Last Thursday, we saw an upside exhaustion climax that indicated we could see lower prices or churn. Price followed through with a decline. Yesterday, we had a downside initiation climax which suggested we would see prices continue lower. That makes two more bearish climaxes that saw follow-through.
The next climax we see will have bullish implications; unfortunately, we didn't get climactic readings today, so the decline is likely to continue. The 5-minute candlestick chart offers some hope as the late day rebound managed to turn the 5-minute PMO upward and the RSI to move out of oversold territory.
Carl's wife/Erin's mom had successful heart surgery yesterday, but she will likely be hospitalized for another three to five days. Thank you for all of your well wishes and prayers! The DecisionPoint publishing schedule will remain irregular, but rest assured, we guarantee you will have your DP Alert before the open the following day!
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: The daily picture had begun to look very bullish with all of the sectors rotating into the Improving or Leading quadrants. However, late last week all of the sectors began to turn over with the exception of Energy (XLE) which has a bullish northeast heading.
We now have several sectors that will more than likely fail to reach the Leading quadrant as they have moved into bearish southwest headings: XLY, XLC and XLK. XLF and XLI are looking shaky too. XLU could shift into the Leading quadrant, but XLRE which was headed there is now turning away.
XLB was seeing a bullish northeast direction, but today reversed into a bearish southwest heading.
Weekly: 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 topped just before it hit the upper bound of the declining trend channel. The market traded most of the day below the 20-day EMA. Now we are concerned that we have a short-term double-top in the making. If price drops below the confirmation line at $370, we could see the decline move below the June low given the minimum downside target of the pattern is about $350.
While the VIX remains above its moving average on our inverted scale, it topped beneath the upper Bollinger Band. Overbought tops on the VIX generally leads to short-term decline. Total Volume increased on today's selling with price closing below the May low. Stochastics have bearishly turned lower.
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S&P 500 New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential hasn't topped, but it is getting close. A top beneath the zero line would be very bearish.
Climax* Analysis: There were no climax readings today.
*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 moved into negative territory as they continue to move lower. Participation is fading with just under 2/3rds of the index showing positive momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM and ITVM continued lower for the second day. They never reached positive territory so this is particularly bearish for the intermediate term. There were no new PMO BUY signals within the index.
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, but improving somewhat. The SCI continued higher today and had a positive crossover its signal line last week, but the reading is too low to call it bullish.
The short-term bias is bullish, but deteriorating quickly. We have a higher percentage of stocks above their 20/50-day EMAs, but those percentages are not rising.
CONCLUSION: Bearish signals continue to execute and bullish signals seem to fail quickly. We had two bearish climaxes and both fulfilled with lower prices. The double-top formation is very concerning. It hasn't been confirmed yet, but if it is, the downside target is $350 for the SPY. None of the indicators are bullish with the exception of the PMO. However, the PMO is looking toppy. It looks like this rough week will get rougher.
Erin is 45% exposed to the market.
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The "magical" $20,000 support level was again lost. The OBV negative divergence is playing out as expected. The PMO has now topped while Stochastics and the RSI continue lower in negative territory. Look for price to test $17,500 and likely break down there.
This chart shows us where support/resistance originates.
After breaking through the short-term declining trend, long-term rates have topped. Short-term rates continue to rocket higher. The yield curve is inverting even more than before.
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 may have closed above the 50-day EMA, but it doesn't look like it is ready to reverse. The RSI continues to sit in negative territory and the PMO is declining. Stochastics were showing strength, but they are flattening in negative territory. We look for a test at 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 paused today, but given the indicators we expect price to continue higher. UUP is definitely overbought based on the RSI, but the PMO and Stochastics look too positive to expect a major downturn. A rising dollar is not only a detriment for Gold, large-cap stocks with global exposure find themselves under pressure.
This could be a reverse island, but we can't read too much into gaps on the UUP chart as it gaps regularly.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Although the Dollar finished mostly unchanged, Gold couldn't stop its skid lower. Indicators remain very bearish. When we do see the RSI and Stochastics back on the rise, we can get bullish on Gold since they would be coming out of very oversold territory.
GOLD Daily Chart: Discounts are very elevated which tells us investors are getting even more bearish on Gold. Extremes haven't been hit, but it's getting close. Sentiment is contrarian so we want discounts to be very high. This support level needs to hold. If it doesn't, the next level of strong support doesn't arrive until $1675.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"It is always a double whammy for Gold Miners when Gold and the market slide lower. The declining trend continues. We still have zero participation in this industry group. We do watch it everyday in the DP Alert, so when it starts to look good "under the hood", we could find some excellent bargains."
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Crude Oil is forming a bullish falling wedge. This suggests higher prices and a likely upside breakout from the wedge. However, indicators remain very bearish and we need to see the April lows hold as support.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday's comments still apply:
"After a strong pullback on the rising 20-year Treasury Yield, TLT rebounded off the prior declining trendline. The RSI moved into positive territory and the PMO is now beginning to accelerate higher. Stochastics are still a problem. However, it is encouraging to see them flatten in positive territory. It's only been one day of rising yields so we don't want to make any major proclamations, but it is starting to look like another rally on tap for Bonds."
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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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
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