Before today's open, the latest Producer Price Index (8.0) showed improvement over last month (8.3). As usual the market took this to mean the Fed had even more pressure to ease off (good luck with that), and a rally ensued. Also, the S&P 500 Index (SPY) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model "Silver Cross" BUY signal.
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 continues to attempt an upside resolution to the bearish rising wedge. Today price got above the 200-day EMA for the first time since August; however, it closed beneath it forming a bearish filled black candlestick. You'll note that the negative OBV divergence is beginning to clear. We need to see the OBV rise above the October high.
Indicators continue look healthy with the RSI positive and now rising, the PMO rising and not overbought, and Stochastics oscillating above 80. We also note that VIX remains above its moving average on the inverted scale and that implies internal strength.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: Yesterday's comments still apply:
"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: Two of the four indicators, SPX Net A-D Volume and SPX UP/DOWN Volume Ratio, reached climax levels today. SPX Total Volume expanded above the one-year daily average, so we are declaring today as an upside exhaustion 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 UP and the condition is NEUTRAL.
STOs continue to contract, but price continues to rise. It seems that with the up and down of the past three days it is finding a way to clear overbought conditions. We say this because we see no deterioration in participation of stocks > 20-day EMA and %PMOs Rising.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERBOUGHT.
The ITBM and ITVM are indecisive right now. Yesterday they fell and today they are rising again. They are overbought so we need to pay attention, but for now they are okay.
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.
Yesterday's comments still apply:
"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: Although we saw a positive finish today, we saw STOs continue lower as well as an upside exhaustion climax. The market is vulnerable to a more sizable decline given that climax and today's formation of a bearish filled black candlestick. On the positive side, IT indicators are rising again and participation continues to expand overall based on the SCI and GCI as well as %Stocks > 20/50/200-day EMAs. The bear market rally is still on, but a pause or pullback this week would not be unexpected. Nonetheless, Erin is keeping her exposure the same.
Erin is 55% exposed to the market.
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It occurs to us that we may be looking at either a symmetrical triangle or pennant on a flag pole. Either way it is bearish. The bear flag suggests another leg down the size of the last breakdown. That is worst case. A symmetrical triangle implies a breakdown but doesn't tell us how far. For now, indicators have paused their declines, but if we don't see an upside breakout from the symmetrical triangle, Bitcoin could be in for a drop to at least $15,500.
Interest rates seem to be in pullback or correction mode.
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 closed beneath the 50-day EMA today. The Adam & Eve double-top's downside target is around 3.5%. Indicators support that conclusion.
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Yesterday's filled black candlestick was fulfilled by today's decline. Now we have a bullish hollow red candlestick. We don't think that candlestick will result in upside. The RSI is very negative and falling. The PMO is falling quickly. Stochastics are oversold and beginning to rise, but remember it is an "oscillator" and oscillators must oscillate. We don't think this marks a bottom for the Dollar. A test of the 200-day EMA should follow.
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Gold continues to rally on the weak Dollar. The RSI is now in overbought territory, but the other indicators are very favorable. Given the strength of this rally we aren't surprised the RSI is high, but we think it will move even higher.
GOLD Daily Chart: Discounts continue to expand. They are reading at historic levels right now. High discounts should translate into higher prices for Gold. The fact that they haven't backed off yet, tells us that bearish sentiment is extremely high. Sentiment being contrarian that should favor Gold. Just on this chart, you can see that spikes in discounts tend to accompany rally bottoms.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"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: USO rallied which brought the RSI back into positive territory above net neutral (50). The PMO is so far avoiding a negative crossover and Stochastics are rising again. $OVX just dipped below its moving average on the inverted scale. While that is negative, if it sees a puncture of the lower Bollinger Band that would likely lead to a more significant rally. At this point it is clinging to support accompanied by neutral readings on indicators. Not helpful.
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We noted a bullish double-bottom on TLT yesterday. Today the pattern was essentially confirmed by the rally above the confirmation line of the pattern. The upside target of the pattern would be close to $102.50. We think that is too optimistic but not out of the question given yields appear to have gone into correction mode.
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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