The Dow was up today because it doesn't have as many tech stocks as the SPX, and its components are arithmetically weighted, which gives the most weight to the stocks with the highest price. The cap-weighted S&P 500 struggled because it has a lot of cap-weighted mega-tech stocks, which again had a terrible day -- META was down -24.56% on a bad earnings report. META has declined -75% from its September 2021 all-time high. Ouch!
With these horrible looking charts, you would expect the entire market would look the terrible too. Not so. This tells us there is plenty of strength out there and you don't really have to look too hard. Interesting areas to consider are Biotechs and Renewable Energy. Energy itself looks very bullish as well.
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: Yesterday's shooting star candlestick fulfilled its promise of lower prices today. Now we have a bearish engulfing candlestick that suggests trouble ahead for another day. The market was in need of a pause and that is likely what we are experiencing right now. Had those big tech stocks participated today, we would have an entirely different landscape.
Despite two days of decline, indicators are holding up well with the RSI staying above net neutral (50) and the PMO rising. Stochastics did tip over but they are comfortably sitting above 80 suggesting internal strength.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: Again the market closed lower but we saw an expansion in New Highs. Sure we had some New Lows, but they are still manageable. The 10-DMA of the High-Low Differential is now in positive territory and rising. More signs of internal strength.
Climax* Analysis: There were no climax readings today.
*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.
Even with a second day of decline, STOs rose. They sadly are now in overbought territory. With internal strength still visible and 3/4ths of the SPX with rising momentum, this shouldn't lead to a dastardly decline. These indicators could easily unwind with more consolidation.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
We now have 94% of the SPX on PMO BUY signals. That is a great foundation to keep price from dropping too quickly. The ITVM is now back in positive territory.
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 bullish. We're seeing an expansion in participation of Stocks > 20/50-day EMAs and those readings are much higher than the SCI.
The intermediate-term bias is bullish. The SCI is rising strongly after a positive crossover. While the reading itself isn't above 50 or 60%, we still see the swift movement higher as bullish.
The long-term bias is getting bullish. The GCI began rising again today and we have far higher percentages of stocks above both the 50/200-day EMAs compared to the GCI reading of 23.8%.
CONCLUSION: Once again the market essentially held strong with a small decline while mega-cap techs failed miserably. Imagine what this bear market rally would look like had these big guys performed even mediocrely. There are plenty of areas of strength in this market; enough in our opinion to keep this bear market rally alive. With short-term indicators getting very overbought, we do see more consolidation and churn ahead. Our STOs need to have an opportunity to relieve extremely overbought conditions. We are looking for a "melt up" as part of the churn and still believe this rally will resume.
Apple (AAPL) beat estimates and after being down somewhat in after hours trading, it is now up +0.38%. Apple is a bellwether and a positive move tomorrow would likely get things moving again to the upside for the major indexes.
Erin is 55% exposed.
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Today saw a textbook pullback to the breakout point for Bitcoin. The PMO is now above zero, but is moving mostly sideways for now. The RSI remains comfortably within positive territory above net neutral (50) and Stochastics are rising and now above 80. We could see it revert back into the prior trading range, but the stage is set for it to move higher.
Yields continue to pullback and are moving out of their rising trends somewhat. It was time for them to correct, but we don't see this as the final top.
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 losing support. It closed beneath the 20-day EMA. We could be looking at another leg up as we saw earlier in the month, but indicators are far more negative than last time. The RSI is falling out of the sky (although it is still in positive territory), the PMO triggered and SELL signal and is accelerating lower and Stochastics have dipped well below the prior October low. This time looks different so we are looking for a move down to 3.5%.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP decided it didn't want to decline after all. We see this as a pause and digestion of the strong decline from earlier this week. We continue to expect to see the Dollar pull back and test the intermediate-term rising bottoms trendline.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Gold got hung up by the Dollar's rally today. The good news is that it only declined -0.15% for GLD and -0.22% for $GOLD. With the Dollar rallying +0.78%, this tells us that there were more buyers out there as that prevented Gold from finishing -0.78% given a perfect reverse correlation. The bullish double-bottom is still intact and price closed above the 20-day EMA.
GOLD Daily Chart: The Bollinger Bands on $GVZ are slowly widening. Since they are doing so on a rally, the volatility is on Gold's side for now. Discounts remain historically high. Before the last rally at the end of September and the beginning of the current rally, you'll note discounts were at similar levels.
GOLD MINERS Golden and Silver Cross Indexes: GDX pulled back, likely not helped by the decline in Gold and the market. We still like this industry group. The RSI is still positive and the PMO is about to enter positive territory. Participation remains very strong. The SCI paused today, likely due to some stocks losing support at their 20/50-day EMAs.
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 has formed a bullish reverse head and shoulder. It's a little wonky as the neckline is rising, but if it should penetrate the neckline, the pattern will be confirmed and the upside target would put price around $87.00. The pattern should execute given the strong indicators. The RSI is positive and rising. The PMO is on a BUY signal and just moved above the zero line and Stochastics are now above net neutral (50). The Energy sector is already enjoying a strong bullish bias. This will only help.
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday's comments still apply:
"The fall in yields has sparked some bullish activity in Bonds. The 20-day EMA and declining tops trendline will likely be the sticking point, but if yields do break rising trends, we might finally see some relief for Bonds. TLT is looking up with a rising RSI, PMO and Stochastics. Still, we think upside potential is fairly limited with a likely reversal at $100 ahead."
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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