This morning before the market opened the latest one-year change of the Consumer Price Index (CPI) was announced as +9.1%. The Futures, which were modestly down, took a dive and we saw the S&P 500 down -2.0% early on. Nevertheless, the losses moderated, and the close was down a quarter of a percentage point.
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, XLU, XLP and XLV are fading toward the Weakening quadrant, while aggressive sectors like XLY and XLK are showing new strength. XLE looks the weakest as it heads back down to the Lagging quadrant.
Weekly: Yesterday's comments still apply:
"In the longer term, the RRG is improving, although we should note that no sector is in the Improving or Leading quadrants. This is a good sign given this weekly RRG has been very bearish for some time. XLE is one of the weakest with its bearish southwest heading and distance from all of the others. "
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: Price challenged the support posed by the double top confirmation line, and the support held. We have had two consecutive days where the market has traded much lower, but cut the losses into the close. Still, the trend from the July top is down.
Total Volume rose slightly on the selling. The PMO has now topped and the RSI is negative. Stochastics are falling fast. Interestingly, the VIX remains above its moving average which suggests the market isn't that shook up.
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Replays are now available on YouTube! Here is the link to Monday's trading room!
S&P 500 New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential continued lower and we saw another expansion in New Lows.
Climax* Analysis: We had one climax reading, the NYSE DOWN/UP Volume Ratio, but SPX Total Volume was short. Had readings been more robust, we would look for a downside exhaustion climax. We did have another hollow red candlestick which has bullish implications.
*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.
Both STOs continued lower and participation is deteriorating quickly.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM and ITVM continue to move lower. %PMO BUY signals is nearing a negative crossover.
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 long-term bias remains bearish. The GCI is flat and currently with a lower percentage of stocks above their 50/200-day EMAs, the GCI will not be able to improve.
The intermediate-term bias is bearish. The SCI rose slightly, but still remains too low to call the intermediate term bullish or even neutral.
The short-term bias is getting bearish, but isn't completely bearish given we have a higher percentage of stocks above their 20/50-day EMAs.
CONCLUSION: It's not as if we need the CPI to tell us that inflation is a huge problem, but news tends to move the market, nevertheless. Like yesterday, we have a bullish hollow red candlestick. However, the PMO has now topped. Indicators continue to fall and they are nowhere near oversold. The VIX is also not bearish enough to look for a strong reversal. Should price drop below the confirmation line of the double-top, the minimum downside target is around $350.
Erin is 45% exposed to the market.
Calendar: With options expiration this week, we normally expect low volatility on Thursday and Friday; however, so far this time is proving to be an exception to that general rule.
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Bitcoin is traveling mostly in a trading range between $17500 and $22500, but we are detecting a possible rising wedge which is bearish. We now have a PMO bottom above the signal line and Stochastics have turned back up. Even if it continues to rally, we don't see it breaking above the top of the trading range.
This chart shows us where support/resistance originates.
Rates in all timeframes are all over the place. Long-term rates still show a declining trend.
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 rallied today, but failed to reverse its declining trend. We continue to look for it to reach 2.7%.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar had a bearish engulfing candlestick yesterday, but it didn't deter it from continuing higher. The RSI is overbought and the PMO is reaching overbought territory. Today we have a bearish filled black candlestick, but given the steep rising trend, it isn't likely to drop precipitously.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: The dollar was up, and gold suffered, as expected.
GOLD Daily Chart: Long-term support failed to hold at $1725. $1675 is the next target. Stochastics are hinting that it should hold there.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners were hit hard today with the drop in Gold. However, as the market came back, so did GDX which formed a bullish "hammer" candlestick. Still we aren't optimistic that it will rebound. It is below resistance at the early July low.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Today Crude Oil was down slightly today and formed a hollow red candlestick. It also held above the 200-day EMA. If we get a rally before it tests the bottom of the wedge, it would tell us to expect an upside breakout. However, with indicators lined up this bearishly, it doesn't seem likely.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT halted is rally, but indicators are still bullish so we do expect to see them test $120.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Thank you for your patience as we care for Carl's wife/Erin's mom. She came home today but needs almost constant care which is keeping Erin on her toes.
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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