We had to add the thumbnail to the chart so you can actually see the PMO crossover BUY signal. The PMO in general has been flat since mid-July. We wouldn't put too much emphasis on this signal. You can actually make a case for a bearish descending triangle in the short term. The chart is showing improvement, but the RSI and Stochastics are still in negative territory. The chart isn't particularly bearish given the rising bottoms on the PMO, OBV and Stochastics. This looks like a move that could see a breakout, but it is still early. Manage any Crude related positions carefully.
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® Chart ($ONE Benchmark)
Daily: XLE has made a stunning comeback on the daily RRG, reversing sharply into a bullish northeast heading and landing back in the Leading quadrant. Other bullish sectors are XLV, XLP, XLB and XLF which are all in the Leading quadrant and are traveling with a bullish northeast heading.
We are seeing deterioration in many of the sectors' headings within the Leading quadrant. XLC, XLU, XLI and XLRE are all headed toward the Weakening quadrant.
Most bearish are aggressive sectors, XLK and XLY. They have bearish southwest headings and are well within the Weakening quadrant. The more defensive areas of the market are showing the most strength.
Weekly: XLE hasn't improved on the weekly RRG. The weekly chart shows us that the market is in a strong rising trend given all sectors with the exception of XLB and XLE, have bullish northeast headings.
XLU has managed to get into the Leading quadrant before all of the other sectors. XLB is seeing improvement. It is moving toward the Improving quadrant, but still has a westward component to its 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: BUY as of 8/2/2022
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: In spite of yesterday's downside initiation climax, the market managed to close higher. This hasn't removed the negative OBV divergence yet. It could get wiped out if the OBV makes a higher high. Price is still within a bearish rising wedge.
The VIX continues to oscillate above its moving average on our inverted scale and Stochastics remain above 80 (although they have turned down). This suggests internal strength is still in effect.
Here is the latest recording:
We apologize but due to technical difficulties (wetware problem), there is no recording for today's DecisionPoint Trading Room. We will be back next week and will make sure to hit the "record" button. You'll find last week's recording HERE.
S&P 500 New 52-Week Highs/Lows: New Highs rose and there were no New Lows. The 10-DMA of the High-Low Differential continues to rise slowly.
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 continued lower. Generally we see price follow these indicators, but lately that hasn't been the case. We could be looking at STOs relieving overbought conditions on consolidation v. decline. That is bullish. We still have 71% of stocks with rising momentum. That could certainly carry the market higher, but yesterday's big pullback on those readings is still concerning.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
There seems to be no stopping the ITBM/ITVM which are now extraordinarily overbought. The market is overdue for a pullback and these indicators demonstrate this. We haven't see %PMO BUY signals stay this overbought for so long. Look at the bullish recovery out of 2020; these indicators don't stay in this territory very long.
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 BULLISH given we have 88.0% of stocks above their 20-day and 86.40% above their 50-day EMAs. These percentages are higher than the SCI reading of 76.8%.
The intermediate-term bias is BULLISH. The SCI is above 70% which is bullish. However, note that the SCI is very overbought now.
The long-term bias is Neutral to BULLISH. We have 62.2% of stocks with price above their 200-day EMA and that is higher than the GCI reading of 35.8%.
CONCLUSION: With our short- and intermediate-term indicators insisting that a price top is due, and the price index fighting that imperative, it really feels like we're in a bull market. We think that this situation is not going to last, but let's see if the market continues to resist the technical signs. The market is in a topping zone, we're not past vulnerability to the negative technical signs, and the market is demonstrably vulnerable to news events -- good and bad. Stay alert.
Calendar: Tomorrow is the last trading day before options expiration. Expect low volatility.
Erin is 60% exposed to the market with hard stops.
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Yesterday's comments still apply:
"Bitcoin dropped below both the 20/50-day EMAs. Price is now testing the bottom of a bearish rising wedge. We expect it to breakdown as the pattern suggests. The RSI nearly hit negative territory today and the PMO has topped and is nearing a crossover SELL signal in near-term overbought territory. Stochastics just dipped into negative territory."
Yields are now in rising trends. We expect that to continue.
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
$TNX is traveling within a bearish rising wedge. However, indicators are still quite bullish, suggesting we will see more upside. The RSI is positive and Stochastics are oscillating above 80. The PMO is on an oversold BUY signal. We do expect rates to continue rising, we simply need to be aware of the bearish wedge.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is on the rise again and that is not only a problem for Gold, it also affects global companies in a bearish manner. That downward pressure on Gold and large-caps could be a problem for the market.
This breakout above overhead resistance looks excellent. The PMO should give us a crossover BUY signal soon.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: We have a bullish cup with handle pattern on Gold. Unfortunately with the Dollar's new strength, it appears the "handle" will continue to form. If that handle drops price below support at $162.50, the pattern will be busted. The RSI is now negative and the PMO has topped below the zero line. Stochastics are falling fast in negative territory.
GOLD Daily Chart: The $GOLD chart shares similar bearish characteristics with GLD, no surprise there. Discounts are expanding a great deal which tells us that investors are very bearish on Gold. That is good for Gold, but it hasn't resulted in a rally yet.
GOLD MINERS Golden and Silver Cross Indexes: Support held today, but yesterday's comments still apply:
"We really liked Gold Miners and Miners in general, but with Gold getting hit, those groups don't look as appetizing. Participation was slashed on this recent decline. The RSI is negative and the PMO is topping beneath the zero line. This was a promising set up. Unfortunately it appears support will need to be tested. We will watch to see participation improve under the surface."
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: We discussed this chart in the opening.
There is a clear support zone between the March low and April/July lows that needs to hold. This is a good place for a reversal, but the declining trend is still intact. A breakout would go a long way in improving our outlook.
IT Trend Model: SELL as of 8/17/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday's comments still apply:
"The short-term declining trend continues for TLT and today's "Dark Cross" IT Trend Model SELL signal suggests TLT will continue to be under pressure. The RSI is negative and Stochastics turned down. The PMO is on a SELL signal and moving lower. This is a fairly strong level of support, but indicators and the yield charts tell us it is likely it will be broken."
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 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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