Today the 20-day EMA crossed up through the 50-day EMA (Silver Cross) generating IT Trend Model BUY Signals for the Communications (XLC) and Materials (XLB) Sectors.
XLB is the stronger of the two. It has broken above the 200-day EMA and is showing strong momentum. The steady rise of stocks moving above their 200-day EMA implies we should see more Golden Crosses (50-day EMA > 200-day EMA). Participation is strong overall as the SCI rises and we see a large number of stocks above both their 20/50-day EMAs. Relative strength has also picked up for this sector.
XLC hasn't come close to challenging its 200-day EMA and it is nearing resistance at the June highs. The RSI is positive and not overbought. The PMO just moved above the zero line. Most impressive is the near vertical increase of the Silver Cross Index (SCI). The SCI and %Stocks > 20/50-day EMAs are overbought, but Stochastics are rising. The big problem is that relatively speaking, XLC is performing inline with the SPY. That's not a bad thing necessarily, but we prefer seeing improving relative strength.
The only sector that doesn't have a Silver Cross is Energy (XLE). XLE is getting close though if it can stay above the 50-day EMA.
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
SECTORS
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: We have only two sectors in the Weakening quadrant. XLV and XLP were in the Weakening quadrant, but made their way back to the Leading quadrant today. XLE and XLY have bearish southwest headings and are in the Weakening quadrant. XLY just entered it today.
The strongest sectors within the Leading quadrant are XLC, XLF, XLB, XLP, XLV and XLRE based on their bullish northeast headings. Those that are losing strength are XLU, XLI and XLK.
Weekly: 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 and are on their way toward the Leading quadrant. 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: Day 5 of higher prices printed today. Indicators are still quite positive although the RSI is overbought. We saw slightly higher Total Volume today on the rally which is good. We didn't like that it was tapering off as prices moved higher.
The VIX continues to oscillate above its moving average on our inverted scale and Stochastics remain above 80 which suggest 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 pulled back slightly. This one indicator that is not overbought. The 10-DMA of the High-Low Differential continues higher which is bullish.
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.
Rising STOs are good for the market, but they are extremely overbought. Participation of stocks > 20-day EMA and %PMOs Rising are very overbought as well.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Yesterday's comments still apply:
"The last time we saw the ITBM reading this high, it came before corrections. Most ominous is the last time this happened it was on the heels of the recovery rally in 2020. 92% of the index have PMO crossover BUY signals. That is overbought, but can also be looked at as a strong foundation to move prices higher. It is unusual to see this indicator remain overbought for so long. This is a testament to the voracity of the current 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.
The short-term bias is BULLISH given we have 92% of stocks above their 20-day and 91% above their 50-day EMAs. While these percentages are much higher than the SCI reading of 76.8%, we note that both of those indicators topped today.
The intermediate-term bias is BULLISH. The SCI has now moved above 70% which is bullish.
The long-term bias is Neutral to BULLISH. We have 64.8% of stocks with price above their 200-day EMA and that is higher than the GCI reading of 34%. The GCI has had a positive crossover its signal line and is rising, albeit very slowly.
CONCLUSION: Overbought conditions continue for nearly all of our indicators. While overbought conditions can persist, we are less bullish. The longer the indicators stay this overbought, the more we will worry. We also noticed that %Stocks > 20/50-day EMAs in the SPY topped out today despite a fifth day of higher prices. The readings are still impressive at 90%+, but this could be a crack in the foundation. Stay vigilant. Don't let the loud bulls drown out your caution.
Erin is 60% exposed to the market.
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BITCOIN
Yesterday's comments still apply:
"As we suspected, Bitcoin hit the top of the bearish rising wedge and is moving back down. We expect a breakdown this time around. Price has been holding above the 20/50-day EMAs, but the RSI and Stochastics have topped. The PMO is technically rising but is already starting to look toppy."
INTEREST RATES
Other than on the 1-month and 3-month yields, we see broken declining trends. However, the new rising trends in interest rates are looking weak.
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 in a short-term rising trend, but is bounded at $29 and the 50-day EMA. Thursday's big jump is still being digested. The PMO is topping and the RSI is back in negative territory. Stochastics are still bullish, but they have tipped over as well. It appears we will see more churn."
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar finished lower on the day as it continues to meander sideways since mid-July. There are positives in the short term. The RSI is positive, Stochastics are rising in positive territory and the PMO has turned back up. We are still overall bearish on the Dollar in the longer term, but this chart does suggest a small rally continuation.
GOLD
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Gold broke its very short-term rising trend and is now about to test the rising trend out of the July low. This looks like a bullish cup with handle. The RSI is still positive, but Stochastics have topped and are now below 80.
GOLD Daily Chart: The 50-day EMA has been breached, but support continues to hold at 1775. Discounts remain high, meaning investors are still quite bearish on Gold. That is typically a positive condition given sentiment is contrarian.
GOLD MINERS Golden and Silver Cross Indexes: Miner closed higher and above the 20-day EMA. We have a bullish cup with handle chart pattern that does imply a breakout move. Participation of stocks above their 20/50-day EMAs is holding up, but we still aren't seeing any new Silver Crosses within in the group. We are cautiously bullish on this industry group. Cautious because the PMO is looking toppy and Stochastics have turned down.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Crude Oil had another devastating loss. On the bright side, support is holding above the 200-day EMA and short-term support at the July low. The indicators are very negative. Today the PMO had a crossover SELL signal.
There is a clear support zone between the March low and April/July lows that needs to hold.
BONDS (TLT)
IT Trend Model: BUYas of 8/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Today's small gain kept price on support, but the 20/50-day EMAs are still strong resistance. As noted yesterday, if price cannot get back above the 50-day EMA, a "Dark Cross" of the 20/50-day EMAs will occur. Given the margin has been so thin between the two, we could see more whipsaw.
On the bright side, while the PMO looks negative, the RSI is rising and Stochastics have turned up. We still expect price to test the May 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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