(Thank you, subscribers for your patience during this time. As promised you have received your DPA before market open the next day.)
While we have negative long-term expectations for the market, we notice that most of the eleven S&P sectors are looking rather bullish intermediate-term. Only two sectors -- Energy and Materials -- have been making new lows, but the rest are either showing rising bottoms from the June low or are making a double bottom against that low.
In the Diamond Mine trading room that Erin holds for subscribers of the DP Diamonds Report on Fridays at Noon ET, she "mines" to find the "Sector to Watch" and "Industry Group to Watch". She noted that aggressive sectors were showing bullish price patterns while defensive sectors (XLP, XLU and XLRE) were displaying fading strength.
Here is an excerpt from Erin's Diamonds Report today:
"In this morning's Diamond Mine Trading Room I liked XLY for "Sector to Watch". After getting participation data for the day, I still believe XLY is the most bullish. As far as "Industry Group to Watch", I also haven't changed my mind. Specialized Consumer Services is outperforming in a big way and today's rally suggests more upside ahead.
Sector to Watch: Consumer Discretionary (XLY)
I decided to go with XLY, but XLC and XLK were close seconds. My reasoning for this one over those was that we have better participation of stocks above their 50-day EMAs and the SCI reading was higher than the others and rising steadily. We have a bullish ascending triangle that implies a breakout above the confirmation line and 50-day EMA.
Industry Group to Watch: Specialized Consumer Services ($DJUSCS)
There were some interesting groups out there within XLY, but this chart floated to top. The RSI is positive, rising and not overbought. The PMO just accelerated above the zero line. Stochastics have tipped up. Not only is there an intermediate-term bullish double-bottom, price is traveling in a rising trend channel.
The DecisionPoint Alert Weekly Wrap presents an end-of-week assessment of the trend and condition of the Stock Market, the U.S. Dollar, Gold, Crude Oil, and Bonds. The DecisionPoint Alert daily report (Monday through Thursday) is abbreviated and gives updates on the Weekly Wrap assessments.
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MAJOR MARKET INDEXES
For Today:
For the Week:
SECTORS
Each S&P 500 Index component stock is assigned to one of 11 major sectors. This is a snapshot of the Intermediate-Term (Silver Cross) and Long-Term (Golden Cross) Trend Model signal status for those sectors.
For Today: 
For the Week:
RRG® Daily Chart ($ONE Benchmark):
This RRG tells a story. While the defensive sectors are the Leading quadrant they are all moving southward toward the Weakening quadrant. On the other hand, all other sectors have bullish northeast headings, including aggressive sectors like XLK, XLY and XLC. XLE has reversed out of its bearish southwest direction and now has a bullish heading.
RRG® Weekly Chart ($ONE Benchmark):
The weekly RRG is also improving with the exception that all sectors are in Weakening or Lagging quadrants. There are now a handful of sectors with bullish northeast headings: aggressive sectors, XLC, XLK and XLY; as well as XLV. XLE and XLB are still in the dog house with their bearish southwest heading.
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 market remains in a declining trend channel, but has now bounced off the confirmation line of the short-term double-top. We'll be able to scrap that bearish pattern. The PMO has bottomed above the signal line which is especially bullish. However, the VIX is very close to popping above its upper Bollinger Band on the inverted scale and that typically leads to a day or two of downside.
Stochastics tipped upward and Total Volume in increasing over time.
SPY Weekly Chart: The weekly chart has gotten much less bearish. The weekly PMO is turning up and there is a bullish falling wedge. The weekly RSI still needs help.
New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential has turned back up which is positive.
Climax Analysis: We got unanimous and very strong climax readings today, giving us an upside initiation climax. SPX Total Volume was a bit thin, and the VIX is overbought.
*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 NEUTRAL and the condition is NEUTRAL.
Excellent to see the STOs have turned up on this possible upside initiation day. Over 3/4ths of the SPX have rising momentum. That is enough to carry prices higher.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is SOMEWHAT OVERSOLD.
Not only did ST indicators turn back up, IT indicators did too.
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.
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 somewhat bullish as more stocks find their way above the 20/50-day EMAs.
The intermediate-term bias is still bearish, but it is improving. The SCI is at a very low reading, but it is rising.
The long-term bias remains bearish as there are fewer stocks with price above their 50/200-EMAs than the amount of stocks with a golden cross.
CONCLUSION: There is no denying that today gap up move improved the condition of the market. All of our indicators turned up and we saw an upside initiation climax. While the bias remains bearish in the intermediate- and longterm, the short-term bias is clearly bullish. The pressure appears to be off next week, but we know how this can go in a bear market.
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BITCOIN
Bitcoin has formed a short-term rising wedge which is a bearish pattern that implies a breakdown. Currently it is making its way to the top of that wedge. If it tips over before testing the top of the pattern, the odds of a breakdown increase considerably. Indicators are positive so it will likely touch the top.
This chart is to show where some of the support/resistance lines come from.
INTEREST RATES
Interest rates appear to be headed to a more profound inversion -- short rates are soaring and long rates have pulled back. It is probable that the long rate pullback will not persist.
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 took another swipe at a breakout from the short-term declining trend. It was unsuccessful. We would expect a test of 2.7% at a minimum.
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 up from 5.30 to 5.51.
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 started the week with a bang, but spent the rest of the week consolidating. This helped the RSI leave overbought territory, but it caused the PMO to turn down and we have an OBV negative divergence.
Stochastics are also topping.
UUP Weekly Chart: UUP continues to hit multi-year highs. The weekly RSI is overbought, but still rising. The weekly PMO is also overbought, but it has accelerated higher significantly. It will take some serious downside to get it to turn back down and that is probable. The rise in the Dollar since its low in 2021 has been parabolic. This suggests when it does move to the downside, it could happen quickly.
GOLD
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GOLD Daily Chart: This week, Gold broke significant support. The RSI is very oversold and has been for an unusually long amount of time and Stochastics are turning back up.
Discounts increased sharply this week. Sentiment is getting bearish enough to consider an upside reversal on sentiment alone. The next level of long-term support is $1675.
GOLD Weekly Chart: Gold is hitting significant support along $1675 and is about to test the rising trendline. While sentiment may appear extraordinarily bearish on the daily chart, we've seen higher discounts in prior years. We would expect Gold to reverse soon, but if it loses support and breaks the rising trend, all bets are off.
GOLD MINERS Golden and Silver Cross Indexes: As Gold goes, generally so do Gold Miners. The downside pressure on Miners has been powerful. The only sign of life is the GCI isn't zero as all other participation indicators are. However, it is at 3.45% and likely to join the others at 0% since there is no possible way the GCI can rise if no stocks have price above their 50/200-day EMAs.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO failed to reach the bottom of the falling wedge yesterday, and now it is rallying back to the top. This looks like a good setup for a breakout.
USO/$WTIC Weekly Chart: Price is testing crucial horizontal support at $69 as well as at the 43-week EMA.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Long-term rates have been declining at that helped TLT to rally last week. Overhead resistance could prove too strong, but the PMO and Stochastics haven't looked this strong for some time.
You could make a case for a reverse head and shoulder-ish pattern, but in any case it looks like a bottoming price formation.
TLT Weekly Chart: The weekly chart is looking more bullish as the weekly RSI rises out of oversold territory and the weekly PMO turning up. This rally came off a critical support zone. While we believe the rally will continue, we're not sure it will get much traction as we expect yields to begin moving higher again.
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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Price Momentum Oscillator (PMO)
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