Today the Real Estate Sector 20-day EMA crossed down through the 50-day EMA (Dark Cross), resulting in an IT Trend Model SELL signal. Strictly speaking, the 20-day EMA and 50-day EMA have the same reading, but price is below both moving averages, which guarantees that the cross will be complete on the next trading day -- unless XLRE moves above those two moving averages. (Not going to happen.)
Also today, the NYSE Composite 20-day EMA crossed down through the 50-day EMA, generating an IT Trend Model SELL signal. This was the first of the major market indexes we follow that changed from BUY to SELL, but the others are not far behind. It's important to note that price close beneath support. The double-bottom from June/July executed as expected and reached its minimum upside target. However, that was the end of that.
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
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 ($ONE Benchmark):
Ugly RRG. It basically tells us what we already know. There is no place to hide out. Every single sector has a bearish heading, with the exception of XLC and XLI which are trying to turn northward. Those small improvements are not enough to start engaging in trading.
RRG® Weekly Chart ($ONE Benchmark):
The weekly RRG is deteriorating very slowly. All of the sectors were enjoying bullish northeast headings, but they are deteriorating with XLY, XLK, XLC, XLV and XLRE showing moves southward. XLU is in Leading and has performed better than the others, but again, we don't feel any sector is safe right now.
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: We have a small descending wedge formation, which we normally expect to resolve upward. That happened at the open, but the jobs report injected concerns of continued hawkish Fed, and the bottom kinda fell out. In addition, we now have a big bearish engulfing candlestick that suggests lower prices on Tuesday.
The short-term rising trend is still intact, but likely not for long given the negative PMO, RSI and flat Stochastics. Additionally, the VIX remains beneath its moving average on our inverted scale and that implies internal weakness.
SPY Weekly Chart: We got the breakout from the falling wedge, but it failed spectacularly when it arrived at the intermediate-term declining trendline. The weekly PMO has not topped. If you look at the pattern now, it is back to a "bugle" shaped broadening pattern which is very bearish.
SPY Monthly Chart: We cannot emphasize enough how significant (bearish) the monthly PMO overbought top and downside signal line crossover are. On this chart there are three of these events. Two marked major declines, and one coincides with a one-year consolidation.
Historically, the most recent monthly PMO top is the sixth highest. It is not easy to discern (particularly with the log scale), but previous monthly PMO tops with downside signal line crossover (marked with vertical red dotted lines) are usually accompanied by major declines.
New 52-Week Highs/Lows: With the rollercoaster day, we did see a contraction in New Lows. The biggest problem on this chart is the lack of oversold readings. There are still a ton of stocks out there that will likely begin making New 52-Week Lows. The 10-DMA of the High-Low Differential is still in decline and now below the zero line. However, like New Lows, we are far from oversold territory.
Climax Analysis: All indicators except the NYSE DOWN/UP Volume Ratio had climax readings today. Unfortunately, SPX Total Volume was light and did not reflect climactic selling, making it less likely that a bounce is at hand.
*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're finally seeing some oversold readings on the STOs. The June low saw deeper readings. We will be watching closely for positive divergences that might hint at a reversal. For now, the decline in the STOs is bearish for the short term. We're now down to only 2% of the SPX with rising momentum, that equates to 10 stocks. That's a heavy burden for those stocks to lead a market rally. The good news is that the longer these oversold conditions continue, the sooner we can look for a bottom. Right now we have further to fall.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
Significantly, the ITBM and ITVM have only declined to the neutral zone, and it is logical that they will probably continue to fall until they are oversold. That is not going to happen without continued price deterioration, so lookout below.
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.
As could be expected, the SCIs had large one-week changes downward.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of participation.
The market bias is bearish in all three timeframes. The SCI and GCI continue lower. The SCI has an anemic reading of 55.4% and the GCI has a terrible 36.8% reading. Participation of stocks above their 20/50/200-day EMAs are all lower than the SCI and GCI.
CONCLUSION: Today's quick rally failure highlights the weakness of this market. Seeing no rising momentum or participation is concerning. What really concerns us are oversold readings. That should be good, right? Oversold readings? Two problems: 1) In most cases the indicators are not THAT oversold, 2) Oversold conditions in a bear market are "thin ice". The foundation is weak. We are looking for more downside. The FOMC is about as hawkish as you can get, but rising rates aren't the only thing worrying investors. The real worry is the Fed not being clear about when they will stop raising rates. Be very careful with any market exposure you have. This current decline is broad and painful.
Erin is 15% exposed with hedges.
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Bitcoin has now broken from the bullish falling wedge. But has it? This isn't a breakout, this is a "drift" sideways. Indicators are still very negative with the exception of Stochastics which are bottoming in oversold territory. We really don't see Bitcoin making a big comeback here.
This chart is to show where some of the support/resistance lines come from.
August saw rates skyrocketing back toward 52-week highs. With the Fed talking about raising rates somewhat indefinitely, we expect all of these rates to continue higher.
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 did pull back today after breaking out of the bearish rising wedge. This new top will likely change this wedge into a rising trend channel. Indicators simply aren't bearish enough to look for a big breakdown here. The RSI is positive, PMO rising and Stochastics oscillating above 80.
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 5.55 to 5.66.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar finished mostly unchanged so it is holding above prior resistance. Indicators are positive suggesting it will keep on rising.
UUP Weekly Chart: This week's breakout was significant. It puts UUP at a multi-year high. The weekly PMO has bottomed above the signal line so although the RSI and PMO are overbought, we expect the Dollar to gain even more strength.
UUP Monthly Chart: The monthly RSI is very overbought. The last time this happened in 2015 the Dollar went into a wide trading range. However, this breakout is very significant and likely we will see more follow-through.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GOLD Daily Chart: The Dollar was up +0.03%, but GLD was up +0.88%. This suggests we had more buyers today. It may seem strange, but we are getting bullish on Gold. Indicators are turning back up and price is bouncing off significant support.
Discounts expanded to very oversold levels. This extreme bearishness could finally help Gold recover. If this becomes the new safe haven (which believe it will eventually be), we could see much higher prices. Right now we'll say we're optimistic this will turn into a new leg up.
GOLD Weekly Chart: The weekly chart isn't particularly encouraging. Price is holding the long-term rising trend and support at 2021 lows. Unfortunately the weekly indicators are very bearish. While sentiment is elevated as noted above, we do see discounts have been much higher.
GOLD Monthly Chart: The big problem on the monthly chart is the large double-top. As long as this support level holds, the pattern will eventually turn into a trading channel. The monthly RSI did pause its decline. The PMO is accelerating its decline. This is the place for Gold to turn around. If it doesn't and support is broken, it will be another casualty of the bear market.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners bounced significantly today on Gold's rally. This is one of only two industry groups with rising momentum. Granted it is only a rise of 0.01, but it's better than nothing. Participation is still nowhere to be found, but seeing the RSI, PMO and Stochastics all rise, we do see some possibilities here. We need to see some follow-through and of course, some participation!
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: We were pleased to see USO hold support and rally. Unfortunately it formed a bearish filled black candlestick as bears pulled back nearly all of today's gains. Support is still holding, but it looks shaky at best given the new PMO crossover SELL signal and falling Stochastics.
There is actually a support "zone" between $67.50 and $70.00. USO can still accommodate more decline, but a break below this current level means a drop below the 200-day EMA.
USO/$WTIC Weekly Chart: The weekly chart is weak. The weekly RSI is falling in negative territory and the weekly PMO is falling. We also don't like the topping formation.
WTIC Monthly Chart: The monthly PMO topped and is now traveling vertically lower in overbought territory. The monthly RSI remains positive, but looking at this chart, it looks more likely that WTIC will test support at $75. This is counter-intuitive to fundamentals of inflation and rising gas prices. The technicals say breakdown, public opinion and fundamentals suggest an upside reversal.
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds appeared to be forming a reverse head and shoulders; then it failed to hold support this week and instead is confirming a bearish reverse flag. We believe yields will continue higher and that reverse flag on TLT suggests we are likely correct.
TLT Weekly Chart: The weekly PMO has now turned down after its crossover BUY signal in July. Support is strong at $105/$108. We believe that will be tested.
TLT Monthly Chart: The monthly chart is very bearish, but also points out the significance of this upcoming support line at $105. A breakdown there would mean a break of the long-term rising trend. If it is broken, the next support level lies at $85.
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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