Today the Consumer Staples Sector (XLP) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL signal. Also, the Utilities Sector (XLU) 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA, generating an IT Trend Model NEUTRAL signal. There are no longer any IT BUY signals on the 11 S&P Sectors.
The PMO on XLP is accelerating lower. There is a possible chance price will reverse off support, but given the very poor participation numbers, it doesn't seem likely.
Utilities have fallen out of the sky. Both XLP and XLU are considered "defensive" areas of the market. We think this proves how far the bear market is reaching. Even Gold isn't finding favor. Participation is also slim to none on XLU. The exception is the amount of stocks still holding "golden crosses". Notice the configuration of the EMAs on XLU, it is the same setup for the majority of Utilities stocks. After the long rally, a double-top formed. The long rally is what is keeping the Golden Cross Index (GCI) from falling as quickly as the rest.
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 RRG: It doesn't take an RRG expert to read the daily RRG. It couldn't be more bearish (well, maybe it can). All sectors are now in the Lagging quadrant with almost perfect bearish southwest headings. We do see that XLC and XLK are trying to hook back up toward the Improving quadrant.
Weekly: The weekly RRG is deteriorating quickly. Given the ugly daily RRG, it was only a matter of time. We still see XLY, XLE and XLU in the Leading quadrant. XLE is at least traveling northward and managed to make it to the Leading quadrant. It is very vulnerable to moving into either Improving or Weakening given its proximity to the center of the graph.
The remainder of sectors are looking bearish as their once bullish northeast headings begin to turn to the bearish southwest 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: The pre-opening futures were up, and the market opened solidly up, and nearly everyone was looking for substantial bounce to begin. Well, it didn't. Nevertheless, the June lows held, so we can't really say that anything has been resolved. There is a big bearish engulfing candlestick today that implies lower prices tomorrow.
Stochastics are trying to rise and the RSI is now oversold. The PMO is still declining quickly, but it is also in oversold territory. The VIX is still not at the 'fear' levels it was back at bear market rally bottoms, but it is close.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: As it was yesterday, SPY traded lower, but SPX New Lows contracted. There were more New Lows than yesterday, but it is a positive divergence versus Friday's New Lows, and that is significant with this indicator.
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 DOWN and the condition is OVERSOLD.
The chart hasn't really changed, they are still in decline. Yesterday's comments apply:
"We can finally write that STOs are extremely oversold. Readings are now challenging June lows. Only 2% of stocks have rising momentum. That's extremely oversold."
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
All of these indicators are extremely oversold. While we see readings that are more oversold than June, they still aren't quite competing with 2020 lows. Only 2% of stocks have a PMO BUY signal. When these indicators finally turn up, that would be the time to expect a bear 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 a tiny bit of improvement in participation, but 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
Those would be signs of some recovery.
CONCLUSION: Once again, the bullish downside exhaustion climaxes didn't trigger any upside movement nor have extremely oversold indicators. The determining factor right now would be whether support holds at the June low. If that level is lost, we would expect the decline to continue in earnest. In either case, we will be looking to our ITBM/ITVM for a shift in direction. They've been quite prescient. New Lows are finally starting to show a true positive divergence. We will stay somewhat optimistic given the extraordinarily oversold indicators. Be careful with your hedges. Erin is.
Erin has slimmed exposure to 10% with a 5% hedge.
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Bitcoin had a failed breakout above the 20-day EMA. The chart was beginning to firm up, but today's stunted rally suggests Bitcoin will continue to move sideways in a range between $18000 and $22000.
Yields continue to rise with no sign of relief.
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 continues to rally strongly. The RSI is now quite overbought, but the PMO is accelerating higher and isn't really overbought when compared to April. Stochastics are very bullish as they oscillate carefully above 80. We are starting to see parabolic characteristics here. Typically those end with an abrupt and powerful decline. We don't see that happening here as the Fed continues to goose the fed funds rate.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar was mostly unchanged to finish the day as it cooled its sharp rising trend. Indicators are still very positive. We don't like the very overbought RSI and overbought PMO.
The dollar has gone parabolic, and we can expect a parabolic collapse soon. The event is short-term, so we don't expect a major collapse, but a parabolic begs for a reversal.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: GLD was higher on the day but formed a bearish filled black candlestick which should resolve to the downside. The PMO is oversold and so are the RSI and Stochastics. It hasn't resulted in a reversal. Given the GVX is oscillating below its moving average on the inverted scale, there is internal weakness.
GOLD Daily Chart: We are now looking at the third highest discount since this indicator began being tracked in 2010! The highest discount recorded was -3.58, followed by -3.2 and now -3.01. We track this to determine sentiment. Investors are extraordinarily bearish on Gold right now. Generally we will see a rebound when they begin paring back, but so far no such luck. Expect Gold to sink even lower.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners rebounded somewhat, but remain below resistance at the earlier September low. Participation is still nil. We'll need to see some (any) improvement to the under the hood indicators before we consider this group 'investable'.
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 rallied today, but made no real headway. The RSI and PMO responded though. The RSI ticked back up in oversold territory and the PMO decelerated its decline. Stochastics aren't looking great yet. The puncture of the lower Bollinger Band for volatility yesterday did give us an expected follow-through rally. It remains oversold on our inverted scale so more upside is certainly possible.
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds continue to sink as yields skyrocket. We don't see any relief in sight, nor do the RSI, PMO and Stochastics which are all configured negatively. Look for a continued decline in Bonds.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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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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