In the FREE DecisionPoint Trading Room this morning, the market was struggling. It made a remarkable recovery after forming a bullish double-bottom. Price is now challenging overhead resistance. The 5-minute RSI is positive and not quite overbought. The 5-minute Price Momentum Oscillator (PMO) is rising on a BUY signal. We thought we'd see a close above resistance, but instead we got a bearish filled black candlestick. Still, this is very encouraging in the short term.
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.
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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: We are using the $ONE benchmark.
Daily: The short-term RRG shows no sector with a bearish southwest heading. Even Energy is beginning to move northward. Other than Energy, all sectors have bullish northeast directions. Materials is the laggard with XLV and XLP moving into the Leading quadrant. This RRG seems to suggest a bear market rally is still possible.
Weekly: The weekly RRG on the other hand is mostly bearish, but that bearish bias is beginning to deteriorate. With the exception of XLB, XLP and XLE, all other sectors are curling back around toward the Improving quadrant. Overall they are still underperforming by a mile as they are situated firmly in the Lagging quadrant. We do note that XLC and XLV are showing a slight bullish northeast 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: We notice that the advance off the bottom from mid-June did not manage to reach the top of the declining trend channel. It is not too late to mend that shortcoming, but if price continues lower, it will probably break down through the bottom of the channel. Technically speaking, the market closed higher today and formed a bullish engulfing candlestick, so we can make a case for a resumption of the rally from the June lows. Volume today was solid particularly after a holiday.
The VIX continues to move sideways, skipping around its moving average on our inverted scale. Indicators are mixed. The RSI is negative, but the PMO is still rising on a crossover BUY signal and Stochastics are rising nicely.
Big News! Carl Joins the FREE DecisionPoint Trading Room!
The DecisionPoint Show on StockChartsTV is undergoing changes. We will now be rebroadcasting our FREE DP Trading Room on StockChartsTV! As part of that, Carl will be joining Erin in the trading room! If you want to attend the trading room LIVE, you can register HERE. Erin will still send out the recording link in Monday's DP Newsletter, but it will now be a slick recording produced by StockChartsTV. Join us LIVE Monday July 11th at Noon ET or watch the recording on StockChartsTV!
Here is the latest recording:
Topic: DecisionPoint Trading Room
Start Time: Jul 5, 2022 08:55 AM
Meeting Recording Link
Access Passcode: July$5th
S&P 500 New 52-Week Highs/Lows: New Lows expanded likely on this mornings drop. This did cause the 10-DMA of the High-Low Differential to pause its move upward.
Climax* Analysis: On Friday we said:
"Today we got an upside initiation climax. It wasn't terribly robust, and SPX Total Volume did not confirm. We don't think this climax will initiate anything. We have a three-day weekend to cool things off, and, again, volume wasn't there. While volume doesn't matter too much for declines, it really needs to be there on upward thrusts to confirm."
Today there were no climax readings, but we think that Friday's upside initiation climax has proved to be more potent than expected, albeit marginally so. On the other hand, we note that Net A-D and Net A-D Volume were negative.
*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 NEUTRAL.
Bad news is that STOs are still in decline and are only in neutral territory--they could fall further. The good news is that there are still more than 70% of stocks with rising momentum to either carry price up further or possibly prevent a big decline.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL to OVERSOLD.
Both the ITBM and ITVM rose today. Granted the move higher was barely visible without a thumbnail, but it is good that they didn't turn over. It's bullish to see more PMO BUY Signals appearing. We are getting close to 2/3rds of the index having PMO BUY signals.
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.
Both the Golden Cross and Silver Cross Indexes were unchanged from Friday. Participation contracted slightly.
The short-term bias is bullish given there are more stocks above their 20/50-day EMAs than the SCI percentage.
The intermediate-term bias is bearish, given the SCI is at a low 11.8% and is flat.
The long-term bias is bearish. The GCI is at a low 29.6% and there are fewer percentage of stocks above their 50/200-day EMAs. The GCI will not be able to improve until those percentages move higher.
CONCLUSION: The market was a bit lopsided today, and that is accounted for by the rally in big tech stocks, so we have the Dow down and the Nasdaq up. Indicators are also a bit lopsided. Short-term STOs are falling and participation contracted somewhat. At the same time, IT indicators are improving and the PMO is still rising on a BUY signal. The door is open for a continuation of today's afternoon rally. However, we would continue to exercise caution should based on weak short-term indicators.
Erin is 45% exposed to the market.
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Bitcoin is attempting to rally off support around $19,000. The PMO accelerated its move higher and Stochastics turned back up. The RSI is still very negative. It's hard to see, but this looks like a reverse pennant on a flagpole. That pattern implies a breakdown ahead so we aren't that optimistic this will turn into a strong rally. Most are becoming disillusioned by crypto.
Rates are continuing to move in a declining trend offering Bonds an opportunity to rally further.
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 getting close to support at 2.7%. It broke down from a bearish rising wedge. Indicators are not favorable, but they are getting oversold. For now we expect yields to continue lower, but there is an opportunity for a pause or consolidation at 2.7%. A breakdown here would mean a likely test of the 200-day EMA.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP gapped up out of a bearish rising wedge. This is a bullish conclusion to a bearish chart pattern and we find that especially bullish for the Dollar. The RSI is positive, the PMO is accelerating higher and Stochastics are about to move above 80. We expect the Dollar will continue to rise.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Gold tumbled. A strong Dollar and a loss of a major support level Friday was a prelude to today's decline. Indicators are all very bearish.
GOLD Daily Chart: Support is definitely available at $1750 for $GOLD and if that level fails there is $1725. Given the indicators, we should be prepared for a drop to the latter.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners lost strong support last week and were hurt significantly by the drop in Gold. We do not like this group given participation is nil.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: On Friday we noted two bearish chart patterns on USO. First a rising wedge, annotated in blue, and a bearish head and shoulders pattern. Today, both bearish patterns were confirmed. The minimum downside target of the head and shoulders is near support at $62.50.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With the drop in yields, Bonds are now starting to shine. Last week saw a confirmation of the bullish falling wedge on the breakout. Since then price continues to rise. Today we saw a close above the 50-day EMA for the first time since early March. Yields continue to look weak so we expect TLT will continue to rally to overhead resistance at $120.
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.
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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