If you recall, yesterday we saw a downside exhaustion climax. Today's positive open suggested we would see it confirmed. However, price began to meander its way lower. There was a failed attempt at a rally around 3p ET with the last five minutes seeing very heavy volume and a price breakdown below yesterday's lows. The 5-minute PMO topped and had a negative crossover SELL signal while the 5-minute RSI tumbled into negative territory below net neutral (50). We saw yesterday's bullish downside exhaustion climax fail to produce higher prices, but many times we will see them result in churn or sideways movement if the climate is bearish enough.
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® Charts ($ONE Benchmark):
Daily: The short-term daily RRG shows the decimation of performance as all but Energy are moving quickly into the Lagging quadrant with bearish southwest headings.
Energy is in the Leading quadrant, but has begun traveling southward toward Weakening. Basically, there are very few places to hide.
Weekly: The weekly RRG is beginning to deteriorate, but not as much as we would've expected. While most sectors are holding northeast headings, some of those sectors are beginning to see southward components. XLY, XLC, XLRE and XLK are four. XLV has taken a turn for the worse as it has reversed course and is now headed toward the Lagging quadrant in a bearish southwest direction.
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: While it is the end of the month, we will review the monthly charts on Friday along with the weekly charts.
Price is sitting on support at the June/July tops. The intermediate-term rising trend is still intact. The hope is that horizontal support will continue to hold in order to protect that rising trend.
We expect the rising trend will be broken as Stochastics are in negative territory and falling, the PMO continues lower after an overbought SELL signal and Stochastics are weak. The VIX punctured the lower Bollinger Band on our inverted scale yesterday. That generally leads to an upside reversal, but that failed.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Lows pared back somewhat. We are looking for oversold readings as we saw in June. Clearly we haven't seen a big enough shake out.
Climax* Analysis: There was another downside exhaustion climax today, and finally SPX Total Volume expanded to confirm. This increased volume alerts us to the potential for a short-term price bottom.
*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.
STOs dropped back into oversold territory. This thrust downward could also be confirming today's downside exhaustion climax. Still, we don't like seeing them falling with such gusto. Only 2% of the SPX have rising momentum which means out of 500 stocks, only 10 have rising momentum. Talk about oversold!
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM/ITVM continue lower and have reached neutral territory. Currently only 50 stocks in the SP500 have PMO BUY signals. Based on only 10 of them having rising momentum, that number should continue to deteriorate.
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 short-term bias is BEARISH: We have a low percentage of stocks > 20/50-day EMAs and those percentages are far lower than the SCI reading of 63%.
The intermediate-term bias is BEARISH: Only 63% of stocks have a 20-day EMA above their 50-day EMA. The SCI is also accelerating lower.
The long-term bias is BEARISH: The GCI topped last week below 40%. Participation of stocks > 200-day EMAs is now lower than the GCI so it will not be rising for some time.
CONCLUSION: Yesterday's downside exhaustion climax didn't result in higher prices, but it wasn't confirmed by volume yesterday. Today we had another downside exhaustion climax and it WAS confirmed by Total Volume. As of this writing, the SPY is down -0.64% in after hours trading. If this bullish signal also fails, it will confirm the internal weakness displayed by STOs, RSI, PMO, Stochastics, among others. Erin is 40% exposed but has her finger on the trigger.
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Yesterday's comments still apply:
"While the chart for Bitcoin is bearish, there is now a bullish falling wedge in the short term. Stochastics have turned up and the PMO is decelerating its decline. We still don't think Bitcoin will do much with this pattern."
Interest rates continue climb higher in rising trends. Inversions continue with more likely on the way.
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 traveling within a bearish rising wedge. However, indicators are very favorable so we do expect $TNX to continue higher and probably breakout rather than breakdown."
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar continues to struggle with overhead resistance. Indicators are still bullish, so we expect a breakout.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: The Dollar finished mostly unchanged today but that didn't prevent another sizable decline in Gold. The PMO is now on a SELL signal after topping beneath the zero line. Stochastics are pointed lower and the RSI is declining in negative territory. This looks like a confirmation of the short-term bearish reverse flag.
GOLD Daily Chart: Yesterday's comments still apply:
"Discounts are reaching levels that generally lead to upside reversals. However, we note that they have been very elevated for over a week and it hasn't resulted in much upside."
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners lost support yesterday and continued even lower today. Every indicator is about as negative as it can be and participation is literally nil as no stocks have price above their 20/50/200-day EMAs. Eventually they will find favor and when that happens, there will be plenty of upside to take advantage of. For now, you'd be jumping the gun buying here.
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 is in free fall. Price didn't even reach overhead resistance at the late July top before turning back down. The PMO has now topped beneath the signal line and the RSI dipped into negative territory. Stochastics continue to fall. Apparently there really is nowhere to hide given Energy was the last bullish sector.
IT Trend Model: SELL as of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: It looks like a short-term bearish reverse flag formed out of the August low is executing with today's deep decline. The PMO and RSI are still falling. Stochastics were rising yesterday but have reversed. We expect TLT to hit the June low.
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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