This is probably the most colorful chart in our arsenal. It is a yield array with every interest rate time horizon. We could've written about the declining trend being broken about a month ago, but we also wanted to point out that long-term rates are now entering 1970's territory. The declining trend began in the 1990's, (for those in our age group, that doesn't sound like long ago, but for perspective, that was over 30 years ago). There is overhead resistance for long-term yields at 5%, but given the steep rising trend and the FOMC's determination to bring inflation down even if it means raising rates for another year, 5% isn't really that far away.
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)
Daily: XLE is now the only sector that isn't traveling in a bearish southwest direction. However, it isn't bullish given it is heading northwest further into the Lagging quadrant. XLY and XLV are about ready to join the party in the Lagging quadrant.
Weekly: Yesterday's comments till apply:
"The longer-term RRG suggests that the most bearish sectors are XLV and XLP which have bearish southwest headings. XLV has hit the Lagging quadrant, but XLP isn't far behind.
As with the daily RRG, XLRE is looking particularly bearish as it makes its way toward the Lagging quadrant. All others with the exception of XLK and XLC should hit the Leading quadrant eventually; although a longer-term market decline would change everything."
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: Price broke down out of the bullish falling wedge. A bearish conclusion to a bearish chart pattern is especially bearish. The PMO is in decline and isn't oversold yet. The RSI is negative and also not oversold (less than 30 is oversold).
The VIX continues to oscillate below its moving average on our inverted scale implying internal weakness.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: Yesterday's comments still apply:
"New Lows are the highest we've seen since June/July. Making the comparison, currently New Lows are NOT oversold. The 10-DMA of the High-Low Differential is now accelerating lower."
Climax* Analysis: And we have yet another downside climax day, and again we must call it a downside exhaustion climax. You'll notice back in mid-June there were four consecutive downside climaxes, and that was not a happy time. SPX Total Volume is strong, confirming the 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.
We are now in oversold territory for the STOs, but they are moving lower aggressively so we wouldn't count on oversold conditions to save the market just yet.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
As with STOs, the ITBM/ITVM are reaching oversold territory. In the grand scheme, they aren't that oversold when compared to 2020, but they are beginning to compete with this years lows.
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 remains bearish in all three timeframes.
Short term: We have a very low number of stocks above their 20/50-day EMAs. While the readings did tick up today, it wasn't enough to change the short-term bias.
Intermediate term: The SCI is at a low 32.2% which in and of itself is bearish, but we also see lower percentage of stocks above their 20/50-day EMAs. This implies that the SCI won't be able to move higher. A silver cross can only be generated if the 20-day EMA moves above the 50-day EMA. EMAs will move in the direction of price so price must be above both the 20/50-day EMAs in order to create a new silver cross.
Long term: The GCI is flat and reading only 36.2%. This means that over 2/3rds of the market is in the midst of a correction or bear market.
CONCLUSION: Given the oversold STOs and ITBM/ITVM as well as all participation indicators, today's downside exhaustion climax might have a chance to return a bit of rally. What could thwart that is sentiment. The VIX simply isn't that oversold. Readings didn't even puncture the lower Band on our inverted scale today. Be on the lookout for a small rally, but prepare for more decline to follow.
Erin is 15% exposed to the market including a 5% hedge.
Key Earnings Tomorrow: AngloGold Ashanti (AU).
Click HERE for a complete Earnings list from Zacks.com.
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Yesterday's comments still apply:
"Bitcoin continues to push against support at about $18,000. The OBV is actually showing a positive divergence with price lows which suggests a possible rally off this support level. However indicators don't see it the same way. There is a new PMO SELL signal accompanied by a negative RSI and falling Stochastics."
Rates are breaking out to new multi-year highs. Given the FOMC's steps to curb inflation with raising the Fed Funds Rate, the rest seem to be following suit. We expect a rising rate environment to continue.
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
Huge move for $TNX today. It has busted out of the bearish rising wedge. A bullish conclusion to a bearish chart pattern is especially bullish. We'll likely annotate a new rising trend channel soon. Indicators are strong, although the RSI is overbought. We expect yields to move much higher.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Yesterday's comments still apply:
"The Dollar rose and nearly busted out of the top of a bearish rising wedge. As we've remarked already, a bullish conclusion to a bearish chart pattern is especially bullish. The PMO is now rising and putting margin between it and the signal line. Stochastics are on the rise and are above 80. The Dollar is looking far more bullish today than even yesterday."
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: GLD was down slightly, but you'll see on the next chart that $GOLD was up slightly. Overall we like that GLD is holding support, but we would really like a sign out of the RSI or PMO or even Stochastics that would imply more upside.
GOLD Daily Chart: Discounts are at record highs, but that bearish sentiment has yet to kickstart a rally. We still expect Gold to revive here, but the strong Dollar is certainly putting major downside pressure on it. We believe it is a positive that Gold has been able to hold support despite the recent rally for the Dollar.
GOLD MINERS Golden and Silver Cross Indexes: GDX basically took back all of yesterday's gain so the chart hasn't changed much so yesterday's comments apply:
"We still believe that we will see a bounce off this support level, but participation really needs to perk up. Still we like the OBV confirmation (almost a positive divergence, but technically price bottoms are rising slightly). The PMO is on a BUY signal."
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Yesterday's big bearish engulfing candlestick was followed by a bearish filled black candlestick. Indicators are less than savory, but they aren't that bearish either. Sentiment suggests internal strength is there, maybe that strength is simply preventing a big decline.
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT is of course at the mercy of the 20-year yield and given its rally today, TLT dropped like a rock. The PMO has now topped below the signal line which is especially bearish. We will likely see prices drop even lower.
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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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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