We generally don't pay attention to upgrades and downgrades, but Apple (AAPL) fell heavily today apparently on news that Bank of America downgraded the stock.
Of course, what wasn't news was that AAPL was also upgraded today!
Time to look at the charts and see what is going on technically.
Apple lost support at the late June top and early July bottom. The RSI is falling heavily and is situated in very negative territory. The PMO is accelerating its decline after topping beneath the signal line which is very bearish. Relative performance this week was terrible against an already weakened SPY. Typically Apple outperforms its industry group. Notice it outperformed through August/September against its group and technically is still outperforming the group. Look at price action through that period; it was falling fast, yet it is "outperforming". Relative strength studies aren't particularly helpful in a bear market.
The weekly chart is slightly less bearish given support is holding at 2020/early 2021 tops. We believe the downside risk is now over 20%. BofA seems to have gotten it right with a downgrade.
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 RRG: This is a highly bearish RRG, but it is suggesting what sectors are being rotated into by investors. XLK, XLP and XLV are all reversing their headings back toward the Improving quadrant. XLC, XLI and XLB seem to be showing slight improvement to their headings as well. Those suffering the most are XLU, XLY and XLF as well as XLE, due to their XLE very bearish southwest headings.
Weekly: Yesterday's comments still apply:
"Given we are looking at a longer-term RRG, we shouldn't expect much change. A few items to note are XLE's strong northeast heading which has now moved it into the Leading quadrant and XLB's abrupt change into a bearish southwest heading.
XLY and XLU may be in the Leading quadrant, but their headings are deteriorating, pushing them toward the Weakening quadrant.
XLV is the only sector in the Lagging quadrant, but it appears it will soon be joined by XLP.
XLC, XLK and XLRE all have bearish southwest headings that could land them in the Lagging quadrant sooner rather than later.
The remainder, XLF and XLI, don't have bearish southwest headings, but the strong southward component of the heading is winning."
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: There is a falling wedge formation, which implies a bullish outcome; however, there is also a reverse flag formation (the last five candlesticks form the flag), which implies a bearish outcome. We're in a bear market, so we have to favor the bearish outcome. The June lows were violated intraday but price closed above them.
The PMO started accelerating lower today. The RSI turned back down and Stochastics are static in oversold territory.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: The positive divergence on New Lows was "locked in" yesterday given we had an official price bottom. If we do form a bottom again, New Lows are setup to continue this positive divergence.
Climax* Analysis: Yesterday's upside initiation climax was cancelled today by a strong downside initiation climax.
*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 OVERSOLD.
The STOs continued to move slightly higher out of oversold territory. This is good for the short term, but the other indicators aren't quite so positive. We had finally seen some improvement in %Stocks > 20-day EMA and %Stocks with rising momentum yesterday, but that was erased today.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The IT indicators aren't confirming as they both continued lower. They are significantly oversold.
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.
Overall, there's no denying the bearish nature of our bias chart. There is a bearish bias in all three timeframes.
Here's what we want to see:
- Stocks moving above their 20-day EMAs
- Next, stocks moving above their 50-day EMAs
- There is a higher %Stocks > 20/50-day EMAs compared to the SCI
CONCLUSION: On Wednesday we got a very promising rally, and it was assumed that there would be follow through today. Those assumptions were dashed hours before the open when the futures were headed downward. Indicators that had been improving reversed quickly. The bright side is the closure above the June low. If we're lucky, price will continue to oscillate just above that support, but we don't believe support will hold. Be careful expanding your positions and probably a good idea to keep a hedge or two if you are exposed.
Erin's exposure is 10% with a 5% hedge.
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Bitcoin was mostly unchanged, at least for volatile Bitcoin. It is still bounded within a trading range between $18,000 and $20,500. Stochastics are on the move and there is a slight rising trend in the short term. We need to see indicators moving more concertedly upward before we can make any sweeping bullish statements.
Yields tipped back up today.
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
Earlier this week we mentioned the parabolic nature of price and the possibility of a sharp decline. We got that yesterday, but $TNX managed a positive close today. The PMO has tipped over and Stochastics are dipping back below 80; however, the decline offered the RSI an opportunity to leave overbought territory.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: We also mentioned that the dollar had gone parabolic on Tuesday. The breakdown was continued today. This softens the rising trend which can be more easily held. There are two rising trend lines offering obvious support. The most accelerated is drawn across the September low. That could easily stop the decline, but failing that, a less accelerated line is drawn across the August low.
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 hollow red candlestick today. The RSI is negative, but the PMO appears to be angling back up. Stochastics are beginning to rise again out of oversold territory.
GOLD Daily Chart: Price is in a declining trend channel. We have the third highest discount reading on Gold since we began recording discounts in 2010. When we say sentiment is bearish, we mean it! We could finally be looking at the revival of Gold, but until price breaks from the declining trend channel, we remain very cautious.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments apply with a few changes:
"GDX is finally starting to look appealing as an investment. There is still work to do, like a break of the declining tops trendline, but after an over 7% rally [yesterday and a continuation today], the internals are improving. The PMO is rising again and participation of stocks > 20/50-day EMAs expanded greatly. If you're going to dip your toes in, you'll probably get an opportunity on a natural move lower toward the breakout point."
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 hit overhead resistance and was stopped. The indicators are wishy washy. Stochastics are looking up, but it's very early. We want to see a breakout to confirm the bullish falling wedge before we make any sweeping conclusions about the bullishness of Oil.
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT's rally was stopped short today. While Stochastics are rising, the rest of the chart is unimpressive. We expect Bonds to continue to languish. Yields are overdue for a serious pullback, but so far it hasn't really happened so until then, Bonds are bearish.
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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