All of the sectors were on IT Trend Model "Silver Cross" BUY signals. XLC is the first to lose its "Silver Cross" (a Silver Cross is a positive 20/50-day EMA crossover. With the steep market decline we expect to see more of these signals fail.
An IT Trend Model "Dark Cross" SELL signal is generated when the 20-day EMA crosses below the 50-day EMA while the 50-day EMA is below the 200-day EMA. This sector was already in a bearish configuration because the 50-day EMA is below the 200-day EMA. That bearish bias is exacerbated by the huge margin between the 50/200-day EMAs.
The RSI is falling in negative territory. The PMO triggered a crossover SELL signal today as well. Stochastics have tanked and are still falling. The Silver Cross Index (SCI) also had a negative crossover. Participation has plummeted. The SCI is very overbought so despite seeing oversold readings on the %Stocks > 20/50/200-day EMAs, we would expect even lower prices. We also note that the Golden Cross Index (GCI) has dropped below its signal line.
More than likely we will be writing about more sectors generating "Dark Crosses" of the 20/50-day EMAs.
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.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
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® Charts $ONE Benchmark:
Daily: The short-term RRG is getting worse by the day. It isn't just aggressive sectors that are losing ground.
If you want to see strength, look to XLP and XLE which are both climbing further into the Leading quadrant with bullish northeast headings. Past that, all other sectors are moving south to southwest toward the Weakening quadrant.
Weekly: The intermediate-term RRG looks bullish. Every sector has a bullish northeast heading. XLU is the strongest given its position in Leading. Don't get overly excited, this chart will likely get very bearish 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: BUY as of 8/2/2022
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: The decline continued with price closing in the bottom half of its range today. The PMO will likely trigger a crossover SELL signal tomorrow. The Nasdaq 100 generated a PMO SELL signal today. The VIX is below its moving average on our inverted scale suggesting internal weakness.
The RSI is likely to drop below net neutral (50) into negative territory tomorrow. Stochastics are plummeting further into negative territory.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Lows contracted, but it wasn't enough to get the 10-DMA of the High-Low Differential to turn back up. When this indicator tops, we generally see more downside.
Climax* Analysis: There were no climax readings today. Yesterday, the VIX punctured the lower Bollinger Band. Typically that will lead to a very short-term upside reversal. It didn't close below the Band so we are still vulnerable to short-term downside.
*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 OVERSOLD.
Well that was fast! STOs are already entering into oversold territory and certainly %PMOs Rising is oversold. However, all of these indicators have plenty of room to continue lower.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is EXTREMELY OVERBOUGHT.
We still see the ITBM/ITVM in overbought territory. They are continuing lower which is very bearish for the market right now. Nearly half of the index still have PMO BUY signals, but given the steep decline, we don't see that indicator improving anytime soon. Expect to see it move even lower.
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.
We had been looking at bullish biases in the short and intermediate terms. Even the long term was beginning to look bullish as more stocks found their way above their 200-day EMA. The picture has changed drastically.
The short-term bias is BEARISH: There are far fewer stocks above their 20/50-day EMAs than the SCI which is at 78.8%. This tells us that the SCI will likely continue lower.
The intermediate-term bias is NEUTRAL but deteriorating given the SCI has topped in overbought territory.
The long-term bias is NEUTRAL, but given the serious deterioration in %Stocks > 50/200-day EMAs. When the GCI tops, we will consider the long-term bias BEARISH.
CONCLUSION: Our short-term indicators are already in oversold territory. However, key indicators like the PMO and SCI have topped in overbought territory and remain there. We could get a bounce based on the VIX being oversold on our inverted scale, but any upside will likely be very limited given only 12% of the SPX have rising momentum. Additionally, we invite you to review our Sector ChartList on our website here. With the exception of XLE, all are topping and/or losing participation. We are looking for more downside with an outside chance of a small dead cat bounce.
Erin is 45% exposed.
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Yesterday's comments with slight changes apply today:
"Bitcoin has formed a near textbook reverse flag after breaking down from the bearish rising wedge. The RSI is in negative territory and declining. The PMO has topped and moved below the zero line. The only possible positive would be Stochastics ticking up in oversold territory."
Yields continue in their rising trends.
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 bullishly broke out of a bearish rising wedge. We consider bullish conclusions to bearish chart patterns as especially bullish. The indicators are strong. The RSI and PMO are rising out of oversold territory. Stochastics are holding above 80 implying internal strength."
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar hit overhead resistance and paused its strong rally. The RSI was getting overbought so this alleviated those conditions. Stochastics are angling lower, but remain strong above 80. The PMO saw slight deceleration. We could see a small pullback to prior support, but overall UUP looks bullish.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Gold enjoyed a small rally off the Dollar's misfortune. It probably delayed a PMO crossover SELL signal for GLD. However, $GOLD did see the PMO negative crossover SELL signal. Stochastics have turned up slightly but are still very negative.
GOLD Daily Chart: Discounts are very high on PHYS. Investors are still very bearish on Gold, but it hasn't resulted in any upside. The bullish cup with handle pattern is hanging on by a thread given today's rally. The PMO SELL signal is very concerning.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners rallied again today, likely helped along by Gold's rally. The PMO is trying to bottom above the signal line which would be very bullish. Participation improved very slightly but overall is very bearish. We should watch this group more closely. If the rally continues we will have a bullish double-bottom.
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 popped above the 50-day EMA for the first time since late June. It also broke out of its declining trend. This means we have a bullish conclusion to a bearish descending triangle pattern. Bullish conclusions to bearish chart patterns are especially bullish. Energy is where the money is rotating to and given the major improvement on USO's indicators, we would expect higher prices.
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We had a viewer of yesterday's DecisionPoint Trading Room write to us today. Paraphrasing, He wasn't as bearish as we were based on the bullish falling wedge and oversold Stochastics and the Commodity Channel Index (CCI) (not shown on this chart).
We aren't ignoring those conditions and pattern, but the overwhelming evidence based on the newly negative PMO, negative RSI and OBV confirmation of the decline is short-term bearish. As we wrote to this viewer, "We are more bearish in the short term. Interest rates will eventually cooperate." Certainly TLT is sitting on short-term support right now, but we see them challenging the June lows soon.
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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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