Today the S&P 500 20-day EMA crossed back up through the 50-day EMA (Silver Cross), generating a new IT Trend Model BUY signal. Yes, the previous SELL signal only lasted one day. That is a huge improvement over the past two times we had a "Dark Cross" in January and April. Those signals portended deep bear market declines.
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
For the Week:
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.
For the Week:
RRG® Daily Chart ($ONE Benchmark):
The short-term RRG is beginning to show signs of life. All but XLE are headed toward the Improving quadrant. Just keep in mind that overall, all of the sectors are still underperforming and in the Lagging quadrant.
RRG® Weekly Chart ($ONE Benchmark):
The intermediate-term RRG is showing marked improvement. All of the sectors are headed to the Leading quadrant to join a very bullish XLU. Two sectors are showing a slip. XLV is headed toward the Lagging quadrant and XLRE is beginning to move in a more southerly direction which could prevent it from reaching the Leading 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 SPY is on the cusp of something great. It has broken and closed above the 20/50-day EMAs and erased the prior day's "Dark Cross" (IT Trend Model SELL Signal). We now have an IT Trend Model "Silver Cross" BUY signal. Of course, should price drop below the 20/50-day EMAs, we could get another whipsaw signal. At this point price needs to break out of the short-term declining trend to signal more follow-through.
Indicators have shifted positively with the RSI back in positive territory, the PMO rising and Stochastics rising much more strongly than before. The VIX also closed above its moving average on our inverted scale which is bullish in the short term as well.
SPY Weekly Chart: Price closed above the 17-week EMA and the weekly PMO has bottomed above the signal line which is bullish for the intermediate term. The weekly RSI is still below net neutral (50).
New 52-Week Highs/Lows: The very short-term positive divergence formed early this week and signaled that we could get a price bottom. This indicator is underrated.
Climax Analysis: Following Wednesday's upside initiation climax, today strong and unanimous climaxes gave us an upside exhaustion climax. SPX Total Volume contracted and, thus, did not confirm.
*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 NEUTRAL.
STOs are now in positive territory and are not overbought. 75% of the SPY now have rising momentum suggesting we should see follow-through on the current rally.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERSOLD.
The IT indicators finally bottomed. We've been waiting for this to confirm the likelihood of this being a longer lasting 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.
The following table summarizes participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation.
Despite a reversal this week, we saw lots of negative movement on Silver Crosses.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of participation.
The only group with a negative IT Bias is Consumer Staples (XLP). The sector has been deteriorating under the surface as it is underperforming the SPY right now, even with its own rally.
The bias has shifted quite a bit from the week before.
The short-term bias is now BULLISH. We have bullish readings on %Stocks > 20/50-day EMAs. With more above their 20-day EMAs than 50-day EMAs, we know that more Silver Crosses should begin to appear.
The intermediate-term bias is BULLISH as well. The SCI has turned up and with the short-term bias being bullish, it should continue to see improvement.
The long-term bias is BULLISH. There is a far higher percentage of stocks above their 50/200-day EMAs than the GCI percentage.
CONCLUSION: The bias is basically bullish in all three timeframes. Indicators are rising and bullish as well. The only sticking point would be the upside exhaustion climax. This climax doesn't necessarily mean we will see a major or longer-term top. More than likely it will result in a pause. However, we do have to temper our expectations given we are in a bear market.
Calendar: Next week is options expiration. It is an end-of-quarter expiration, so we should expect very high volume on Friday, as well as lower volatility toward the end of the week.
Erin is 30% exposed with one hedge.
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Bitcoin finally burst out of a falling wedge. The last wedge resolved with a "drift" sideways. This is far more encouraging. Indicators have reversed and price is about to cross above the 50-day EMA. The RSI is now in positive territory and the PMO is nearing a crossover BUY signal. Stochastics are still in negative territory but are rising nicely. We would expect Bitcoin to see follow-through on the rally.
This chart is to show where some of the support/resistance lines come from.
Interest rates are nearing breakouts or have had breakouts. With the Fed signaling rate increases indefinitely, we believe this rising trend will 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
$TNX formed a rising trend channel this week, canceling out the bearish rising wedge. This is very bullish. The RSI is positive and the PMO is rising and not at all overbought. Stochastics are oscillating above 80. This is another piece of evidence that rates should continue to increase.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount. As buying power shrinks, home prices will come under pressure.
This week the 30-Year Fixed Rate rose from 5.66 to 5.89.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar began to soften this week. The RSI is still positive, but the PMO and Stochastics have topped and are not encouraging.
Price weakness is overlayed by a bearish rising wedge which is suggests price will break below the intermediate-term rising trend.
UUP Weekly Chart: After breaking out last week, we are seeing a textbook pullback to the breakout point. The weekly PMO is flattening and is extremely overbought. The weekly RSI is positive and fortunately this pullback has offered it the opportunity to relieve overbought conditions.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GOLD Daily Chart: The Dollar's demise gives Gold a "golden opportunity". GLD managed to hold support at the July low and has now formed a tiny bullish ascending triangle. This implies a breakout above resistance $160.
Indicators are starting to see some improvement but are still relatively bearish. The RSI is negative, but rising. The PMO is flat but rising very slightly. Stochastics are rising, but are still in negative territory. Discounts have been very high, meaning investors are still quite bearish on Gold. However, that condition is changing as they began to shrink this week.
GOLD Weekly Chart: If Gold were going to rebound, this was the place to do it, right on the long-term rising trend and support at 2021 lows. Indicators aren't particularly bullish right now, but we are encouraged by support being held.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are coming alive. Still zero readings on the GCI and SCI, but far more stocks are perking up given there are more stocks above their 20/50-day EMAs. Today's breakout above the 20-day EMA suggests more rally to come. With Gold looking up and the market rallying overall, they should benefit.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Despite a bearish filled black candlestick on Thursday, Crude Oil rallied strongly, recapturing support at $70. All of the indicators turned back up suggesting it should continue higher.
USO/$WTIC Weekly Chart: Just has price dropped below the 43-week EMA, it recovered and closed above. Weekly indicators are still a problem given the RSI is negative and the weekly PMO is still in decline. It's also hard to ignore that topping formation that looks like a loose head and shoulders. We can say short term has a bullish bias while the intermediate term appears to have a more bearish bias.
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT was able to cling to support this week in spite of rising rates. However, we believe this is short-lived as the RSI is negative, the PMO is trending lower and Stochastics are still well-below net neutral (50).
TLT Weekly Chart: This isn't the last support level left. Price is actually sitting on top of a support zone between $105 and $108. Weekly indicators are negative. The weekly PMO is nearing a crossover SELL signal and the weekly RSI is very negative. We expect price to at least test $105.
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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