Time to review the Golden Cross Index (GCI) and Silver Cross Index (SCI) on the Nasdaq (ONEQ). One thing that popped out at us were the positive divergences between price bottoms and some of the participation indicators. For context, below the Nasdaq chart we've included the SP500 and Dow Industrials. None have the positive divergences we're seeing on the Nasdaq. Additionally, the GCI had a positive crossover its signal line today.
The rally has been holding up. Based on participation, we would read the short-term bias as bullish given there are many more stocks within the Nasdaq that have price above their 20/50-day EMAs v. the SCI. This means that the SCI should continue to move higher.
The intermediate-term and long-term biases are bearish. The SCI is at a very low 30% and the GCI is at only 13.5%. We also note that %Stocks > 20/50-day EMAs look a bit overbought.
There's ammo for the Nasdaq to climb higher, but today it underperformed the SPY, leaving its internal strength questionable.
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: $ONE Benchmark
Daily: Defensive sectors XLP, XLV and XLU are falling from favor. Leadership is now being held by XLY, XLI, XLF and XLRE given they all are within the Leading quadrant and have bullish northeast headings. Additionally, XLB and XLE have strong northeast headings. XLB has the best chance of reaching the Leading quadrant right now based on nearness.
We are seeing aggressive sectors XLC and XLK turning back down toward the Weakening quadrant, but they do remain in Leading for now.
Weekly: On the longer-term RRG the picture is different with all sectors (except XLE) making their way northward. This could support the hypothesis of a longer-term rally developing.
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: The SPY managed to close higher. More importantly, support is holding at the late June top and the 50-day EMA. Indicators are still positive with the exception of a negative OBV divergence.
Stochastics did tip over, but as long as it remains above 80, internal strength is present. Similarly, the VIX turned down on our inverted scale, but it remains above its moving average suggesting internal strength is still there.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: We're still seeing negligible readings on New Highs/New Lows telling us we don't have any new leadership, but at the same time, we aren't seeing expansion of weakness. The 10-DMA of the High-Low Differential is flat as a consequence.
Climax* Analysis: There were no climax readings today. Friday's mild downside initiation climax didn't play out today, but the VIX has topped on the inverted scale and Total Volume was very weak on today's positive close.
*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 OVERBOUGHT.
STOs were mixed today with the STO-B rising and the STO-V continuing its decline. Participation of stocks above their 20-day EMAs and %PMOs Rising both moved slightly higher and further into overbought territory. Overall the indicators are bullish, just overbought.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
%PMO BUY signals is overbought, but the ITBM/ITVM are not. They continue to rise and that bodes well. 87% of stocks have PMO BUY signals which could easily support a rally continuation, particularly when we know that 89% of stocks have rising momentum.
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 bias chart is looking more interesting.
The short-term bias is bullish. We have 84% and 55% of stocks above their 20-day EMA and 50-day EMA, respectively. With the SCI reading at just 23.0%, we should begin to see more "silver crosses" which would then make the intermediate-term bias bullish.
Currently the intermediate-term bias is bearish but improving quickly. An SCI below 50% is clearly bearish, but it's rising quickly. Based on the short-term bullish bias, we are likely to see even more improvement.
The long-term bias is bearish given the GCI is at a very low 28.4%. We finally have more stocks above their 200-day EMA vs the GCI, but hardly enough for the GCI to improve quickly.
CONCLUSION: The SPY eked out a small gain today while the Nasdaq was down. The indicators are favorable enough to look for more rally. However, big name earnings are going to begin coming in this week. This should lead to an increase in volatility. Volatility is rarely our friend. 68% of those who have reported so far have had positive reports and that seems to have fueled this short-term rally. The FOMC is set to make its rate hike official on Wednesday. We don't like to conclude with a "wait and see", but there are a lot of variables that could push the market in either direction. Technicals suggest more rally. We'll have to see how earnings affect that technical outlook.
Three big names report tomorrow: Microsoft (MSFT), Alphabet (GOOGL) and McDonalds (MCD). Others to release later this week are Apple (AAPL), Amazon (AMZN), Ford (F), Meta (META) and Exxon-Mobil (XOM).
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Bitcoin unsuccessfully test the 50-day EMA. While it broke above short-term overhead resistance, once it hit the 50-day EMA it stalled. The RSI is still positive, but falling. The PMO is about to top below the zero line which would be especially bearish. Stochastics are in positive territory, but falling fast. It appears the short-term rising bottoms trendline will be tested around 20,000.
The declining trend continues for all but the 1-month and 3-year treasure yields which continue to rocket higher.
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 once again testing support. This is a strong support level as $TNX has been able to bounce off it three times prior. Indicators do not support this hypothesis. The PMO and Stochastics look especially bearish. We do see a possible island reversal pattern based on Friday and today's trading, but that is likely wishful thinking to expect a gap up.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is at critical support. The RSI is positive, but the PMO is still falling on a crossover SELL signal and Stochastics are falling fast. For now the indicators suggest a breakdown ahead. Stochastics will likely be the first to tell us when a rally is on the way.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: With the Dollar in decline we expected more out of Gold. Indicators are mixed. Stochastics are rising again which does suggest this tiny rally could get legs. Unfortunately we do not have rising momentum, it is flat. The RSI is negative and flat as well. The 20-day EMA is arriving as resistance quickly. A breakout above that level would have us very bullish. For now we are cautiously bullish.
GOLD Daily Chart: Discounts remain elevated, but so far that bearish sentiment hasn't resulted in any upside.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners lost another support level today. Below the daily chart, we've included a weekly so that you can see the support zone that GDX is sitting on. There is still no real heartbeat in this industry group based on all of the 0% participation numbers. Until Gold begins to rally, this group likely continue to suffer.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: This morning on "Your Daily Five" and the new "DecisionPoint Trading Room" on StockChartsTV, Erin discussed a possible reverse head and shoulders developing on Crude Oil. Carl isn't a fan of the pattern in general, but today's rally set up the right shoulder. The RSI is rising, but negative. The PMO is flat. Given last week's decline, it is positive that the PMO didn't turn back down aggressively. Stochastics just moved into positive territory. The picture is still very murky, but overall is showing bullish tendencies.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds, not surprisingly turned away at overhead resistance at the May top. It's been slow going for TLT, but there is a clear bottoming formation. The RSI is positive, PMO rising and Stochastics above 80. We should expect a breakout.
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.
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