We heard discussion on how Consumer Discretionary (XLY) stocks were leading the charge, but by day's end Energy (XLE) was the clear winner. Looking at the Sector Summary (which we've moved to the top today), XLE was up more than twice as much as XLY. Notice also that Utilities (XLU) are continuing to find their way to the top of the leader board as well.
If we're going to talk about XLE, we should look at the sector "under the hood". It appears we are going to see a PMO crossover BUY signal before the week is out. Participation is excellent, the best of all sectors. Both the Silver Cross Index (SCI) and Golden Cross Index (GCI) are well above the 70% bullish threshold. We would still like to see readings of %Stocks > 20/50/200-day EMAs to move past the SCI and GCI readings. There's no denying this sector carries the relative strength currently.
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® Charts ($ONE Benchmark):
Yesterday's comments still apply:
"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."
XLP and XLV have turned southwest and are headed toward the Lagging quadrant. All others should hit the Leading quadrant to join resident XLU. XLE, XLY and XLK are getting close to the Leading quadrant. 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 rising bottoms trendline held up again today as price finished with a doji candlestick. Unfortunately that particular candlestick doesn't help us out because it is considered a neutral formation. It does tell us that bulls and bears exerted the same amount of pressure.
The RSI halted its decline but remains in negative territory below net neutral (50). The PMO is still moving lower after topping bearishly below its signal line. The VIX continues to oscillate below its moving average on our inverted scale suggesting we still have internal weakness. Stochastics topped yesterday and continue lower which is definitely bearish.
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S&P 500 New 52-Week Highs/Lows: New Lows continued to expand despite the positive close. The 10-DMA of the High-Low Differential is flat but below the zero line. It's just one more indication of how weak the market is.
Climax* Analysis: There were no climaxes 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 OVERBOUGHT.
The STOs pulled back which is a bad omen. The rally did nothing to improve the number of stocks with rising momentum. It didn't push many stocks above their 20-day EMA either.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
We had to manually compare the ITBM reading from yesterday to determine if it is rising or falling. Technically it's rising, but clearly not that convincingly. We still consider them to be neutral, since we aren't seeing a noticeable change. There was a rally, but we saw the stocks with new PMO SELL signals.
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.
Yesterday's decline did serious damage to %Stocks indicators so the bias hasn't changed from yesterday:
The short-term bias is Bearish given the steep decline in participation of %Stocks > 20/50-day EMAs sharply dropping.
The intermediate-term bias is Bearish. Not only are the %Stocks > 20/50-day EMAs lower than the SCI, the SCI has topped beneath its signal line.
The long-term bias is Bearish. The GCI is at a very low reading and we see fewer stocks above their 50/200-day EMAs. The %Stocks > 50/200-day EMAs is lower than the GCI percentage.
CONCLUSION: The market finished higher, but given today's doji candlestick, we know it was a stalemate between bulls and bears. We would consider this a pause and not likely a jumping off point. The technicals below the surface swayed to the bears with STOs topping and the loss of more PMO BUY signals. The RSI, PMO and Stochastics for the SPY still look terrible. Options expiration is coming up so we will likely see more volume tomorrow and Friday. More than likely the stalemate will continue. Consider tightening stops, particularly if your stock/ETF has a topping PMO.
Erin is 30% exposed to the market.
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Yesterday's comments still apply:
"We finally got bullish on Bitcoin given the strong breakout from the bullish falling wedge and 20/50-day EMAs. The indicators were finally rising in agreement. Well, the bottom dropped out. We now have a negative RSI, PMO top beneath the zero line and sharply declining Stochastics...all in one day. The breakdown below the 20/50-day EMAs and below the July/August bottoms. Not a good look. More decline likely ahead."
Rates continue to march skyward with little relief in sight with many yields breaking multi-year highs.
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 now testing overhead resistance at the June high. Given the rising trend channel, strong RSI, rising PMO (which isn't overbought) and Stochastics oscillating above 80, we expect to see the breakout."
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar was only slightly lower today. We have a bullish hollow red candlestick accompanied by a PMO bottom above the signal line, positive RSI and Stochastics reversing in positive territory. The picture is still bullish for the Dollar.
Given price did not have to test the bottom of the bearish rising wedge before reversing, we expect higher prices.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Gold held support today, but formed a bearish engulfing candlestick. Indicators are not healthy either. The PMO topped beneath both the signal line and zero line and continues lower. Stochastics look particularly weak given the top well beneath net neutral (50).
GOLD Daily Chart: Yesterday's comments apply:
"You'll note that we've added $GVZ. This is the volatility index for Gold. It is on an inverted log scale as we do on the $VIX. $GVZ hasn't penetrated the lower Bollinger Band yet so Gold is vulnerable for more decline."
GOLD MINERS Golden and Silver Cross Indexes: GDX held up today, but indicators are still suspect. Yesterday's big decline took most Miners below their 20/50-day EMAs. We only saw slight improvement today. Stochastics have topped. The set-up is still bullish, but with Gold struggling, it'll likely be slow going particularly if the market breaks its rising trend.
(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: The rally has resumed in Crude Oil which is giving the Energy sector a boost. The $OVX, the "VIX" of Crude Oil is very overbought so this rally is still vulnerable. Indicators are okay, but mostly flat. We would expect USO to rise to the short-term declining tops line.
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT managed a small rally. The RSI is still very negative. Stochastics are mostly flat in oversold territory. The PMO is decelerating. Overall the indicators don't support a rally that would bring price out of the declining trend channel it currently is in.
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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