This is the first of what will likely be a slew of "Dark Crosses" on the sectors. A "Dark Cross" happens when the 20-day EMA drops below the 50-day EMA. If the Cross occurs above the 200-day EMA it is a Neutral signal which is what happened to XLV. You'll note on our DP Sector Scoreboard that Communications (XLC) has an IT Trend Model "Dark Cross" SELL signal because the crossover occurred below the 200-day EMA.
XLV is one of the weakest sectors on the daily $ONE Relative Rotation Graph (RRG). It had set up a near textbook reverse head and shoulders, but the rally never really took hold and failed long before the upside target of the pattern was hit. Participation began to shift shortly after the August top. The Golden Cross Index (GCI) fell beneath its signal line and the Silver Cross Index (SCI) began topping shortly after the price top. Indicators are very negative with the Price Momentum Oscillator (PMO) dropping below the zero line today. While %Stocks > 20/50/200-day EMAs are oversold, we wouldn't expect a bounce.
A great lesson is seeing the relative strength line of XLV to the SPY rising slightly. Just because it is outperforming the SPY, it doesn't mean price is rising. It simply means it isn't falling as quickly.
The DecisionPoint Alert Weekly Wrap presents an end-of-week assessment of the trend and condition of the Stock Market, the U.S. Dollar, Gold, Crude Oil, and Bonds. The DecisionPoint Alert daily report (Monday through Thursday) is abbreviated and gives updates on the Weekly Wrap assessments.
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MAJOR MARKET INDEXES
Each S&P 500 Index component stock is assigned to one of 11 major sectors. This is a snapshot of the Intermediate-Term (Silver Cross) and Long-Term (Golden Cross) Trend Model signal status for those sectors.
RRG® Charts ($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: The decline continued in earnest today. Price is now about ready to test the rising trend out of the June low. Support is available at $390.
Indicators are telling us that rising trend will be broken. Stochastics are in negative territory and falling. The PMO continues lower after an overbought SELL signal. Stochastics are falling vertically. However, we now have yet another puncture of the lower Bollinger Band by the VIX on the inverted scale. These punctures typically lead into upside reversals.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Lows expanded were similar to yesterday. We saw no New Highs (not a surprise). The 10-DMA of the High-Low Differential is nearing negative territory.
Climax* Analysis: Today there were unanimous climax readings, giving us a downside exhaustion climax. SPX Total Volume was still light and did not confirm exhaustion. To be clear, high volume is not actually necessary to confirm the climax, but an expansion of volume would help indicate that there was panic selling.
*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 NEUTRAL.
STOs switched direction in negative territory which is bearish. We do have oversold readings on %Stocks > 20-day EMA and %PMOs Rising. There are currently only 3% of stocks with rising momentum in the SPX which translates to only 15 stocks out of 500. The market needs to do a quick about face to bring up that percentage.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERBOUGHT.
The ITBM/ITVM continue lower. We still consider their readings overbought. Meanwhile only 13% of the SPX are holding onto their PMO BUY signals. Again, a very oversold reading, but one that will likely continue to deteriorate since of those 13% only 3% have rising PMOs.
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 68.6%.
The intermediate-term bias is BEARISH: Only 68.6% of stocks have a 20-day EMA above their 50-day EMA, the SCI is in decline and just had a negative crossover its signal line.
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: Today's downside exhaustion climax arrives alongside oversold indicators and multiple punctures by the VIX of its lower Bollinger Band on the inverted scale. Support is available as price readies to test the rising trend out of the June low. While we are due for a reversal, participation is extremely thin. Consequently, we wouldn't look for an extended move to the upside; more than likely we will pause the decline and then quickly resume it.
Erin is 40% exposed (primarily in Energy and Utilities).
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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: Yesterday's comments still apply:
"The Dollar hit overhead resistance and has been consolidating. Indicators are still strong so resistance will likely be broken. There is a tiny OBV positive divergence with price lows last week."
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 bearish reverse flag.
GOLD Daily Chart: 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 today. The PMO also triggered a crossover SELL signal. Participation is practically nil. After doing some research, I found there is one Miner out there that still has a positive EMA configuration (20-EMA > 50-EMA > 200-EMA) and another that has a Silver Cross (no Golden Cross). Until Gold rights its ship, this industry group will continue to suffer.
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 topped again and took the Energy sector for a rough ride today. XLE had the worst finish today, down -3.39%. The RSI and Stochastics are beginning to crack, but for now the PMO is trending higher. This seemed to be the one bright spot in the market, but it is fading away too.
IT Trend Model: SELL as of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Price action looks very much like a reverse flag. The pattern suggests price could easily drop below the June low. One positive? Stochastics are rising and the PMO is not pointed downward. We would still look for at least a test of the June low, but more likely a breakdown there.
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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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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