Today the Crude Oil (USO) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL Signal. Note the very ugly PMO top well below the signal line and the zero line. We'll discuss USO in more detail in its section below.
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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: BUY as of 11/15/2022
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: The bearish rising wedge has been confirmed with today's breakdown. It is, however, still holding support at $390. The PMO is about to give us an overbought crossover SELL signal which suggests this is only the beginning.
The VIX did manage a close above its moving average on the inverted log scale, but it did dip below which suggests internal weakness is beginning to appear. Stochastics are still above 50 (positive territory), but given the vertical decline on the indicator, we doubt that will last through tomorrow.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: It appears we are looking at the next short- to intermediate-term top right now. If so, the negative divergence on New Highs will still be present. The 10-DMA of the High-Low Differential is topping again. That is usually a sign of a longer-term top.
Climax* Analysis: We got climax readings on the SPX Net A-D Volume and SPX DOWN/UP Volume Ratio, though they weren't as strong as yesterday's. Two out of four is marginal, but SPX Total Volume was strong enough to confirm. Since yesterday's was an initiation, today's is a downside exhaustion climax, but that doesn't mean the decline is necessarily over.
*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 hit negative territory today. This has been near-term oversold on the last two price tops, but we see this decline as contagious and are prepared to see those indicators move even lower. Participation is shrinking among stocks above their 20-day EMAs and rising momentum has tanked, leaving the index with no internal strength.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM/ITVM both continue lower and both are overbought. The internals as noted above are weakening. We now only have a little over half of the index on PMO BUY signals. Given there are only 19% with rising momentum, we would expect to see this indicator plunge even lower.
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 BEARISH. Participation of stocks above their 20/50-day EMAs is far less than those with "silver crosses".
The intermediate-term bias is BEARISH. The SCI has topped in overbought territory.
The long-term bias is BULLISH, but deteriorating. Given the GCI continues to rise and there are more stocks above their 50/200-day EMAs than those with "golden crosses". The GCI should continue to rise based on higher percentages above their 50/200-day EMAs, but we already note the GCI is pausing. Do not think that because the bias is listed as bullish in the long term that the bear market is over. Not a chance.
CONCLUSION: Internals continue to get worse as internal weakness begins to seep in. Primary indicators are all in decline and there isn't any rising momentum to hold things together for the SPY. While we do have a mild downside exhaustion climax, we don't see a rally ahead. Instead we would look for a pause in the decline with possibly some consolidation above $390. The market is still highly vulnerable to another dastardly decline based on those negative indicators so keep stops tight or consider booking some profits from this bear market rally. It appears to be on its last legs.
Erin is 10% exposed.
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Yesterday's comments still apply:
"Bitcoin tested the top of the trading channel and pulled back to finish near the lows of the day. The PMO is still rising, but the RSI has yet to move into positive territory above net neutral (50). Stochastics have topped. We don't think a breakout will happen here, more than likely the trading range will be extended."
Slight pullback in rates after yesterday's strong showing. It appears the decline in rates isn't quite over.
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 fell but continues to hold support at 3.5%. Given the ugly PMO and negative RSI, we don't like its chances to continue to hold support. The intermediate-term rising trend is a possible reversal area.
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP rallied slightly but remains below resistance at the November lows. The RSI is very weak. Stochastics are rising and did get above 20, but they have been oscillating in this area for some time so we won't put too much emphasis on them. The PMO is now help as it travels sideways. We don't think the Dollar is through declining just yet, but we will take our cue from the PMO when it finally reveals its intentions.
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Gold managed a slight gain. The bearish rising wedge is still a problem and today price nearly confirmed the pattern. The RSI is positive, but both the PMO and Stochastics are in decline. The $GVZ is above its moving average on the inverted scale which implies internal strength, but it continues to decline. If it reverses on its moving average, the outlook would definitely improve.
GOLD Daily Chart: $GOLD was up about the same amount that the Dollar was down so today was basically a wash. The rising wedge is also visible on the $GOLD chart. Discounts remain high, but they did pare back slightly. Bearish sentiment is still in force, but we're not so sure it will be enough to ensure an upside reversal here.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners held their ground as Gold was mostly unchanged. Given the market declined by over 1.4%, we see GDX's hold above support as positive. The biggest problem right now is momentum slipping in overbought territory. Stochastics have also topped and moved below 80. Participation is still robust, but we do see fewer stocks above their 20/50-day EMAs. On the bright side, the SCI remains above its signal line. We'd be careful here. While this group looks alright, if Gold breaks down it will be a very rough ride for Miners so keep those stops tight.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/21/2022
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: The bearish engulfing candlestick was prescient as price dropped like a rock today. While it is sitting on a support zone, the indicators are simply too negative to expect that level to hold. The PMO has topped beneath its signal line, below the zero line. The RSI is in negative territory and falling. Stochastics turned over beneath 50 and are headed lower in negative territory. A breakdown seems imminent.
IT Trend Model: BUY as of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT looks about as bullish as we've seen it in many months. There is now a rising trend channel in force. The RSI is getting a bit overbought, but the PMO is rising strongly and Stochastics are holding easily above 80. While a trip to the bottom of the channel is a possibility, indicators seem to suggest a breakdown won't occur. We're not sure how much longer this will last, but yields don't seem to be done with their correction and that will work in Bonds favor.
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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