Today the Utilities Sector (XLU) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL signal. These signals tend to be long-term -- the last upside 50/200-EMA crossover was in October 2020. A "golden cross" will not be possible until price manages to move above both the 50/200-day EMAs. That won't happen anytime soon. XLU has been in a severe downtrend since the beginning of September. While this looks like a possible recovery, price is still hung up at the steep declining tops trendline and participation remains extremely thin across the board.
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.
Weekly RRG® Chart: 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.
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: At publication we noticed that that the long "tail" on today's candlestick is in error (too long) -- the market opened way up and stayed there all day. We reported it to StockCharts.com. The long tail makes that candlestick a hanging man, bearish as you might guess, so we wanted to clarify. The bar chart lows are also incorrect. The bullish falling wedge has not been confirmed with a breakout yet, but it's getting close.
Last week's rally on Thursday pulled the PMO upward and today's rally kept it moving, though not into a crossover BUY just yet. Sensitive Stochastics are moving swiftly higher, but there are a few issues. The RSI, while rising, is still in negative territory below net neutral (50) and the VIX remains beneath its moving average on our inverted scale, so internal weakness is still visible.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: We missed out on a positive divergence with New Lows since last week's spike is higher than September's. However, we do have a positive divergence on the NYSE New Highs/New Lows chart.
Climax* Analysis: Last Thursday had an upside initiation climax, Friday had a downside initiation climax, and today we got another upside initiation climax. Note that, in spite of being initiation climaxes, the first two in the series didn't initiate anything but exhausted the move. We shall see about today's climax.
*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.
We pointed out on Friday a number of positive divergences with price lows. The STOs have accelerated the positive divergence and participation indicators, %Stocks > 20-day EMA and %PMOs Rising also have positive divergences with price.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
We like the look of this chart given the visible positive divergences as well as the ITBM/ITVM being very oversold. We now have over half of the SPX with PMO Crossover BUY signals which is very good for the intermediate term.
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 bias is bullish. We have an increase in %Stocks > 20/50-day EMAs and both hold positive divergences with price.
The intermediate-term bias is still bearish given the SCI is holding a low percentage and isn't really rising.
The long-term bias is bearish given there is a lower percentage of stocks > 50/200-day EMAs and the GCI is falling.
CONCLUSION: We pointed out bullish behavior and positive divergences last week. They are intact. While price hasn't confirmed the bullish falling wedge, today's upside initiation climax suggests that will occur in the next day or two. Stochastics and the PMO are in agreement as they rise. This appears to be a solid price bottom. We expect today's rally will continue, but as always this is occurring in the midst of a bear market so we should definitely temper our bullish expectations. Our friend, Mary Ellen McGonagle pointed out this weekend that earnings are now going to be the focus as big names like NFLX, GS, TSLA and IBM report this week.
Erin is 10% exposed with a 5% hedge.
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We have an almost textbook bearish descending triangle (flat bottoms, falling tops). This would suggest not only a trip to the bottom of this trading range, but a breakdown there as well. Stochastics and the PMO are rising, but not enthusiastically. The RSI tells us that price is right in the middle of its 2-week trading range so indicators are not as helpful as we would like. Intermediate term, the chart is bearish based on the chart pattern, but short term, is so-so (technical term) given indicators are not that bearish, but aren't that bullish either.
Rates continue in their rising trends. The 30-year yield could see another inversion should it drop below both the 10-yr and 3-month yields.
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 needs a solid breakout; if not, a bearish double-top will form. The PMO is on a crossover BUY signal, but it sure looks toppy. The RSI isn't overbought, but getting close. Stochastics are the most positive as they bottomed above 80. Overall, we do expect the breakout will occur, it may need another test of the rising bottoms trendline before that happens.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar has now formed an "Adam and Eve" bearish double-top. We were asked in today's trading room what exactly an "Adam and Eve" formation was. These patterns are distinguished by a pointed left top accompanied by a second rounded top on the right. The 20-day EMA is holding as is the rising trend, but this bearish pattern along with the new PMO crossover SELL and Stochastics which topped below 80 suggests at least a test of the early September top and confirmation line of the double-top.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: We like the bounce which could be the beginning of a double-bottom forming. The PMO is also attempting to bottom above its signal line. On the bearish side, the RSI is negative and Stochastics are still in decline. Additionally, we have bearish filled black candlestick. We'd like to see the $GVZ get back above its moving average on the inverted scale as that would imply we finally have internal strength. Not yet.
GOLD Daily Chart: We are certainly encouraged by the intermediate-term bullish falling wedge on $GOLD. The PMO bottom above the signal line is also good to see. Discounts are at historic highs which tells us traders are still very pessimistic about Gold. We'd like to see overhead resistance broken at the July low and particularly at the 20-day EMA. That would mean a rally could be in the cards. It's too early.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners rebounded strongly today setting up a possible reverse head and shoulders. The PMO has amazingly avoided a crossover SELL signal. The SCI is turning back up above its signal line. Still, we need to see participation of stocks > 20/50-day EMAs expanding meaningfully. Stochastics turning back up would also be something to key in on.
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 continues to lay atop the intermediate-term declining trend. Given the struggle at the EMAs, Stochastics falling and a PMO that wants to top, we expect more churn and chop. We hope this is a bullish flag formation, but until indicators begin confirming, we would be very careful with Oil related stocks
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The decimation of Bonds continues. We've only seen two positive closes this month and given the strength of yields and the negative configuration of the primary indicators, the decline will likely continue.
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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