Energy (XLE) still holds leadership among all of the sectors, but even with today's +1.85% rally, price remains below strong resistance at the June top. XLE needed a pause to clear overbought conditions and that is what is happening right now. Despite this second top, the PMO is still rising, Stochastics remain above 80, the RSI is positive and not overbought, and participation remains strong. We believe it will break out on its next try. Currently over 91% have a 20-day EMA and it just gets stronger from there with 95% above their 50-day EMA and 100% above their 200-day EMA. The Silver Cross Index (SCI) and Golden Cross Index (GCI) are at significantly high percentages as well. This is a very strong foundation that suggests XLE will weather the storm.
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: No short-term bottom has formed, so the new rising trend line is tentative. The hope today is that we are seeing a reverse island formation on the neutral doji candlestick. The PMO continues to be a problem for us as it topped beneath the signal line, but interestingly, it is moving more sideways rather than declining quickly. There is time to reverse the damage, but this doesn't look good.
The VIX remains above its moving average on the inverted scale and despite the deep declines of yesterday and today, we aren't seeing readings spike higher on fear. Investors aren't nearly as nervous as we would expect.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Lows expanded greatly which isn't a surprise given the declines of yesterday and today. The 10-DMA of the High-Low Differential may be topping in near-term overbought territory.
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.
STOs are continuing to fall with the STO-V now in negative territory. We still have 60% of the SPX with rising momentum so we could conceivably turn off the decline.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL to OVERBOUGHT.
IT indicators are now a problem as they have all topped.
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 bias in the short term is NEUTRAL. While %Stocks > their 20/50-day EMAs took a hit, those percentages are still above the SCI reading...barely.
The bias in the intermediate term is NEUTRAL. The SCI decelerated and could top soon.
The bias in the long term is NEUTRAL. We are waiting on the GCI to have a positive crossover its signal line before we can switch to a bullish long-term bias. We would also like to see a higher reading on the GCI.
CONCLUSION: Indicators are all breaking down, but participation is still strong enough to reverse the decline. However, with topping IT indicators it seems highly likely that we'll see a test of the October low. We would reevaluate all positions to determine if they are still relatively strong against the SPY and holding up against the past two days of decline. If they've weathered that storm, they likely will weather more decline. Erin is slowly shedding her exposure, but many positions are holding up to this decline.
Erin is 45% exposed.
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Yesterday's comments still apply:
"Bitcoin is still moving sideways. While support at $20,500 was lost, it is still holding above both the 20/50-day EMAs. We aren't bullish though. The RSI may be positive, but it is declining. The PMO is trying to top and Stochastics have already dipped lower."
Interest rates are back on the rise across the board. Most are making new multi-year highs.
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 reversed off support and is maintaining the current rising trend. It did close on the bottom end of the OHLC bar, but it also closed above the prior highs this week. The PMO is beginning to slow and the RSI is staying in positive territory. Stochastics are rising, but still look unsure. We expect they will continue higher.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar rallied and broke the declining trend. This is a breakout from a bearish descending triangle. Bullish conclusions to bearish chart patterns are particularly bullish. With the PMO reversing in oversold territory, Stochastics rising and a positive RSI, we would look for a breakout above the September high.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: GLD broke below support, but closed above it. It formed a bullish hollow red candlestick so all is not lost for Gold. A PMO crossover SELL signal will likely occur tomorrow barring a strong rally.
GOLD Daily Chart: Indicators are struggling. Stochastics were rising but have topped in negative territory. This isn't a good look. Despite historically high discounts, Gold is on the ropes again. Unfortunately, we expect a breakdown here.
GOLD MINERS Golden and Silver Cross Indexes: GDX continues to suffer as Gold loses strength and the market declines. Today the SCI crossed below its signal line confirming our bearish outlook for the group. Participation is diminishing. We think GDX will be fortunate to hold above $22. We would say, if the market decides to halt its decline, the upside reversal here could be stunning. We just don't think it is worth the risk right now.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Yesterday's comments still apply:
"Indicators are improving as the PMO is beginning to accelerate a bit. Stochastics are about to move above 80 and the RSI is comfortably within positive territory above net neutral (50). The $OVX is still above its moving average on the inverted scale suggesting internal strength. This was the only area of the market that was unscathed by today's large decline. We expect it to continue higher."
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday's comments still apply:
"The declining tops trendline is still intact and price did not overcome the 20-day EMA. The RSI is negative. The PMO is rising on a BUY signal, but we don't like how Stochastics have flattened. More than likely we will see a drift through the declining tops trendline. A breakout above the 20-day EMA would have us move bullish."
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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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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