Today the Russell 2000 ETF (IWM) 20-day EMA crossed down through the 50-day EMA (Dark Cross) below the 200-day EMA, generating an IT Trend Model SELL Signal. Had the crossover occurred above the 200-day EMA, it would have been a "Neutral" signal. The PMO has just entered negative territory and based on the OBV, volume is pouring out of this ETF. Where's Santa?
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: BUY as of 11/15/2022
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: The market paused the decline today, but didn't make much headway. The PMO is still headed south and the RSI is firmly negative.
Total Volume was even lower today as holiday trading volume begins to set in. Stochastics are below 20 and flat. The VIX did manage to close above its moving average on our inverted scale, but spent the majority of the day below the MA. This combined with low Stochastics are a sign of internal weakness.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential is about to hit negative territory again. The market tends to be extraordinarily weak when this indicator is negative.
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 DOWN and the condition is OVERSOLD.
STOs are very oversold now, but they have seen more extreme readings. They can absorb more downside without issue. Only 4% of stocks in the SPX have rising momentum. That certainly suggests lower prices ahead if there is no positive momentum to lift them.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM/ITVM are in neutral territory and not at all oversold. We now have only 8% of the SPX on PMO BUY signals. Given only 4% have rising momentum, we would look for this indicator to move 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 market bias is BEARISH. Participation of stocks above their 20/50-day EMAs is slim and getting slimmer.
The intermediate-term market bias is BEARISH. While the SCI holds a reading of 70%, it is declining after a negative crossover. This indicators suggests the decline will continue for some time.
The long-term market bias is BEARISH. The GCI has topped.
CONCLUSION: Maybe Santa will come, but we don't see him bringing a rally; more likely, he will ease the declining trend with a pause as we saw today. While the STOs are very oversold, they show no sign of reversing course. The intermediate-term indicators can accommodate plenty more downside before seeing oversold conditions. Participation is sickly across the board. All of our indicators are too negative to look for a good rally, a digestion period seems most likely.
Erin is 12% exposed with a 5% hedge.
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Bitcoin made a comeback today. We read an article that implied most novice investors have left crypto and aren't likely to return so even with a rally, we don't see Bitcoin returning to its former glory. More likely we will watch this trading range persist. Right now price is ready to retest overhead resistance. The RSI and Stochastics are beginning to rise, but the PMO is ugly right now, topping below the zero line and headed for a crossover SELL signal.
The decline in rates is likely coming to a close with the 30-yr yield breaking its short-term declining trend. Don't forget there is the Interest Rate Hedge ETF (PFIX) which will move higher with rates. We are also looking at TTT, the leveraged inverse ETF for TLT.
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
The correction in yields appears over as $TNX rallied strongly and closed above the 50-day EMA for the first time since early November. The PMO is going in for an oversold crossover BUY signal and Stochastics are rising vertically. We expect to see rates continue to rise.
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: It appears the bullish falling wedge was busted. We had two closes above the declining tops trendline, but now price is back in the pattern. The pattern itself is getting "stale". It will now become too easy to get above that declining tops trendline even with a drift sideways. Indicators have turned south in a hurry. The new PMO crossover BUY signal is in the process of being erased and Stochastics have topped in negative territory.
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: If the Dollar is going to continue its way lower, Gold will benefit greatly as it did today. We still can't ignore the bearish rising wedge, but a new PMO crossover BUY signal is very encouraging, especially given it is alongside a positive RSI and rising Stochastics.
GOLD Daily Chart: $GVZ is still above its moving average, implying internal strength. Discounts are finally beginning to cool, but today's reading is still very bearish. We do like seeing them pare back as that tells us that traders are beginning to warm to the metal.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners remain above support at the 200-day EMA and August high. The group was breaking down in a big way, but all of sudden participation is back up suggesting the decline was more of a pause than beginning of a corrective move. We still advise caution. If the bullish outlook on Gold changes, this group could plunge.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/21/2022
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil mostly repeated yesterday's action as we have a nearly identical candlestick today. Price is holding above support at $65. We're not very bullish here. The indicators are improving, but it is early. For now they have a slight bullish bias. The PMO is the most bullish as it heads in for a crossover BUY signal. However, the RSI and Stochastics aren't really confirming this as a good entry.
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds are likely on their way down now. The rally was great, but the breakdown from the parabolic advance is getting legs. The RSI is now negative and the PMO is about to trigger an overbought SELL signal. Stochastics just hit negative territory. TTT is a leveraged ETF that is the inverse of TLT basically. It might be time to investigate.
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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