In John Mauldin's free newsletter, Thoughts from the Frontline, he stated in regards to the FTX failure, "There appears to be a great deal of contagion brewing. I think that FTX has the potential to be the biggest financial debacle of our lives. Bigger than Enron, bigger than Madoff."
We recommend that you read it if you would like a clearer picture of where things are so far. Here's today's Bitcoin chart, looking ugly.
Today the USO (U.S. Oil Fund ETF) 20-day EMA crossed down through the 50-day EMA (Dark Cross), generating an IT Trend Model NEUTRAL signal. Price has been in a narrow trading range for about five months, and the EMAs are very close together. We could see more signals as they braid together.
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.
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 is now clustering atop support at $390. The bearish rising wedge is still in force. The pattern suggests and eventual breakdown. We suspect we will see the pattern confirm with price drifting sideways given holiday trading this week.
All of our primary indicators (RSI, PMO and Stochastics) are still bullish. The VIX is still oscillating above its moving average suggesting there is internal strength.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Highs expanded just slightly on a down day. Additionally, the 10-DMA of the High-Low Differential is rising. We do note that a negative divergence is visible.
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 NEUTRAL.
While we have very good participation of stocks above their 20-day EMAs, they aren't necessarily rising. In fact, based on a much lower 68% PMOs Rising, we will likely lose much of that participation. The STO-B did turn up today, but we aren't seeing confirmation from the STO-V which continues lower.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM did turn back up today, but like the STO-B, it wasn't confirmed by its counterpart the ITVM as it is moving lower. We still have 82% with PMO BUY signals, but remember we only have 68% with rising PMOs. That percentage is likely to decrease further. We have a negative divergence on %PMO BUY signals as well.
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 still have broad participation of stocks above their 20/50-day EMAs.
The intermediate-term bias is BULLISH as the SCI is above 50% and rising.
The long-term bias is BULLISH given the rising GCI and higher percentage of stocks above their 50/200-day EMAs.
CONCLUSION: The bias may still be bullish in all three timeframes based on the SCI and GCI, but we feel less bullish. More than likely we won't see a big decline this holiday week, but more and more stocks are losing momentum. While we have broad participation, we expect to see those numbers diminish based on the lost momentum within the index. The market is in a precarious position. It is consolidating, but we believe we are vulnerable to a decline based on negative divergences and underlying weakness.
Erin is 35% exposed.
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The 15,500 level looks like it is providing support, but we don't offer that as any kind of hope. The Crypto markets are very demoralized at this point, and it is hard to see how confidence can be restored.
There is a lot of congestion beginning at about 12,000 and lower where it could find support.
Interest rates are moving higher again, but most are in declining trends.
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
Support seems to have been found for $TNX. The RSI is rising but negative. Stochastics are hinting that the decline is now over, but the PMO isn't confirming yet. This is a strong support zone so we do believe it will continue rising.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is recuperating. It formed a price cluster or island and then we got the island reversal with today's gap up. Price hasn't recovered its prior rising trend, but the PMO, Stochastics and rising RSI suggest it will.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Gold has now retraced back to the original breakout point of the gap up rally. We now have a price island above the October high. That would imply a gap down. The 20-day EMA is in danger of being lost as support, but the 50-day EMA isn't that much lower and we would look for that as possible support. Stochastics are starting down so while the RSI is positive and PMO is technically rising, Stochastics could be giving us an attention flag.
GOLD Daily Chart: Although Gold is in decline again, discounts pared back quite a bit, indicating that investors may slowly be warming to the shiny metal.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are forming another price island which means we could see a gap up again. Gold needs to turn around so the group can rally strongly again, unfortunately Gold is looking more iffy. Participation is slowly dissipating for GDX and like Gold, Stochastics have topped out. Be careful here, at least until Gold reverses back up.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/21/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: We almost had a bullish engulfing candlestick. This looks like a nice pivot point based on Stochastics, but confirmation is needed from the RSI and particularly the PMO which is in decline. Price did penetrate support so we would look for a test of the September low first.
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT is stuck in neutral as the 20-year yield is slowly reversing back up. Stochastics are usually a good early warning system and they have turned down. They do remain above 80, but the decline seems inevitable. More than likely TLT is headed for a downside reversal. The PMO is still hopeful, but we really aren't.
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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