The market ultimately didn't do much today. Notice how price began forming a trading range. The range was expanded based on gap support and the price decline in the morning. Price did overcome resistance at yesterday's highs. It rolled over to finish the day, basically discounting the breakout. In the process, the 5-minute RSI moved into negative territory and the 5-minute PMO triggered a crossover SELL signal. This could mean a decline to start trading tomorrow.
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)
Daily: More improvement on the short-term RRG. Instead of only XLK in the Improving quadrant, it is now joined by XLC, XLI, XLB and XLV. XLV could actually find itself in the Leading quadrant (not shown) if it can continue with its rally.
XLU and XLY still have westward components to their headings, but the improvement is good as they hook back around toward Improving.
XLE, XLRE, XLF and XLP all have bullish northeast headings, but have some ground to cover to reach Improving. Although we saw how quickly XLC, XLI and XLB moved to that quadrant, so it is entirely possible they will reach it before the end of the week.
Weekly: The weekly RRG is still reflecting internal weakness in the market. All sectors with the exception of XLE have strong bearish southwest headings. XLE is moving further into the Leading quadrant as Energy industry groups begin to surge.
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: It didn't look good this morning, but ultimately the SPY finished with a bullish hollow red candlestick. The rally of the last two days was strong and a pause was needed.
The RSI paused as well given we didn't see a large change between yesterday's close and today's. The PMO looks very good as it rises out of oversold territory. Stochastics are rising quickly. Total Volume did pull back today, but is still above the annual average. The VIX remains beneath its moving average on our inverted scale, so internal weakness hasn't subsided just yet.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Lows expanded today, but are still manageable. New Highs are still negligible, but given the bear market beatdown, we probably won't for little while longer.
Climax* Analysis: There were no climaxes today. Yesterday's upside exhaustion climax was followed by the market treading water today. Considering the huge advances the first two days of this week, this pause seems premature by at least a day. If the market continues to churn for a few more days, that would be positive and probably result in another few days of rally afterward. We would not look favorably upon a continued pullback.
*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.
Both the STO-B and STO-V ticked down today. Not a good thing. Fortunately, we didn't lose too many rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is EXTREMELY OVERSOLD.
The ITBM/ITVM continue to rise. We also saw more, not less, PMO BUY 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 comments still apply:
"The short-term bias is now bullish. We have a large number of stocks above their 20/50-day EMAs and those percentages are far higher than the SCI.
The intermediate-term bias is still bearish. The SCI may've turned up but the percentage is still bearishly low.
The long-term bias is bearish. The GCI continues lower. Given %Stocks > 200-day EMA is less than the GCI percentage, we can't expect the GCI to bottom in a meaningful way."
CONCLUSION: We aren't surprised that the market took a day off after the rallies on Monday and Tuesday. What does concern us is the possibility of a pullback given the STOs reversed lower today. Participation didn't see much if any damage, but we may see churn before the rally continues. Tomorrow will provide us with critical information: Will support hold? (We believe so.) Will STOs turn back up? (Probably not right away.) Will the IT indicators continue to rise? (Highly likely.) The majority of our indicators are still quite bullish suggesting to us that this was a pause rather than the beginning of a longer-term decline.
Erin is 15% exposed, but looking to expand to 30% if we don't see a market pullback.
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Resistance at $20,500 and the 50-day EMA held strong today. We do see a rising PMO and cup-shaped reversal that is encouraging. Stochastics are rising nicely and have moved above 80. Not thrilled with the RSI topping, but it would have to after a 1.44% decline.
Yesterday's comments still apply:
"A lot is being made on the business shows about yields pulling back. Yields got a little ahead of themselves momentarily, but we don't expect the pullback to last long. The 10-Year Bond Yield chart (just below the next one) shows that the excess has been relieved, and solid horizontal support is just ahead."
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 looks very bullish. It resolved the parabolic advance, hit the rising trend line and 20-day EMA and promptly bounced higher. This really looks like a bull flag. The PMO is still holding its BUY signal and if we see follow-through, it will bottom above the signal line. Stochastics are not yet confirming so today's gap up could turn into a reverse island.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar rallied but formed a bearish filled black candlestick. The bright spots would be a positive RSI and the bounce off the rising trend as well as a move back above the 20-day EMA. Not so positive, the declining trend hasn't really been broken. The PMO is on a new overbought crossover SELL signal and Stochastics continue lower. We don't expect a solid rally just yet.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: With the Dollar rallying, Gold wasn't able to continue its rally. The rising trend hasn't been broken and the indicators are still quite bullish: positive RSI, PMO on an oversold BUY signal and Stochastics above 80.
GOLD Daily Chart: Discounts stagnated after falling from historic highs. We are still looking at Gold favorably.
GOLD MINERS Golden and Silver Cross Indexes: Given the market's decline and Gold's pullback, Gold Miners struggled today. On the bright side, they closed at the top of their trading range today and formed a long tail on the OHLC bar. Typically that means higher prices. Participation is still very strong. This still is an interesting group to consider pulling from.
(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: USO rallied strongly again today. Resistance at both the 50/200-day EMAs was overcome. This is fulfilling the bullish falling wedge we identified earlier. The indicators look great with a positive RSI, PMO rising on an oversold BUY signal and Stochastics nearing 80.
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Today's pop in yields pushed TLT lower. It did form a hammer candlestick which is bullish for tomorrow. Indicators are neutral, not giving us too much information. What we expect is Bonds to move lower as we are looking for yields to begin expanding again.
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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Price Momentum Oscillator (PMO)
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