Today the Dow Industrials (DIA) and Financial Sector 20-day EMAs crossed up through the 50-day EMA generating IT Trend Model BUY signals. The Dow continues to tear along and could actually challenge resistance at $340. It does need time to digest between now and then.
XLF has been seeing outperformance overall since mid-August, but as you can see no headway was made. Outperforming a sickly index as the SPY doesn't mean you will see absolute performance. We do like the break above the 200-day EMA combined with today's IT Trend Model Silver Cross BUY signal. Participation is robust and not entirely overbought. This sector is poised to continue higher, quite possibly past resistance at the August high.
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.
CLICK HERE for Carl's annotated Sector charts.
THE MARKET (S&P 500)
IT Trend Model: SELL as of 9/8/2022
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: The bearish rising wedge is still dominating the short term and price stuck below resistance at $390.
The RSI, PMO and Stochastics are all very positive. However, with that bearish pattern hanging over the short term, we do need to exercise some caution.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: Although New Highs pulled back, we still saw an impressive amount given today's decline. The 10-DMA of the High-Low Differential is looking a bit shaky, but is in positive territory and rising.
Climax* Analysis: Only SPX Net A-D Volume reached climax levels today, so today will not count as a climax day.
*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 OVERBOUGHT.
STOs pulled back today but remain overbought. These indicators need some relief. We would expect something similar to the last bear market rally with late July early August reading being overbought, but finding relief on consolidation or small declines.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL to OVERBOUGHT.
We really like the look of the ITBM/ITVM. They've reached positive territory and are continuing to rise. This is one of the reasons we do have confidence (for now) in the current rally. 95% of the SPX are on PMO crossover BUY signals. That is plenty of support to keep the rally pushing higher.
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 in the short term is BULLISH. We have strong participation of stocks above their key moving averages, particularly above the 20-day EMA.
The bias in the intermediate term is BULLISH. The SCI continues to rise strongly out of oversold readings.
The bias in the long term is NEUTRAL. We are waiting on the GCI to have a positive crossover its signal line before we can switch to a bullish long-term bias. Given we have more stocks above their 50/200-day EMAs v. stocks with Golden Crosses, we read it as Neutral.
CONCLUSION: Friday's upside initiation climax didn't amount to much but price did stay within the bearish rising wedge and didn't drop perilously. The STOs turned down so more churn and chop is likely. Given the upcoming Fed announcement on Wednesday, we could see very little price movement tomorrow. Investors know that we will see a 75 bps hike, the big question is whether they will hint at slowing things down in December. I was reminded by my colleague, Mary Ellen McGonagle, that the last two bear market rallies were stunted on prior rate hikes. However, our bullish IT indicators and bullish short/intermediate-term biases suggest this rally isn't over yet.
Erin is 55% exposed.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact email@example.com for more information!
Bitcoin continues to digest last week's breakout. Indicators are bullish, although not fiercely. The PMO is relatively flat and the RSI is positive, but falling. Stochastics remain above 80, but have ticked lower. We expect more consolidation along $20,000.
Interest rates have reversed higher with the one-year yield nearing multi-year highs again.
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
It appears that $TNX will bounce off this multi-layered support level based on the RSI. Stochastics did tick up, but not convincingly. The PMO is the biggest issue as it continues lower. Given the Fed will raise rates again this week, we believe the rest will follow suit.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is now in the process of forming a bearish descending triangle (flat bottoms, declining tops). Indicators are switching gears and moving bullish. The RSI is positive now and Stochastics are rising. The PMO is still not on board, but it is decelerating. We expect the Dollar will test the declining trend shortly.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: As the Dollar recovers, Gold is dying on the vine. Indicators are very negative with the RSI falling below net neutral (50), the PMO nearing a crossover SELL signal and declining Stochastics which topped beneath net neutral (50).
GOLD Daily Chart: Discounts are still at historic levels. We did see some short-lived rallies off prior deep discounts. Support will arrive soon at the September/October lows. Given the negative indicators, a breakdown seems inevitable. The Dollar isn't cooperating either.
GOLD MINERS Golden and Silver Cross Indexes: Participation is thinning again as far as stocks > 20/50-day EMAs, but the SCI is accelerating higher. Price is actually sitting on the 20-day EMA. Entry here would be high risk, if you own it, a tight stop would be an excellent idea.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Crude Oil was down again, but it continues to hang tight above the moving averages. Indicators are breaking down. The $OVX is above its moving average on the inverted scale which implies internal strength. We wouldn't be surprised if USO took off after the election. Up until then we expect to see more sideways churn and chop.
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT didn't test overhead resistance at the 20-day EMA and it didn't 'touch' the declining tops trendline. Typically a failure to reach resistance leads to even lower prices. There is one bullish possibility out there in the short term, price is forming a bull flag and it is coming alongside a new PMO crossover BUY signal and positive Stochastics. Still, we don't hold out much hope for TLT, particularly in the intermediate to long terms.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
(c) Copyright 2022 DecisionPoint.com
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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.