XLK generated a PMO crossover BUY signal as the PMO crossed above its signal line. The rally has been strong for this sector, though not as strong as we would expect given the declining trend has not been broken. We also note that the October low is below the June low. Additionally, price hasn't overcome the 20-day EMA yet. This means that XLK has a bearish configuration. A breakout here would have us more bullish on this sector as we prepare for the market to continue to rally. If we're right about this rally continuing, XLK will benefit given it has been performing inline with the SPY.
Participation is puny when you look at the %Stocks > 50/200-day EMAs, but as beatdown as this sector is, most of the stocks are still struggling to overcome the same resistance that XLK is. We are seeing an expansion in stocks above their 20-day EMAs and Stochastics are rising strongly which is encouraging.
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.
Weekly RRG® Chart: Yesterday's comments still apply:
"XLE remains the most bullish sector in the longer-term, but even it is beginning to see deterioration to its once bullish northeast heading. XLF will likely join all of the other sectors in the Lagging quadrant. There aren't any sectors showing improvement with certainly suggests the bear market is not over in the intermediate term."
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: The SPY lost support just as it had broken above the 20-day EMA. We expected some churn or a pause after the rally and price hasn't returned into the short-term declining trend. Of course, it also failed to reach the intermediate-term declining trendline which suggests we still have weakness.
The indicators really didn't suffer. The PMO is still rising on its new BUY signal and Stochastics continue to rise quickly toward 80. The VIX is sitting on its moving average and therefore not revealing internal weakness, but neither is it suggesting internal strength.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Lows expanded, but not by much.
Climax* Analysis: There were no climaxes 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 NEUTRAL.
STOs were unperturbed by today's decline and continued rising. We still see 80% of SPX stocks with rising momentum. Certainly enough to carry the index higher.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
IT indicators are all still rising with over 2/3rd of the index on 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 bullish. We see increases in %Stocks > 20/50-day EMAs and both hold positive divergences with price.
The intermediate-term bias is still bearish but improving given the SCI is turning back up and should see a positive crossover the signal line soon.
The long-term bias is bearish but starting to improve. A rise in the GCI would help. We do have more stocks above their 50/200-day EMAs and those percentages are higher than the GCI, suggesting we will get the GCI rising soon."
CONCLUSION: Price pulled back to the yesterday's breakout point in textbook fashion. Indicators were not shaken on today's decline and participation remains strong. Overall we would expect to see price resume the rally that began last week, but we may have to deal with chop and churn as it drifts higher. We are seeing historic levels of bearish sentiment that should play out with a rally continuation.
Our friend, Mark Young of WallstreetSentiment.com who studies sentiment, noted today in a social media post:
I just wanted to point this out. If you are Bearish on the stock market right now, you have a great deal of company. Company that is not sophisticated and that usually gets it wrong, especially when they make big bets. Ask yourself this, is there anyone (ANYone) who's not well aware of the problems facing our economy?
Erin is 15% exposed with a 5% hedge. She added one of her "Diamonds in the Rough" and one from the "runner-up" list she shared with subscribers yesterday.
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 support@decisionpoint.com for more information!
BITCOIN
Bitcoin is still range bound. There is a high likelihood that price will simply "drift" above the declining tops trendline. We wouldn't make too much of a move like that given the RSI is falling and Stochastics have topped. Expect more sideways action with a gentle declining trend.
INTEREST RATES
Rates popped higher today putting pressure on Bonds.
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 finally broke out today after pulling back just above the short-term rising trend. Typically when price turns up before testing a trendline, it will see more rally with a possible steepening of the rising trend. This looks like the case for $TNX. The PMO is still acting sketchy, but the RSI (albeit overbought) and Stochastics are rising strongly. We expect it to continue higher with a possible pullback to support.
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The bearish double-top pattern on the Dollar was likely busted on today's rally. We now have a symmetrical triangle. These are continuation patterns, meaning the prior trend determines where the breakout/breakdown will occur. In this case given the short- and intermediate-term rising trendlines, the expectation is a breakout not a breakdown. The PMO isn't on board with this yet, but the RSI and Stochastics seem to be as they remain above net neutral (50).
GOLD
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Gold saw PMO crossover SELL signals. It appeared we would get a nice rally on Gold, but the chart just keeps breaking down further. Support will likely fail to hold at the September low. Volume was heavy to the downside for GLD. We hope that is an exhaustion, but as noted, indicators don't imply an upside reversal ahead.
GOLD Daily Chart: Discounts saw another rise at historic levels. Note that before the last rally out of September lows, sentiment was at the same extreme levels it is now. Big difference is we had a PMO rising as well. This time around the PMO just triggered a SELL signal. We can't count on bearish sentiment to bail Gold out without positive momentum going along for the ride.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners fell heavily, aborting the tiny rally that was creating a bullish reverse head and shoulders. The busted pattern along with a second top on the SCI suggests to us that the September low will easily be tested and likely broken.
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 pushed its way back out of the longer-term declining trend. Price is still below the 20/50/200-day EMAs and indicators are slow to respond (of course it is one day of rally). The PMO does appear to be flattening already, but we'd like to see Stochastics rising in confirmation. The short-term declining trend is fully intact, but Erin does note that Crude Oil related industry groups are seeing some bullish action.
BONDS (TLT)
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We had bullish hammer candlestick that should have marked a short-term low. Today's heavy decline told us how bearish TLT is. It is tough when yields are rising so quickly. We really don't see any relief ahead for Bonds as yields pushed much higher today.
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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