Healthcare (XLV) had just garnered a new PMO crossover BUY signal. Today the PMO turned over and triggered a SELL signal in spite of a positive finish on the day. The reading for the PMO and its signal line shows as identical (-1.07); however, the system notified us that ultimately, by thousandths of a point it has moved beneath the signal line. With margin this thin, we could very well be writing about another whipsaw back into a BUY signal.
Participation is thin but there is a slight short-term bullish bias given the percentages of stocks above their 20/50-day EMAs are higher than the SCI which is rising. The bias in the long term is still bearish so be careful if you venture into this sector.
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
SECTORS
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® Chart ($ONE Benchmark)
Daily: XLE has now popped into the Leading quadrant. In just four days it has leapt ahead in the bullish northeast direction, moving from the Lagging quadrant into the Leading quadrant.
XLRE and XLP are new residents in the Improving quadrant and both hold bullish northeast headings.
XLY is nearing the Improving quadrant, but it is still carrying a westward component to its heading which is slowing it down. XLU is still traveling too much toward the west and that is preventing it from making much headway toward the Improving quadrant.
All other sectors are within the Improving quadrant have bullish northeast headings.
Weekly: XLE is the only bullish sector. All others have bearish southwest headings. XLU is only in the Weakening quadrant, but given its swift move southwest, it will likely join most of the others in the Lagging quadrant.
XLF and XLY are the only sectors within the Improving quadrant but that is likely to change by the end of this week.
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: SELL as of 9/8/2022
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: Price is clinging to support at the September low. The June low was technically broken on the September slide. The VIX is puncturing the lower Bollinger Band again and that typically leads to a day or two of upside movement.
The PMO which recently topped very bearishly below its signal line, continues to move lower along with the RSI and Stochastics. The OBV is confirming the decline.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Lows expanded significantly today. We don't have a positive divergence available given today's reading outsized prior readings since October.
Climax* Analysis: There were no climax readings today. However, we did see high Total Volume.
*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 NEUTRAL.
STOs expanded greatly and are already moving into oversold territory. Still, we've seen them much lower. We find it favorable that over 1/3rd of the SPX have rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
Yesterday's comments still apply:
"Readings may be oversold, but both the ITBM/ITVM continue lower. %PMO BUY signals topped before even reaching 50%. A 34% reading is not oversold."
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.
We were finally seeing a bullish bias in the short term, but that has changed drastically.
While there is a higher percentage of stocks above their 20/50-day EMAs compared to the SCI, those percentages aren't really rising. We consider the short-term bias to be bearish.
The IT bias is very bearish given the SCI topped beneath its signal line and is carrying such a low percentage.
The LT bias is bearish given the GCI is falling and we are not seeing enough stocks above their 200-day EMA particularly given there are more stocks with golden crosses than above the 50/200-day EMAs. This implies it will continue to deteriorate.
CONCLUSION: Volume is increasing on the selling. This could be a sign of a market decline just getting started or a form of capitulation. Given the highly negative indicators, we vote for more downside. On the bright side, STOs and the ITBM/ITVM are now in oversold territory and the VIX punctured the lower Bollinger Band on our inverted scale. We would look for sideways consolidation/churn at best and a breakdown below support at worst. The ground is not fertile for a strong rally reversal.
Erin is 15% exposed.
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BITCOIN
Yesterday's comments still apply:
"Bitcoin hit overhead resistance last week and has been inching lower since. The short-term rising trend has been compromised. The PMO is flat and unhelpful, but both the RSI and Stochastics are negative. We would expect price to continue lower."
INTEREST RATES
Yields continue to trend 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 is about to test overhead resistance at multi-year highs. The indicators suggest a breakout is ahead. The RSI is positive, rising and not yet overbought. The PMO has bottomed above the signal line which is especially bullish. Stochastics just moved above 80 which is very bullish. We expect higher rates to continue.
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar slowed its ascent, but yesterday's comments still apply:
"The Dollar continues in its recovery after the breakdown from the parabolic rally in September. The breakdown cleared overbought conditions for the RSI which remains positive. The PMO triggered a crossover BUY signal yesterday and Stochastics are rising. The Dollar should test overhead resistance at the September top soon."
GOLD
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Gold fell yet again despite a very small rally in the Dollar. The PMO is actually holding onto its crossover BUY signal and is mostly flat. However, the RSI is negative and Stochastics are moving swiftly lower. Given $GVZ is stuck beneath its moving average on the inverted scale, internal weakness hasn't been shaken.
GOLD Daily Chart: Discounts on PHYS have pulled back, but remain at historically high levels indicating investors are still very bearish on Gold. This hasn't translated into higher prices based on extreme bearish sentiment, but it at least sets the stage for an eventual upside reversal. Indicators unfortunately suggest that an upside reversal isn't around the corner.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"The setup for Gold Miners couldn't have been better, but the rising Dollar and falling Gold has taken GDX back down. Maybe this will set up a reverse head and shoulders. It's too early to say, we need an upside price reversal now. While participation has pared back, it isn't in the basement so a good day for gold or the market should get these guys to turn back up."
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Today's pullback in Crude Oil took USO back below its 50-day EMA and broke the tenuous short-term rising trend. A reversal isn't out of the question given price is maintaining above the 20/200-day EMAs and it hasn't fallen back into the longer-term declining trend. Indicators are breaking down, but the PMO is still rising and the RSI remains in positive territory above net neutral (50). Stochastics do not look promising. We are still cautiously bullish on USO.
BONDS (TLT)
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT managed a positive close. Indicators are still pretty ugly and price wasn't able to recapture support at the September low. Volume was very high on this small rally, so we could actually see some follow-through on this move if yields cooperate.
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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