Today the S&P 500 Index (SPY) 20-day EMA crossed down through the 50-day EMA (Dark Cross) generating an IT Trend Model SELL Signal because the crossover took place below the 200-day EMA. That event also emphasizes the technical weakness of the broad market.
Remember that back on December 15th, the Silver Cross Index (SCI) signaled weakness on its own negative crossover. Before that it had turned down in overbought territory on December 5th. While moving averages may lag, the SCI is an early detection 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 12/28/2022
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: This is what we mean by "drift" in a chart pattern execution. Technically price is outside the bullish falling wedge, but it has been declining. If this is about the best we're going to get as far as a confirmation of the pattern, it is another example of internal weakness.
Speaking of internal weakness, the RSI is in negative territory, Stochastics are falling below 20 and finally, the VIX is below its moving average on our inverted scale. We forgot to mention that the PMO is now in negative territory.
Here is the latest recording. No recording on 12/26:
S&P 500 New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential had just turned back up and today it tipped over below the zero line.
Climax* Analysis: We had unanimous downside climaxes today. We're going to call it a downside exhaustion climax. SPX Total Volume was still holiday light.
*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 NEUTRAL.
Both STOs turned back down today which is very bearish. It appears the positive divergences on %Stocks > 20-day EMA and %PMOs Rising are already dissolving with almost no upside price movement. With only 11% of the index with rising momentum, it will be very hard to turn this bus around.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
Just when it appeared we were going to see an upside reversal on our ITBM/ITVM, they accelerate lower. The 9% with PMO crossover BUY signals could conceivably hold onto them given 11% have positive momentum.
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. We have lower percentages of stocks above their 20/50-day EMAs than the SCI percentage.
The intermediate-term bias is BEARISH. The SCI is falling after a negative crossover in overbought territory.
The long-term bias is BEARISH. The GCI is rising, but we do see fewer stocks above their 50/200-day EMAs than those with golden crosses (50-day EMA > 200-day EMA). That means we will eventually see the GCI turn down.
CONCLUSION: All of the bullish signs we saw yesterday have disintegrated. The bullish rising wedge really hasn't been confirmed given price "drift". Positive divergences on short-term indicators have not resulted in a new rising trend for the market. The STOs which had been rising have topped. We can offer a small bit of hope that Santa will arrive; today saw a downside exhaustion climax. We don't believe it will amount to much given the clearly bearish bias, but we could see a small rally or at least consolidation as we move into the final week of 2022. Tighten stops. January is likely to be a tough month.
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Yesterday's comments still apply:
"Bitcoin is tightening up its trading range. The RSI has turned down and the PMO is flirting with a crossover SELL signal. Stochastics are very bearish. Price is stuck beneath the 20-day EMA. The chart says Bitcoin will move lower."
Yields are back on the rise and we believe they will test prior highs if they aren't already.
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 breaking from its intermediate-term declining trend. The RSI is positive and the PMO is on an oversold BUY signal. Stochastics are almost at the extreme 100 level and show no signs of deterioration. Interest rates are going to move much higher. (Reminder, check out PFIX)
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is breaking out of its bullish falling wedge. Today was also a bullish engulfing candlestick. Price closed on the 200-day EMA. A break above the 20-day EMA is likely given the rising PMO and Stochastics. The RSI is still negative, but it is rising.
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Yesterday's comments still apply:
"Gold is traveling within a bearish rising wedge. You can see that based on the prior two tops, we have a rising wedge within a rising wedge. However, yesterday's intraday high did pop above it. The PMO is flat but sitting on a crossover SELL signal. The RSI has been positive since the beginning of November and Stochastics are staying above net neutral (50) so there is internal strength. Although based on $GVZ, that strength is being lost."
GOLD Daily Chart: Stochastics turned up, but the rest of the chart is very bearish. Discounts are paring back but a reading of -2.21 is still exceptionally high historically. You might not know that by looking at this chart.
GOLD MINERS Golden and Silver Cross Indexes: As we noted yesterday, if Gold were to take a dive, GDX would likely do the same. Gold Miners also had the market working against it. Participation is still strong, but cracks are definitely visible as the SCI had a negative crossover and the PMO is topping beneath its signal line in overbought territory.
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 pulled back heavily as the Energy sector struggled. Price is still above the declining tops trendline and the 20-day EMA. The short-term rising trend is also intact. The RSI is positive, the PMO is rising and Stochastics are above 80. $OVX, the volatility index is still above its moving average on the inverted scale which signals internal strength. We are still bullish on Crude.
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday's comments still apply:
"With yields on the rise, Bonds are declining quickly. Support has been met, but based on the falling RSI, falling PMO on an overbought SELL signal and Stochastics moving lower, we believe the decline in Bonds is only getting started."
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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