Major indexes continue to see IT Trend Model "Dark Cross" SELL signals. Remember, a "Dark Cross" occurs when the 20-day EMA crosses below the 50-day EMA. OEF's Dark Cross occurred below the 200-day EMA so it is considered a SELL signal. Had the crossover occurred above the 200-day EMA it would have been a Neutral signal. The SPX and Dow have not yet had Dark Crosses, but they are close.
Looking "under the hood" at OEF we see that the Silver Cross Index (SCI) had a negative crossover at the bear market rally top so we already knew the bias was bearish in the intermediate term. This "Dark Cross" is confirming what it already told us. Participation shot up on yesterday's rally, but today it pulled back on the decline. The bias is still somewhat bullish in the long term given the GCI is technically rising and there are more stocks above the 200-day EMA. However, given there are fewer above their 50-day EMA than have Golden Crosses (50-day EMA > 200-day EMA), the bullish bias is deteriorating quickly.
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: After two days strong rally, the market pulled back in a big way. We now have a very steep declining tops trendline. The RSI is falling in negative territory and the PMO is again accelerating lower. The declining tops on the OBV confirm the declining trend.
Price does have the look of a bullish cup with handle, but we believe the handle has gotten a bit too long. The VIX punctured the lower Bollinger Band today and closed beneath its moving average on the inverted log scale. Typically we see a rally day after a puncture, but given it rebounded and closed well above the Band, it's a weak signal.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential hit negative territory today and we had enough New Lows to wipe out the possibility of a positive divergence brewing.
Climax* Analysis: There were strong, unanimous climax readings today, and SPX Total Volume was solid, so we'll call it a downside initiation climax. This is on the heels of yesterday's upside initiation climax, so where does this leave us? While at price pivots we consider that climaxes may signal initiation of a new trend direction, climaxes are at their core exhaustion events. Let's just chalk it up to churn.
*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.
Despite the decline, STOs continued higher. We think this is indicative of the churn we are beginning to experience.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM/ITVM are still declining. We only have 9% of the SPX with PMO crossover BUY signals and based on the chart above we have only 9% of the SPX with rising PMOs. They aren't likely the same stocks so that implies some of those PMO Buy signals are quite vulnerable.
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 less than the amount with Silver Crosses.
The intermediate-term market bias is BEARISH. The SCI is declining after a negative crossover. This indicator suggests the intermediate-term declining trend will continue.
The long-term market bias is BEARISH. The GCI has topped. Additionally, we have fewer stocks above both their 50/200-day EMAs than Golden Crosses so we should expect the GCI to move lower in earnest soon.
CONCLUSION: No more Santa analogies. It appears we are going to experience chop and churn going into the holidays. The STOs are rising, but ITBM/ITVM are falling. Participation pared back after a brief rise yesterday and remains very weak. Other indicators are negative as well and we have a bearish bias in all three timeframes right now. Keep your stops in play in case this turns out to be the beginning of a sharp decline rather than consolidation as the charts imply.
Erin is 15% exposed with a 2% hedge.
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Yesterday's comments still apply:
"Bitcoin took the day to digest yesterday's rally. Price is now back in an official short-term declining trend. It will be easy to dissolve even with sideways movement, but it does give us a bearish bias. The PMO has so far avoided a negative crossover and Stochastics are rising again. The RSI, however, remains bearish in negative territory below net neutral (50). We don't like this price action and the indicators are still wishy washy."
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 TBF, the 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
$TNX is vulnerable to a reverse island formation. This would imply a gap down ahead. However, we don't see that happening. We have a positive RSI and new PMO crossover BUY signal. Stochastics could not be stronger. The correction is over in our opinion.
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Yesterday's comments still apply:
"We are still monitoring the bullish falling wedge. The pattern implies a breakout ahead. The PMO saw a crossover BUY signal, but it is flat. We would like to see some confirmation with the breakout. In the meantime, Stochastics have begun to rise and the PMO BUY is still in effect. We see a bullish bias on the Dollar."
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: The selling was on for Gold. The Dollar was up only slightly but Gold fell heavily. This means we had plenty of sellers bringing down the price of Gold. We have a bearish rising wedge. Price did manage to hold the pattern together, but there is a high likelihood of a breakdown. The PMO triggered a crossover SELL signal and Stochastics are turning lower before reaching 80.
GOLD Daily Chart: $GVZ is still above its moving average, implying internal strength, but the chart is breaking down. Discounts continue to pare back and while it means investors are more bullish on Gold. However, discounts are in the very high range historically meaning overall sentiment is on the bearish side.
GOLD MINERS Golden and Silver Cross Indexes: GDX fell today but formed a bullish hammer candlestick. We see the group breaking down. The PMO has now topped ominously below its signal line. The SCI had a negative crossover today. The chart hasn't completely fallen apart. Stochastics are rising as is the GCI and participation is still high. As we continue to say, be careful with this group.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/21/2022
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: It was a bad day for Energy and Crude Oil, but the technicals haven't broken down yet. The RSI is still positive and the PMO is on a crossover BUY signal. The $OVX is oscillating above its moving average and that implies internal strength. We expect the declining tops trendline will be broken.
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT is holding above the 50-day EMA, but that is about the only positive on the chart. The RSI has moved into negative territory and the overbought PMO SELL signal looks very bearish. Stochastics are also tumbling lower and are below 20. We are very bearish on Bonds in the short term.
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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