Today we got four more Silver Cross BUY signals (the 20-day EMA crossed up through the 50-day EMA): The Dow Jones Industrial Average (DIA), the S&P 500 (SPY), the Industrial Sector (XLI), and Bonds (TLT). All remain in solid uptrends although DIA, SPY and XLI failed to pass through overhead resistance at the 200-day EMA. TLT is so far below its 200-day EMA that it hasn't even come close to being tested.
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: All sectors remain in the Leading quadrant with the exception of XLV. All of them are beginning to rotate back toward Weakening with the exception of XLU. This does imply some weakness seeping in.
Weekly: The long-term RRG shows a market that is improving greatly. All but XLB, XLU and XLE have bullish northeast headings. XLU doesn't look that terrible as it does have a northward component to its heading and could find itself in the Improving quadrant after a likely foray into Lagging. Energy (XLE) was hit very hard and is still trying to recuperate in the intermediate term.
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 market continued to digest last week's rally, but not much damage has occurred. Price remains above support at the early June lows. Additionally, the PMO is still rising and the RSI is positive. Total Volume also decreased on today's selling.
Stochastics are also staying comfortably above 80 suggesting internal strength. The VIX also remains above its moving average on the inverted scale and that also suggests internal strength.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Highs pared back. The 10-DMA of the High-Low Differential remains in positive territory, but it could turn back down which we do not want.
Climax* Analysis: There were no climax readings today.
*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.
STOs were mixed on today's selling. The STO-B remains overbought and the STO-V somewhat overbought. Participation is shrinking somewhat, but readings still remain overbought.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
More overbought indicators, but all are rising which is bullish. The problem is that they are getting very overbought, particularly for a bear market rally. We saw %PMO BUY signals top, but only one percentage point was lost.
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.
Although all of the %Stocks > 20/50/200-day EMAs continued lower, it didn't really change our bias analysis so yesterday's comments still apply with little change.
We have a strong bullish bias in the short term based on %Stocks above their 20/50-day EMAs being much higher than the SCI.
The intermediate-term bias is also bullish now given the sharp increase and trajectory of the SCI.
The long-term bias is still bearish given the GCI is only at 28.6%, but it is improving and should continue to improve given there are far more stocks with price above their 50/200-day EMAs than those with Golden Crosses. This will eventually push the GCI upward. Note how far the 50-day EMA is from the 200-day EMA on the SPY. The majority of stocks have this configuration so it will take time before we see the GCI begin to accelerate higher.
CONCLUSION: The pause has continued as price digests last week's strong rally. Nearly all of our indicators are overbought and some are turning over. While this is a problem, momentum for the SPY is moving higher. A PMO top would be big problem given overbought conditions. We expect an upside breakout, but we are now a bit more cautious given participation is now shrinking and many of our indicators have topped. Erin remains 55% exposed to the market.
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Yesterday's comments still apply:
"Bitcoin is in a short-term rising trend but it has been a bumpy ride. Price action is mixed. While it has traded above the 20-day EMA, it cannot hold above the 50-day EMA. The OBV is in a clear negative divergence with price and the PMO is flat. The RSI is positive, but falling. We also see a small rising wedge that is bearish. Stochastics are moving lower. $25,000 is now the upper bound to watch, but right now it looks shaky."
Yields popped higher today, putting pressure on Bonds which were finally beginning to breakout.
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
We have talked about 2.5% being the next support level. We thought it would breakdown there, but today $TNX recaptured support at 2.7%. The RSI is still negative, but Stochastics and the PMO are flattening in anticipation of a continuation of today's rally.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: So far support is holding at the 50-day EMA. The RSI turned up and reentered positive territory and Stochastics are rising again. Both of those indicators tend be "leading" unlike the PMO which can sometimes "lag". Price is still in a declining trend, but there is now a possibility the Dollar could recover. It's too early to bank on it.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: A bearish engulfing candlestick has formed at the 50-day EMA. This implies more decline tomorrow. However, we didn't seem the same result on $GOLD.
GOLD Daily Chart: $GOLD finished slightly higher on the day, meaning no bearish engulfing candlestick. Stochastics did top as they did on GLD. However notice on $GOLD, the 50-day EMA has been overcome and price is now above the May low. Overall we still like Gold.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners pulled back sharply today, pulling price back below the 20-day EMA. The RSI is still negative and there is plenty of margin between all of the EMAs which are already configured negatively with the fastest EMA on the bottom and the slowest on the top. The PMO is still rising, but participation is shrinking again. There is a ton of upside potential, but seeing participation already weakening, we aren't that optimistic. Of course, if Gold doesn't breakout, this group will likely be the first to benefit.
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 recovered somewhat, but we won't feel confident until price can maintain above the 50-day EMA. The PMO remains on its BUY signal but the margin is thin between it and its signal line. The RSI is negative but is attempting to recapture positive territory. Stochastics topped and could hit negative territory soon. We are still bullish on Oil and Energy, but babysitting your positions is necessary for now.
IT Trend Model: BUY as of 8/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT had finally broken out but hopes were dashed when interest rates skyrocketed today. The rising trend is still intact and the RSI/Stochastics are positive. The PMO is looking suspect already, but that is a function of the over 2% decline. This is a nice looking bottoming formation and today's IT Trend Model "Silver Cross" BUY signal is encouraging. If we lose the rising trend, be prepared for a possible trip down to $110.
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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