Today the Hearth Care Sector (XLV) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY signal. Usually this kind of crossover signifies some kind of resolution and indicates higher prices ahead; however, the price pattern is still congested, and "wait-and-see" seems to be the way to go for now. A break above $132.50 would certainly brighten the picture.
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 most bullish sectors (those with bullish northeast headings) are XLB, XLE, XLI and XLRE. XLU appears to have switched into a bullish northeast heading as well. XLV is the only sector in the Weakening quadrant (barely).
Aggressive sectors are all beginning to turn over in the Leading quadrant.
Weekly: On the longer-term RRG the picture is different with all sectors (except XLE) making their way northward. All but, XLB and XLE have bullish northeast headings. 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 lost support at the 50-day EMA and late June/early July highs. The PMO is decelerating and the RSI could reach negative territory if the SPY closes lower again. There is a negative OBV divergence in play now.
Stochastics continued lower today and is now below 80. This could possibly be a bull flag developing but with indicators softening, we don't favor that conclusion.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: Yesterday's comments still apply:
"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: Similar to Friday's downside initiation climax, there were marginal climax readings reached today on some of the indicators, giving us a downside exhaustion climax. SPX Total Volume did not confirm. The VIX remains above its moving average on the inverted scale which is positive, but it is clearly in decline.
*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.
Both STOs moved lower today. Participation wasn't damaged by much, but the market is more vulnerable than it has been.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
%PMO BUY signals is overbought but continues to rise. The ITBM/ITVM are still rising which is good for the intermediate term.
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.
Participation was damaged slightly today, but it hasn't changed our bias assessment yet.
The short-term bias is bullish but starting to deteriorate. We have 74% and 50% of stocks above their 20-day EMA and 50-day EMA, respectively. With the SCI reading at just 23.6%, 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. An SCI below 50% is clearly bearish, but it's rising. 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 28.6%. 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 lost important short-term support today. It does remain above the 20-day EMA, but participation is thinning somewhat. We may've had a downside exhaustion climax today, but STOs are moving lower. The short-term is looking less bullish. Walmart (WMT) released earnings and fell -7.6% today. It is up in after hours trading, but it is a reminder to investors that our economic woes are hardly behind us. Consequently, investors are losing faith in growth stocks again. Consider positioning more defensively particularly if we see more decline in growth stocks and more momentum building in defensive areas.
Big names reporting this week: Apple (AAPL), Amazon (AMZN), Ford (F), Meta (META) and Exxon-Mobil (XOM).
Erin is 40% exposed.
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Bitcoin had another failed breakout and is now back below the 20-day EMA. The RSI is negative and the PMO has topped below the zero line which is especially bearish. Stochastics continue to fall and should reach negative territory tomorrow. We expect the short-term rising bottoms trendline will give way.
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
Yesterday's comments still apply:
"$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 bounced before testing support which bodes well. The RSI has remained in positive territory suggesting internal strength. The PMO and Stochastics are attempting to turn back up. We suspect the Dollar's decline is coming to a close.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Gold continues to move mostly sideways. Now that the Dollar is looking more bullish, we expect it will be slow going for any rally in Gold. Indicators have begun to turn back up and the PMO is very close to a crossover BUY signal.
GOLD Daily Chart: Discounts pared back but remain elevated. So far bearish sentiment hasn't resulted in any upside.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners have not broken from their declining trend. Newmont (NEM) reported earnings today and was up +3.48%. It's up +1.00% in after hours trading. While this could spur miners to reverse, we still wouldn't want to be in this industry group until we start seeing participation increase greatly.
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's bearish engulfing candlestick makes the reverse head and shoulders pattern suspect. We did see a much higher high today, but it couldn't be maintained. We are still cautiously bullish on USO based on Stochastics and a flat not falling PMO.
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds finished higher but formed a bearish filled black candlestick. This tells us that while prices closed higher on the day, they finished below the open. That suggests that bears took control. Still, the RSI is positive and Stochastics are rising. The PMO is still rising too. We expect a breakout here.
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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