Today the 20-day EMA crossed down through the 50-day EMA, below the 200-day EMA (Dark Cross), for the Dow Industrials (DIA) and Nasdaq Composite (ONEQ), resulting in IT Trend Model SELL signals. We may be experiencing the beginning of a good rally, but prices will need to get above the 50-day EMA for them to have a chance of erasing today's signals.
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: We're using $ONE as our benchmark.
Daily: The RRG is showing improvement after this strong rally. All of the sectors are underperforming, but now we see all but XLE curling up toward the Improving quadrant. They still have quite a bit of distance to travel, but another few days of rally should close the gap between Lagging and Improving.
Weekly: The intermediate-term picture is more encouraging with the majority of sectors heading back toward the Leading quadrant. We do detect weakness for Healthcare (XLV) and Staples (XLP) in particular given they have switched into bearish southwest headings, moving toward the Lagging quadrant. Additionally, XLRE is losing steam given the southerly addition 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: Despite a rally continuation, the SPY also saw a "Dark Cross" SELL signal in the intermediate term. It doesn't have that far to go before it gets back above the 50-day EMA so the signal could turn back into an IT Trend Model BUY signal quite quickly. However, price still has to deal with overhead resistance at not only the 50-day EMA but also the May top and early June lows.
Indicators are improving somewhat with Stochastics and the RSI rising as well as the PMO decelerating somewhat. Still, the VIX remains beneath its moving average on our inverted scale and both Stochastics and the RSI are in negative territory. All suggest internal weakness is still there.
Here is the latest recording:
We did not record on Monday due to the holiday so here is a copy of the week before:
S&P 500 New 52-Week Highs/Lows: We saw a slight positive divergence between price lows and New Lows leading into this rally which could mean it will hang around longer.
Climax* Analysis: There was a marginal climax on SPX Net A-D Volume, but none on the rest, so we'll call this a no climax day.
*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 NEUTRAL.
STOs contracted back into neutral territory quickly. Nearly half of the SPX have rising momentum which could fuel the rally higher.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The ITBM and ITVM were unchanged today. When/if they turn up convincingly, that would indicate a longer lasting rally ahead; but, we're not quite there yet. We have an anemic number of PMO BUY signals right now.
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 bias is still BEARISH in all three timeframes.
We would remark that the intermediate-term bias is seeing some improvement given the SCI is reversing, but we need to see more stocks above their 50-day EMA.
The long-term bias is also improving as we see more stocks above their 200-day EMA and the percentage is higher than the GCI percentage.
When we see more stocks above their 20/50-day EMAs (more in the 70% range), the short-term bias will move to bullish.
CONCLUSION: The rally continues and it is broad, including nearly every sector except Energy. We will assume yesterday's upside initiation climax is still in effect. Despite new "Dark Crosses", we do see opportunity, as in the case of the SPY, price could reverse those crosses into BUY signals quickly. We are still patiently awaiting the ITBM/ITVM to reverse upward in a meaningful way as they have been bellwethers for rally continuations during this bear market. In the meantime, watch any hedges closely or tighten stops. If this gets going, you don't want to be caught flatfooted.
Erin is 15% exposed, but has tightened her stops on her hedges. She is eyeing an ETF for an add (DP Diamonds subscribers have been notified of her selection).
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Yesterday's comments still apply:
"We have a new bullish falling wedge annotated now that we have the top. The pattern implies an upside breakout ahead, but we know how the last wedge resolved... with a "drift" out of it and then more downside. We have to admit that the PMO is starting to turn up, but Stochastics and the RSI need more help."
Interest rates are in the process of breaking above resistance at the June highs. We don't see 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
Yesterday's comments still apply:
"We have reannotated the trendlines on $TNX. We had a bearish rising wedge, but price broke through the top and formed two new tops that we can use. This sets up a rising trend channel. The indicators are all very strong with a positive RSI, rising PMO and Stochastics oscillating above 80. It is at the top of the rising trend channel, so we could see a slight pullback to test the bottom of the channel."
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP formed a giant bearish engulfing candlestick yesterday and now today we have a bearish filled black candlestick. We've annotated a rising wedge formation which suggests the Dollar will at least move to test the bottom of the wedge. We expect a small pullback, but not likely that deep.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Yesterday's bullish engulfing candlestick did not result in higher prices today. We have a higher low, but unfortunately we also have a lower high. This could be another reverse flag in the short term. Given Stochastics are turning back down, the RSI is negative and Stochastics are topping in negative territory, there is a high likelihood this support level on Gold will not hold up.
GOLD Daily Chart: On the bright side, the Dollar appears under pressure so a breakdown could at least be delayed. Discounts are very high and that could also help Gold from breaking down as bearish sentiment is bullish for price.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners didn't move much likely due to Gold's decline. Like Gold, we could be looking at another reverse flag in the short term. However, in GDX's case, the PMO is nearing a crossover BUY signal and Stochastics are rising nicely. Participation in the very short term is firming up as more of these stocks move above their 20-day EMAs.
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 stopped the bleeding, but formed a bearish filled black candlestick. Indicators aren't looking healthy so we do expect Oil to at least consolidate if not break down further.
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT is clinging to support right now. Indicators aren't bullish and now they are turning back down. TLT will be fortunate if it stays above this support level. We are looking for a breakout in yields and further decline for Bonds overall.
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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