One of the things the Fed wants to see is higher unemployment, which would indicate that the economy is slowing. Today's jobs report showed that unemployment, instead, ticked down to 3.5%. While investors are hoping that the Fed will ease up on raising interest rates, this number indicates that the Fed will probably not be easing at all. I was watching the futures before the report was released, and the market was quiet, neutral, in line with the consolidation we have seen. When the jobs report was released, the market took a dive. On the five-minute bar chart we can see that the result was an island reversal, which implies still lower prices.
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
For Today:
For the Week:
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.
For Today: 
For the Week:
RRG® Charts:
Daily: XLE looks the best, and it is the only sector we would consider at this time.
Weekly: Only XLE is headed in the right direction and in the right quadrant.
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: Yesterday we had a bullish picture with the pennant formation and rising PMO. Today the jobs report blew that picture out of the water. Price broke down from the pennant (the reverse of expectations), and the PMO topped below the signal line, which is very bearish. We assume that last week's low, the bear market low so far, is about to be retested.
We see that the declining tops line has steepened compared to the one drawn from the August top.
SPY Weekly Chart: The weekly PMO has decelerated, hinting at a potential bottom. We are in a retest of last week's low.
New 52-Week Highs/Lows: New Lows gave us early warning of the rally off the May and September price lows.
Climax Analysis: We noted that yesterday's downside initiation climax left us little to feel bullish about. Today's follow through resulted in unanimous climax readings and a downside exhaustion climax. SPX Total Volume confirmed. Whether or not the move is indeed exhausted remains to be seen. We're not counting on it.
*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 NEUTRAL and the condition is NEUTRAL.
Both STOs topped today, setting the stage for a continued down move next week.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The ITBM and ITVM topped today, which implies that more selling is on the way.
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 following table summarizes participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation.
In spite of Friday's collapse, most stock indexes closed up for the week, and except for Consumer Discretionary, all SCIs actually improved. Be that as it may, only one SCI and two GCIs are at or above 50% (bull market levels).
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of participation.
Energy and Gold Miners showed significant improvement this week.
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 notice that the Silver Cross Index (SCI) has topped below the signal line. This is an important caution whien it happens with the PMO, but does that apply to the SCI? We think it is a rule that will apply to most indicators.
CONCLUSION: It has been an exciting week -- two days of short-covering rally, followed by a disastrous one-day decline of -2.8%. The rally was understandable with indicators painfully oversold, and sentiment was (according to Jared Dillian - the 10th Man; MauldinEconomics.com) the worst in the last 50 years. We expected a rally to ease oversold internals and to dial back bearish sentiment, and we expected any rally to eventually run out of steam, and for the bear market to resume in a few weeks. But, what the heck, it all happened in the same week, as Friday's jobs report stood the market on its ear. Oddly enough, the market actually closed up for the week, but as a followup of today's carnage, next week will probably see the bear market lows retested. The problem is that people are really, really, really counting on the Fed giving up on raising interest rates, and it looks like the Fed is really, really, really not going to accommodate those folks.
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BITCOIN
Bitcoin is currently contained within a descending triangle. According to Bulkowski (Encyclopedia of Chart Patterns), the likelihood of an upside breakout in a bear market is in the 20-30% range.
This chart is to show where some of the support/resistance lines come from.
INTEREST RATES
Yields are in a rising trend, and we expect this to persist.
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
The 10-Year Bond Yield got a bit parabolic in September, but it also corrected back to the rising trend line. It is currently rising off of that trend line, and is headed toward the line of resistance drawn across last month's high.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount. As buying power shrinks, home prices will come under pressure.
--
Home Prices Drop at Fastest Rate Since Great Recession:"The price declines are the sharpest since January 2009, when the economy was in the midst of the worst recession since the Great Depression, according to Black Knight. Median home prices are down 2% since their June peak." (Fox Business 10/3/2022)
This week the 30-Year Fixed Rate fell from 6.70 to 6.66. Nevertheless, the trend is up and a real killer for the real estate market.
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 had a short-term parabolic up move in September (much like the 10-Year Bond Yield), and it corrected back to the rising trend line. It is currently headed up toward the line of resistance drawn across the September top.
In this time frame UUP looks as if it is decelerating, and it may not make it to the previous high.
UUP Weekly Chart: There is also a longer-term parabolic advance in this time frame.
GOLD
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GOLD Daily Chart: GLD has violated the short-term rising trend line, but it is still holding at horizontal support line.
GOLD Weekly Chart: It is encouraging to see that gold has recaptured the long-term rising trend line, nad more importantly, the horizontal support line.
GOLD MINERS Golden and Silver Cross Indexes: GDX has pulled back from overhead resistance, and could be setting up a reverse head and shoulders -- only the right shoulder remains to be formed.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: After almost four months of decline, it looks as if crude is finally responding to reality of how scarce it is becoming. Could have something to do with OPEC curtailing production (among other things).
The decline almost pulled the 50EMA below the 200EMA, but that's not happening now.
USO/$WTIC Weekly Chart: This chart highlights the fact that crude was getting too far above the rising trend line and needed to correct back.
BONDS (TLT)
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Last week's gains were taken back this week, and the PMO turned down again below the signal line.
TLT Weekly Chart:In this time frame we can see how the declining tops lines are accelerating downward.
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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