While the SPY clings to support at the June lows, the QQQ lost that support this week. Most troublesome would be participation indicators that certainly suggest more downside is possible. Erin does "ETF Day" on Wednesdays for DecisionPoint Diamonds reports and the inverse QQQ ETFs made an appearance in her scan results today.
Most concerning would be the top beneath the signal line on the Silver Cross Index (SCI). Not only is it at a very low 11% (the SPX is at 14.4%, not much of an improvement), the Golden Cross Index (GCI) is falling with a low 18% reading. Based on the %Stocks > 20/50/200-day EMAs, there is more downside likely. While the readings are oversold, we can see that they were at much lower levels in September. If we grasp at straws, we do note that those percentages did tick slightly higher today despite the small decline in the index overall.
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® Chart ($ONE Benchmark)
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 technically closed below the September low, but we would still say that it is holding support for now. Total volume was very thin which could indicate a possible inflection point to the upside, but given the VIX remains so far below its moving average on our inverted scale and the QQQ dropped below this support level, we expect lower prices not higher ones.
The PMO and RSI continue lower and are negative. On the bright side, the PMO is definitely oversold. Stochastics also continue lower. We watch Stochastics closely because they are more sensitive than the PMO. Typically they will turn higher before the PMO.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Lows pared back slightly so a positive divergence could be set up if price manages to bottom here.
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 DOWN and the condition is OVERSOLD.
STOs are oversold, but we've certainly seen lower readings. Given they continue to move lower, the market is internally weak. We still have 1/3rd of the index showing rising momentum, but that number is slimming and is not oversold.
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.
The short-term bullish bias has disintegrated with the breakdown of %Stocks > 20/50-day EMAs. We would read the current short-term bias as neutral to 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: Support is barely holding at the June and September lows. With the loss of this support level on many of the major indexes, we expect the same will happen with the SPY. Investors aren't as hungry as we thought last week. STOs and the ITBM/ITVM continue lower which generally means more weakness, but we should consider that they are all oversold. One problem is that participation isn't that oversold when you look at %Stocks > 20-day EMA and particularly seeing 1/3rd of the SPX having rising PMOs. With some indicators still obstinately staying out of oversold territory, it opens up the real possibility that a more dastardly decline could be ahead.
Erin is 10% exposed with 5% hedge.
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Bitcoin broke down from its rising trend channel but is attempting to rectify the situation with today's small gain. The PMO is still holding a crossover BUY signal, but one day of decline could easily change that. Stochastics continue lower and the RSI is negative. We are looking for a test of $18,000.
Yields appear to be topping in the longer term with many topping before overcoming September highs.
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 didn't quite hit overhead resistance before turning lower. The PMO is still on a BUY signal and Stochastics did make it above 80 so a breakout isn't out of the question. We just aren't happy with the move lower before testing resistance.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is beginning to look toppy. We saw very little change in price over the past two days. Indicators haven't completely broken down so a continuation of this rally isn't out of the question. Just be prepared if it does decide to top here.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: The Dollar was unchanged so today's gain on Gold is due to an increase in buyers. The indicators are still wishy washy, but a rally continuation would set up a PMO bottom above the signal line. Once Stochastics turn back up, we will get more bullish on Gold.
GOLD Daily Chart: Discounts continue to move lower suggesting investors may actually be seeing bullish possibilities for Gold. However, with $GVZ staying below the moving average on the inverted scale, internal weakness is a problem.
GOLD MINERS Golden and Silver Cross Indexes: Miners are attempting to come back to life. They don't need that much resuscitation given participation is still seeing some improvement here and there. Most important is the rising SCI. We could see a reverse head and shoulders build. We still need a second bottom for that to be a consideration.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Yesterday's comments still apply plus some:
"The 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 (yet). 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 no longer bullish as we do see this as a possible pivot point since it remains on key support.
IT Trend Model: SELL as of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT formed a bullish engulfing candlestick today but remains below resistance at the September low. While the PMO is still negative and falling, the RSI and Stochastics are rising again. We may see a resurgence in bonds as rates begin to look toppy.
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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