Today three 20-day EMAs crossed up through the 50-day EMAs (Silver Cross) generating an IT Trend Model BUY signals for three sectors. Let's review the charts.
The Consumer Staples Sector (XLP) has been consolidating for about a month. We saw an excellent breakout yesterday, but it did not hold. Additionally, the Silver Cross Index (SCI) turned down today. There are far better sectors to drop your fishing line in.
One of those sectors would be Technology (XLK). Price action is more promising on XLK versus the defensive XLP. Today XLK not only broke through overhead resistance at the June tops, it also closed above the 200-day EMA. The SCI shows over half of the sector with Silver Crosses and participation of stocks above their 50/200-day EMAs is strong suggesting we will finally see more Golden Crosses. It will take time though. Notice on XLK the 50-day EMA is well-below the 200-day EMA. This is a set up you'll see on most of the tech stocks. That's a long distance before we see a Golden Cross.
Finally a look at XLU. XLU gapped up yesterday and rather than a move back toward the breakout point, XLU continued higher. Nearly all of the stocks have price above their 20/50/200-day EMAs so both the SCI and GCI should move quickly higher. If we had a complaint it would be it is nearing resistance at the April highs. Still, with this kind of participation and a PMO that is rising and now above the zero line, it is reasonable to believe it will breakout.
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
For Today:
For the Week:
SECTORS
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.
For Today: 
For the Week:
RRG® Daily Chart ($ONE Benchmark):
Major improvement to the daily RRG this week. All but XLV are in the Leading quadrant. The most bullish are those with northeast headings: XLE, XLB, XLY, XLI, XLK, XLRE and XLU. Middle ground would be XLF and XLC which are in the Leading quadrant but haven't got complete bullish headings given they are moving southeast. The two weakest sectors are clearly XLP and XLV which have gained no ground this week as they rotate in place. XLV is clearly the weakest given its southwest bearish heading and being the only sector sitting within the Weakening quadrant.
RRG® Weekly Chart ($ONE Benchmark):
The weekly RRG is bullish. All sectors with the exception of XLB and XLE have bullish northeast headings. If they continue in this direction we will all nearly all of them in the Improving or Leading quadrants next week. XLB isn't really bearish. It is traveling swiftly northward and also could hit the Improving quadrant soon. XLE is still traveling in the bearish southwest direction, but it is flattening out and could make the turn to the north soon.
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 rally continued in impressive fashion today, breaking above another line of overhead resistance. We could see it break above the 200-day EMA next week given strong RSI and PMO. One weak point is a VIX puncture of the upper Bollinger Band on our inverted scale. Many times that does lead to a pullback or consolidation.
Stochastics are strong as they oscillate above 80. Total Volume was very strong on today's rally.
SPY Weekly Chart: We noted that the weekly PMO had turned up last Friday and price had broken from the bullish falling wedge. This week's strong rally continuation bodes well for the intermediate term.
SPY Monthly Chart: The monthly chart shows us that the declining trend that began at the bull market top is still in play. A breakout from that declining trend and a monthly PMO that turns back up would have us considering that this bear market is over.
New 52-Week Highs/Lows: Typically we will usually see a positive divergence between New Lows and price lows at the close of a bear market. We don't have that yet. The 10-DMA of the High-Low Differential moved above zero this week and that is a good sign that we could see even more upside.
Climax Analysis: Only SPX Net A-D Volume met the climax threshold today. SPX Total Volume came in strong, making us think we might be looking at a blowoff.
*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.
Finally we see the STO-V in line with other rising indicators in our arsenal. There was a very slight contraction of stocks with rising PMOs, but not a significant decline. Still we need to be cautious, particularly if both participation indicators (%Stocks > 20-day EMA and %PMOs Rising) begin to move lower more quickly.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERBOUGHT.
We love seeing both the ITBM/ITVM rising strongly, but that has unfortunately put them in overbought territory. %PMO BUY Signals was already overbought, but it hasn't tipped over yet. There is still more head room for all of these indicators to rise, but it is slimming, particularly %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.
The following table summarizes participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation.
The following table summarizes participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation.
The biggest winners as far as the Silver Cross one-week change are Technology (+30) and Industrials (+30). The loser was Gold Miners (GDX) as they saw no improvement to the already 0% SCI reading.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of participation.
The short-term bias is bullish due to so many stocks being above their 20/50-day EMAs.
The intermediate-term bias is bullish given percent stocks above their 20/50-day EMAs is far higher than the SCI percentage, it could climb even more quickly next week.
The long-term bias is bearish but improving. The GCI has a very low reading of 28.8%. It is beginning to rise again due to more stocks above their 50/200-day EMAs. The issue is that 50-day EMAs are so far below 200-day EMAs, it is taking awhile for the improvement to affect the GCI.
CONCLUSION: The market is rising quickly...maybe too quickly. We can't argue with the bullish indicators or improvement in market biases, but many of the indicators are overbought and vulnerable to a downturn. Typically when overbought indicators top, the market tops out as well. For now we will go with more upside ahead. When sectors like XLK and XLY are showing leadership, the market follows suit. While we aren't thinking this is the end of the bear market, current technicals do suggest follow-through on the current short-term rally.
Erin is 50% exposed to the market.
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BITCOIN
Bitcoin is struggling to overcome short-term resistance at the prior top. We do see it holding above the 50-day EMA and indicators have improved greatly with the PMO back above the zero line and Stochastics moving above 80. We do expect it to rise to test resistance at the May intraday low.
This chart is to show where some of the support/resistance lines come from.
INTEREST RATES
The declining trend in the longer-term rates continues and now the 3-month yield is falling as well.
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
This week $TNX lost important support suggesting more downside ahead. This breakdown executes a large head and shoulders topping formation. The expectation of the pattern is a drop to 1.8%. Indicators favor this conclusion as well.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount. As buying power shrinks, home prices will come under pressure.
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This week the 30-Year Fixed Rate ticked down from 5.51 to 5.30.
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar spent most of the week declining, putting it on support near $28. The 20-day EMA was lost as support and now the RSI is in negative territory. The PMO was already flagging the problem when it topped after the bearish filled black candlestick.
UUP Weekly Chart: It isn't surprising that the Dollar began to decline when you see the weekly chart. Overhead resistance was coming at the 2020 top and price hit that level and began is move downward. The weekly PMO has topped, but we saw that previously in the 2nd quarter and the Dollar held its rising trend. The long-term 2022 rising trendline has not yet been breached and the weekly RSI remains positive.
UUP Monthly Chart: The monthly chart is bullish with the exception of the monthly RSI reaching overbought territory. The PMO is on the rise still. No real damage has occurred in the long term.
GOLD
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GOLD Daily Chart: Gold had an opportunity to reverse with a declining Dollar and this week it did just that. The technicals have really improved off this bottom. There is now a PMO BUY signal and today the RSI moved above net neutral (50) and Stochastics moved above 80. This looks like a solid reversal with potential.
Full Disclosure: Erin owns GLD. Although she will be switching to IAU as she begins expanding her position. IAU holds physical gold unlike GLD.
Discounts are trending lower, meaning that investors are more bullish on Gold. Not a surprise given this strong reversal.
GOLD Weekly Chart: This was the place Gold needed to see this reversal. Strong support at the 2021 lows and long-term rising trendline aligned. The weekly RSI is rising again but remains in negative territory for now. The weekly PMO has decelerated, but hasn't actually turned up. We hope to see confirmation from both of those weekly indicators soon.
GOLD Monthly Chart: Price topped at the 2020 high setting up an ominous double-top formation. It is still in very much in play on the monthly chart. A breakout from the steep declining trend and a rising monthly PMO would have us more bullish on Gold in the long term.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are finally waking up. We aren't entirely convinced they're a good bet right now given GDX hasn't closed above the 20-day EMA yet, but the rise in Gold will certainly put the wind at GDX's back. Participation is beginning to improve. We'd like to see some new "Silver Crosses" so the SCI will read more than 0%. However, notice the configuration of the 20/50/200-day EMAs on GDX. This is the same configuration on all of the Gold Miners which tells us it will take much more upside to actually see the SCI rising again. Certainly this is an industry group to keep an eye on.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: It was an up/down/up/down/up week for Crude Oil. Overall the short-term rising trend has remained intact. We saw a breakout above the 50-day EMA, but price action today formed a bearish filled black candlestick. We like that the RSI is now above net neutral and a new PMO crossover BUY signal arrived this week. We expect more upside.
USO/$WTIC Weekly Chart: Price bounced off the 43-week EMA this month. While the weekly RSI turned up in positive territory, the PMO is not confirming. A rising PMO would improve the picture in the intermediate term greatly.
WTIC Monthly Chart: Price is well-below resistance at $110 on the monthly chart. The monthly PMO tipped over in overbought territory on the June/July dastardly decline. The monthly RSI does remain positive and has left overbought territory, but the long-term picture for Oil is suspect.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds have been trying all week to breakout with no success. Yields have been falling and have broken support levels. We expect a breakout, but wow, it is slow going.
This looks like a solid bottom, but resistance needs to give way.
TLT Weekly Chart: The reversal came off strong support and this week we got an oversold weekly PMO crossover BUY signal. The weekly RSI isn't positive yet, but this is very encouraging.
TLT Monthly Chart: When we look at support on the monthly chart we see that price reversed above it. Generally if price reverses before testing a support line, it suggests we will see higher prices. The monthly RSI is confirming somewhat as it rises, but the monthly PMO is still very negative, especially after moving below the zero line.
Good Luck & Good Trading!
Erin Swenlin And Carl Swenlin
Erin is 50% exposed to the market.
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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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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