We'll cover the charts in more detail in their sections later on in the report, but two new signals were triggered on the Dollar and Gold that should be mentioned in "Alert" fashion as an opening.
The Dollar (UUP) 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA, generating an IT Trend Model NEUTRAL signal. It wasn't considered a SELL signal because the crossover occurred above the 200-day EMA.
Also, Gold (GLD) 20-day EMA crossed up through the 50-day EMA (Silver Cross) generating an IT Trend Model BUY signal. The fact that both of these signal changes occurred on the same day reinforces the concept that the Dollar and Gold generally have a near perfect reverse correlation. This is because Gold is denominated in the Dollar. If the Dollar is up 1%, a perfect reverse correlation implies Gold would be down 1%. It isn't always the case and that tells us whether Gold was "weak" or "strong" against the Dollar.
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
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: The bearish rising wedge is still intact. It appeared on Friday that we would get an upside breakout, but that failed to materialize today. We would still consider that bearish pattern to be in force. $390 will be the next line of defense (support). We nearly saw an IT Trend Model "Silver Cross" BUY signal today on the SPY as the 20-day EMA is kissing the 50-day EMA.
Indicators still look strong. The RSI is falling, but remains comfortably within positive territory. The PMO is still rising and Stochastics are rising above 80.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: The short-term negative divergence persists on New Highs. We do not like that the 10-DMA of the High-Low Differential is declining again too.
Climax* Analysis: Only SPX Net A-D Volume reached climax levels today, so we will not designate it a climax day.
*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.
Today's decline pulled both STOs downward. There is still solid participation with over 84% of stocks above their 20-day EMA and 81% showing rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERBOUGHT.
The ITBM turned back down today which in some respects confirms what we're seeing on the declining STOs. However, The ITVM is still moving higher. %PMO BUY signals is still overbought, but rising.
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 excellent participation of stocks above their 20/50-day EMAs.
The intermediate-term bias is BULLISH. We have a strong SCI reading and it is moving strongly higher. We do want to watch out if it begins to top out as it is going to reach overbought territory soon.
The long-term bias is Neutral to BULLISH. The GCI is rising, but the reading is still below 50%. There are a substantially higher participation of stocks above their 50/200-day EMAs than those with golden crosses. That leaves plenty of upside potential for the GCI.
CONCLUSION: The market paused after last week's strong rally. This was not unexpected. Primary indicators (PMO, RSI and Stochastics) are firmly bullish, but the STOs turned down too easily today, particularly after a hot rally. If that weren't bad enough, the ITBM also turned down confirming short-term weakness. The bearish rising wedge also adds to our cautionary stance. Rather than a strong resumption of last week's rally, this week will probably bring chop and churn. At the moment, Erin isn't planning on paring exposure this week, but she probably won't expand it either.
Erin is 55% exposed to the market.
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Bitcoin was beginning to recover somewhat, but traded much lower over the weekend. Today it had a wide trading range, but essentially finished unchanged. Indicators are all very negative so another breakdown isn't out of the question.
Interest rates saw a small rally today, probably accounts for some of the downside pressure on the market.
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
After confirming an Adam & Eve double-top, $TNX is attempting to abort the bearish pattern with a strong bounce off the 50-day EMA and mid-October low. The RSI is rising but is still in negative territory. The PMO and Stochastics accelerated their decline. This is likely a pause before a breakdown. We are looking for a test of 3.5%.
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: As noted in the opening, UUP saw a Dark Cross of the 20- and 50-day EMAs. It took a breather today but formed a bearish filled black candlestick. This suggests the decline isn't over yet. The Dollar's demise is not only helping Gold, but the market seems to like this breakdown as well. Stochastics aren't hinting that a reversal will happen here. We would expect a test of the 200-day EMA in the short term.
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Also noted in today's opening, GLD saw a Silver Cross. Indicators are very favorable with the RSI positive, PMO rising strongly and Stochastics oscillating above 80 and currently rising. We expect GLD will test $167.50 very soon.
GOLD Daily Chart: As of publishing, we don't have the updated Premium/Discount for the Physical Gold Trust (PHYS), but we can say that last week saw some of the highest readings on record. Wednesday's reading was the second highest we've recorded. Extreme bearish sentiment is good for Gold and it finally appears to be paying off. Overhead resistance for Gold lies around $1800; we do expect it to reach that level.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are tied to Gold, but they don't have a perfect correlation; so while Gold was up today, Gold Miners were down. Gold Miners are subject to the winds of the market as well as Gold, they are companies not an asset class.
Right now price is essentially stuck below resistance at the 200-day EMA. On the other hand, price is holding support at the August top. Indicators are strong and while the SCI is trying to top, participation of stocks above their 20/50-day EMAs is robust. We expect this level of resistance to not be a problem. We are looking for a test of resistance at $34. Really, this is the best Gold Miners have looked since last year.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/4/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: We see a bearish rising wedge on Crude Oil. The RSI just moved into negative territory and the PMO is nearing a negative crossover. Stochastics are also negative and falling. All of this begs for a breakdown which would confirm the bearish wedge. Consider $67.50 a downside target for now.
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The 20-year yield was up slightly today which contributed to the current pause in the rally on TLT. While indicators are positive overall, upside potential has been very limited on Bonds. If yields continue last week's correction which seems likely. We also now have a bullish double-bottom on TLT. If price can break more decisively above the confirmation line at the late October top, the upside target of the pattern would be close to $102.50. That seems a bit too optimistic at this point.
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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