The rally was on today! You can see on the 5-minute candlestick below that once it started, it really didn't subside. Currently, the 5-minute RSI is overbought, but the 5-minute PMO is still on a crossover BUY signal. We would expect at least a pullback toward $398 support level in the very short term. We'll explain our reasoning later.
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 oscillate between $390 and $402.50. As noted yesterday, we see price likely drifting sideways and out of the bearish rising wedge. The RSI remains positive. Holiday trading contributed to the very low volume. Price closed above the 200-day EMA for the first time since August.
Stochastics are rising above 80 which suggests internal strength. One big negative would be the penetration of the upper Bollinger Band by the VIX on our inverted scale. These punctures nearly always lead to a market top. However, it doesn't imply a longer-term breakdown. The VIX is like a candlestick pattern, usually only good for a few days.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Highs expanded greatly. The negative divergence is still there, but in a longer-term perspective, it could clear before we see another major market top.
Climax* Analysis: We didn't expect climactic activity today, but we almost got unanimous readings (except the NYSE UP/DOWN Volume Ratio), making today action an upside initiation climax. SPX Total Volume was only 79% of the one-year daily average, so there is not a lot of confidence in the impulse.
*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.
Both STOs rose on the day though not aggressively. We saw a small expansion in %PMOs Rising. We really needed to see that as that one indicator was causing us heartburn. Lower momentum amongst components could easily turn into a market decline rather than consolidation or a rally.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
All of our intermediate-term indicators have turned back up including %PMO BUY signals.
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. We worry that it is getting overbought though.
The long-term bias is BULLISH given the rising GCI and higher percentage of stocks above their 50/200-day EMAs.
CONCLUSION: The internals we've been worrying about are beginning to look better, particularly %PMOs Rising. Additionally we have a solid 83% of stocks with PMO BUY signals. This consolidation period has managed to clear overbought conditions on our STOs and they are now rising. We saw an upside initiation climax but it is somewhat questionable as it comes on low volume holiday trading. Still, combined with improving indicators, we think we could see follow-through on today's climax. However, let's not forget the VIX puncturing the upper Band, that implies we could see a small decline tomorrow to digest today's rally first.
Erin is 35% exposed.
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Yesterday's comments still apply:
"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."
The one-year yield is nearing 52-week highs again. The others are still 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
Indicators are now starting to insinuate that the 10-year yield may not move higher, at least for now. Stochastics seemed to imply a move to at least test the declining trend, but they have stalled. This week will likely not see big moves in yields. Remember that the Bond market will be closed on Friday (as the whole market should be!).
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar backed off its rally, failing to recapture the intermediate-term rising trend. Stochastics and the PMO are hopeful, but the RSI is negative and falling. It seems to us that sideways movement is likely ahead.
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: The decline in the Dollar helped Gold halt its decline right on support. This is highly encouraging especially when paired with a positive RSI and PMO that is angling back up. Stochastics aren't confirming yet.
GOLD Daily Chart: Gold sentiment backed out of bearish territory big time today suggesting investors are far less bearish. That could contribute to a resumption of the rally right at this support level.
GOLD MINERS Golden and Silver Cross Indexes: It was a confirmation of a new reverse island with today's slight gap. Price closed easily above the 200-day EMA and closed at the high for the day. Like Gold, the PMO is turning back up. Participation turned on a dime and is now very robust. We'd like to see the SCI start rising again. Given %Stocks > 20/50-day EMAs expanding above the SCI reading, it should. This group is looking very good. Gold just needs to hold up to ensure a great move higher.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/21/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Crude Oil could be reversing here as Stochastics are rising again. We still don't like the look of the PMO and RSI. The $OVX just moved above its moving average so internal strength may be returning in the short term. We can't get overly bullish until the RSI and PMO confirm.
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT is back above the 50-day EMA and the September low. The indicators are very strong and with yields looking suspect again, Bonds could continue to find favor. Stochastics are oscillating above 80 indicating internal strength. The RSI and the PMO look very encouraging as well.
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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