Link
Access Passcode: June@21st
S&P 500 New 52-Week Highs/Lows: New Lows expanded today. The 10-DMA of the High-Low Differential is decelerating in oversold territory, but it hasn't turned up yet.
Climax* Analysis: There were no climax readings today. So far yesterday's upside initiation climax hasn't produced.
*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 are contracting and still suggest a rally will take hold. We saw a positive divergence on them prior to the recent bottom. Almost 1/3rd of the SPY are now showing rising momentum that could support a bear market rally.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The ITBM/ITVM were mostly unchanged. %PMO BUY signals are coming back, but still remain at an anemic 7%.
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.
In the short term, we are now seeing a higher percentage of stocks > 20-day EMA than stocks > 50-day EMA. That suggests improvement, but readings are still very low so the short-term bias is neutral to bearish.
In the intermediate term, the SCI is falling and is at a very low 11% which is bearish.
In the long-term, the GCI is falling from an already low 31.6% and we have %Stocks > 50/200-day EMAs reading lower than the GCI. This means we won't see the GCI rising any time soon and that is bearish.
CONCLUSION: The STOs are still rising after setting up positive divergences when the market bottomed. We are also seeing more participation, just not enough to affect the bearish bias in all three timeframes. The market is extraordinarily oversold but investors still seem hesitant--for good reason given prior rally failures. We have a short-term foundation for a bear market rally again, but it is weak. All things considered, we continue to be cautiously optimistic.
Erin is 20% exposed with a 10% hedge.
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After breaking below 20,000, Bitcoin made a valiant effort to rally. Indicators were looking up, but no longer. The RSI is moving down in oversold territory. The PMO decelerated, but is still moving lower and Stochastics have topped in negative territory. We still expect Bitcoin to test the $12,000 level, but it might take more consolidation before it breaks down again.
Rates fell heavily today, bringing long-term rates down toward overhead resistance at the May highs.
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 lost support at the May high, but held onto the 20-day EMA. The indicators have really turned ugly suggesting this next trip to the bottom of the bearish rising wedge will result in a breakdown that will confirm the pattern. The RSI is still positive but nearing negative territory. The PMO has topped and Stochastics are falling fast.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: We still have a bullish cup with handle pattern. However, if we see price break below the 20-day EMA we would scrap that and concentrate on the larger bearish rising wedge. Indicators are mostly neutral and unhelpful.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Gold continues to stay within its trading range. We haven't seen the expected flight to safety, but if the Dollar breaks down that will change. For now indicators are neutral or negative. The RSI is in negative territory but rising slightly. The PMO is flat and still holding onto a crossover BUY signal, but Stochastics topped below net neutral (50). We expect Gold to continue to meander sideways.
GOLD Daily Chart: Discounts are pulling back slightly which indicates investors are getting slightly more bullish on Gold. So far it hasn't resulted in a Gold rally.
Full Disclosure: Erin owns GLD.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners slumped today before testing the 20-day EMA. The RSI is negative and falling. The PMO is on a crossover SELL signal and is turned down. Stochastics have topped in negative territory. Participation still isn't showing a heartbeat. It appears this rally is already failing so expect a test of the support zone between $28 - $29.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Important support was lost on Crude Oil at the prior highs and 50-day EMA. This support level is shaky, but it needs to hold in order to keep the rising trend going. Unfortunately given the bearish indicators, we would look for consolidation at best with a high likelihood price will test $70 eventually. We suggested tightening stops yesterday. If you haven't, we wouldn't give your Energy stocks much more rope.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT broke above the May low, but it is still situated below the 20-day EMA. The RSI is negative, but rising. The PMO is nearing a crossover BUY signal and Stochastics are on the rise. This looks good for Bonds, but we've seen numerous failures. Tread carefully.
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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