On our DecisionPoint Trading Room show this morning Carl pointed out that we had a ton of signal changes pending, depending on today's closes. As it happened, there were Silver Cross BUY signals (20-day EMA crossed up through the 50-day EMA) on five market indexes: S&P 400 Mid-Cap (MDY), S&P 600 Small-Cap (IJR), Russell 2000 (IWM), Nasdaq 100 (QQQ), and Nasdaq Composite (ONEQ).
For S&P Sectors there was one Silver Cross BUY signal on Consumer Discretionary (XLY), and a Golden Cross BUY signal (50-day EMA crossed up through the 200-day EMA) on Health Care (XLV).
You'll note quite a bit of turnover on our Market Scoreboards.
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 but Healthcare (XLV) are in the Leading quadrant. This suggests short-term strength which is obvious when you look at the markets.
Particularly bullish are XLY, XLI, XLU, XLP and XLRE due to their northeast headings. The others don't look terrible given none have bearish southwest headings.
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: NEUTRAL as of 1/21/2022
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: With all the new BUY signals today, SPY and DIA are very close to a 20/50-day EMA crossovers. Maybe tomorrow. Resistance is strong at the June tops and 200-day EMA.
Price paused after a strong rally last week. Today's decline came on less Total Volume. The PMO is rising strongly and the RSI is positive and not overbought. Stochastics are oscillating above 80. All are good signs. One "issue" could turn out to be the VIX's puncture of the upper Bollinger Band on our inverted scale. Usually we see a downside reversal. Maybe today is all we'll get.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Highs continue to climb. The 10-DMA of the High-Low Differential is in positive territory but flat. We need to watch this carefully. It is usually bad news when it does.
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.
The STO-V may not be highly overbought, but the STO-B and %Stocks indicators are. It didn't take much downside to turn those %Stocks indicators lower.
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. 91% of the index have PMO BUY signals and based the chart above 87% have rising momentum. This means that only about 4% of the PMO BUY signals are in jeopardy. This kind of participation can fuel the market rally.
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 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 lots of time before we see the GCI begin accelerating higher.
CONCLUSION: Today the market digested last week's strong rally. Indicators and participation are still very positive. The only real problem is overbought indicators. In the very-short term, the VIX did top after puncturing the upper Bollinger Band so more digestion and consolidation seems likely. With so many indexes and sectors seeing Silver Crosses, there is a strong bullish bias in the near term. Erin has increased her exposure level to 55% and is on the look out for more opportunities until short-term indicators begin to deteriorate.
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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.
With the exception of the ulta-short-term 1-month and 3-month yields, all are in declining trends and most have lost support levels. We would expect to see them fall further.
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 lost support last Thursday and continues its decline. The next level of support is at 2.5% and along the 200-day EMA. The indicators look terrible so we aren't counting on it stopping there.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Support is now being tested at the 50-day EMA, June top and the intermediate-term rising bottoms trendline. We so many layers of support we would think this will be the area for a rebound. However, with the RSI negative and falling, the PMO declining and Stochastics non-responsive, it isn't likely to hold.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Gold has formed a cup-shaped base and saw a follow-through day (fourth day of higher prices). The short-term rising trend looks strong. The RSI is now in positive territory and both Stochastics and the PMO are rising. We expect GLD to reach resistance at $167.50 with a likely breakout.
GOLD Daily Chart: $GOLD has overcome resistance at its 50-day EMA and the May low. Indicators are strong and not overbought (we want Stochastics to oscillate above 80). Discounts continue to trend lower which tells us that bearish sentiment is deteriorating.
GOLD MINERS Golden and Silver Cross Indexes: This could be the time to enter Gold Miners, but given the mixed indicators, it would be a very risky proposition. While the short-term declining trend was broken, it wasn't a strong upside move and price is still under the 20-day EMA. The PMO BUY signal and Stochastics are bullish, but seeing %Stocks above their 20/50-day EMAs topping is not at all encouraging.
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 had a great set up going into today with the exception of the bearish filled black candlestick. This failure changes the bullish outlook on Crude Oil. The RSI has turned down in negative territory and, the PMO and Stochastics have topped. Manage your positions in Crude Oil related stocks carefully.
IT Trend Model: NEUTRAL as of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We expect a Silver Cross BUY signal on TLT tomorrow, unless there is a sharp price reversal. That seems unlikely given today's strong breakout. The PMO is accelerating higher with the RSI in positive territory and Stochastics today reading above 80. The yield charts look bearish so we expect TLT to continue higher.
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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