Light Crude Oil - Continuous Contract ($WTIC) had a "Death Cross" of the 50/200-day EMAs. That triggers a LT Trend Model SELL signal. Did you know that there is a "volatility index" for Crude Oil? We haven't trotted it out in recent memory, but it showed an interesting reading today that we thought we would address. Here's a refresh on volatility.
Volatility is measured as the expected change in the price of an instrument in either direction. For example, if oil volatility is 15% and current oil prices are $100, it means that within the next year traders expect oil prices to change by 15% (either reach $85 or $115). *
*From Investopedia.com link
US Oil Fund ETF (USO) looks different from the $WTIC chart as it tracks the movement of WTI Crude Oil by purchasing NYMEX crude oil futures.
Examining the chart, we see that the OVX on our inverted scale popped above the upper Bollinger Band today. When we see this type of activity on the VIX, we expect to see a very short-term top in price. However, we can't make too much of this. Note that it isn't as overbought as we've seen it previously. Still, this level has tended to result in lower prices in the short term.
The PMO and Stochastics are improving on this third day of rally, but the RSI is negative. We don't expect a deep decline, but we could see a very short-term top.
The DecisionPoint Alert Weekly Wrap presents an end-of-week assessment of the trend and condition of the Stock Market, the U.S. Dollar, Gold, Crude Oil, and Bonds. The DecisionPoint Alert daily report (Monday through Thursday) is abbreviated and gives updates on the Weekly Wrap assessments.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
MAJOR MARKET INDEXES
Each S&P 500 Index component stock is assigned to one of 11 major sectors. This is a snapshot of the Intermediate-Term (Silver Cross) and Long-Term (Golden Cross) Trend Model signal status for those sectors.
RRG® Charts ($ONE Benchmark):
We see bullish northeast headings popping up and if not northeast, they are traveling northward from the Lagging quadrant. If this rally continues, we would expect to see nearly all of these sectors reach the Improving quadrant (not visible).
XLE was on a fast train to the Lagging quadrant, but that is changing as it begins to curl back toward the Leading quadrant. XLU took a brief dip into Lagging, but continues to move quickly toward Leading.
XLV has turned southwest and is the only sector headed toward the Lagging quadrant. All others should hit the Leading quadrant to join residents XLP and XLU. We do see some deterioration of heading on XLC and XLRE which could actually end up in the Lagging quadrant.
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 short-term declining trendline has now been broken. This is coming after a near perfect bounce off the short-term rising bottoms trendline. Today's rally pushed price above both the 20/50-day EMAs, basically erasing the "Dark Cross" we reported last week.
The PMO is now rising and the RSI has moved into positive territory above net neutral (50). Stochastics are strongly rising.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Highs are starting to pick up slightly. The positive divergence on New Lows was prescient.
Climax* Analysis: As happened on Friday, today we had unanimous climaxes, albeit more subdued, and we have another upside exhaustion climax. SPX Total Volume was adequate, though not climactic. The VIX is now back below its moving average on our inverted scale which suggests internal weakness as well.
*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.
While it is bullish to see the STOs moving upward with gusto, it has put them in overbought territory. %Stocks readings are also overbought.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM/ITVM are rising in concert now suggesting we will see more follow-through.
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 clearly Bullish. %Stocks > 20/50-day EMAs are rising quickly.
The intermediate-term bias is Bullish. The %Stocks > 20/50-day EMAs is much higher than the SCI. Additionally, the SCI is rising again.
The long-term bias is Neutral to Bullish. The GCI is at a very low reading, but it has begun to rise again. We also see more stocks above their 50/200-day EMAs suggesting it will continue rising.
CONCLUSION: The indicators are in agreement that we are in a bear market rally. However, short-term indicators are overbought and we did see a second upside exhaustion climax. The overbought short-term indicators and this exhaustion climax do suggest we will see a pause in the action or a possible drop this week. Longer-term, we still believe we are in a bear market so keep your bullish expectations tempered.
Erin is 30% exposed to the market.
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Bitcoin is continuing the rally and could actually see $25,000. Indicators are very positive and are not overbought. Stochastics are above 80 which is good as we want to them oscillate above this level to signify internal strength.
Rates continue to march skyward with little relief in sight.
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 remains in a strong rising trend channel and are staying above support at the late June top. The RSI is positive and not overbought. The PMO is rising and is also not overbought. Stochastics have been oscillating above 80 for some time indicating internal price strength. As with all rates, we expect to see new 52-week highs.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP lost support on Friday at the July high and today continued to break down, moving it below the 20-day EMA. If nothing else, we expect it to test the rising trend. It could find support at the 50-day EMA and late July tops, but given the PMO is nearing a crossover SELL signal and Stochastics are dropping, it won't likely hold.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: GLD formed another bearish black filled candlestick. It formed just under the 20-day EMA which means that resistance at the 20-day EMA held strong given price was pulled back from the intraday high above the 20-day EMA.
GOLD Daily Chart: While indicators are improving, they aren't particularly convincing right now. However, we do see a possible bullish double-bottom in the making.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners have reversed and with Gold rising and the market rising, they are taking full advantage. Participation of stocks above their 20/50-day EMAs has improved quickly and we saw a new PMO crossover BUY signal. The short-term declining trend is being broken and that is confirming a bullish falling wedge. Overhead resistance is arriving quickly, but we believe it won't be a problem.
(Full Disclosure: Erin owns GDX.)
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 is rallying, but we are going to temper expectations for a few reasons. First is the chart we opened with showing the $OVX soaring through its upper Bollinger Band on our inverted scale. Second, we have a bearish filled black candlestick. Third, the RSI is still negative and the PMO isn't moving higher with much enthusiasm.
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: In today's DecisionPoint Trading Room, Carl noted that TLT is managed to hold support despite the downward pressure being applied by yields. However, he did agree that the indicators are looking very suspect. Support isn't likely to hold much longer if rates continue their march 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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