Forgive the eye test, but we felt you should see all of the sectors on one page. It may not be obvious, but every sector out there has a PMO top with the exception of Communication Services (XLC) and Healthcare (XLV). Of the two sectors, we prefer XLV.
XLC isn't a strong sector. Price has been moving mostly sideways for months. While it broke from the intermediate-term declining trend, it is about to reenter it. There is an IT Trend Model "Silver Cross" BUY signal that triggered last week, but it appears to be late to the party. The Silver Cross Index (SCI) is accelerating higher; however, we see that participation of stocks above their 20/50-day EMAs is waning and that will eventually be a drag on the SCI. The sector doesn't look terrible, but it doesn't look very enticing either.
XLV is about to challenge the April top. It broke from its declining trend at the end of October. It is pulled back with the rest of the market today, but the technicals, other than an overbought PMO, still look favorable. The SCI on XLV is less bullish than XLC's as it is in the process of topping. %Stocks > 20/50-day EMAs are only slightly higher than the SCI percentage. This means that the SCI doesn't have much fuel and when those percentages drop further, the SCI will top.
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
SECTORS
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: Last week price failed to test the top of the prior rising wedge. That in turn formed a tighter bearish rising wedge. The expectation is a breakdown from the formation. While $390 and the 50-day EMA looks fairly sturdy, the overbought and topping PMO suggest that will not be the stopping point of any decline.
We still see some internal strength as the VIX continues to oscillate above its moving average on the inverted scale. The RSI remains positive, but falling. Stochastics have dipped below 80 and display their lowest reading since early November. They typically provide early warning that there are problems under the surface.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: The prior negative divergence has been softened as we had more New Highs. The negative divergence is still visible though and likely to "stick" as we don't see price making a strong reversal that would fuel New Highs.
Climax* Analysis: We had strong and unanimous climax readings today, giving us a downside initiation climax.
*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 are continuing lower which has set up a short-term negative divergence with price which is still holding a rising trend. Participation slumped as there are now fewer stocks with price above the 20-day EMA. Major damage has been done as far as rising momentum. We now have less than 1/3rd of stocks with rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
IT indicators are now confirming the declines in the STOs as both the ITBM and ITVM have topped in overbought territory. %PMO BUY signals is still reading at 69%, but with only 31% of stocks with rising momentum, that percentage will be sailing lower very soon.
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. The SCI may still be rising, but participation of stocks above their 20/50-day EMAs is less than those with "silver crosses".
The intermediate-term bias is BULLISH. The SCI is at a high reading and technically still rising.
The long-term bias is BULLISH given the GCI continues to rise and their are more stocks above their 50/200-day EMAs than those with "golden crosses". That implies the GCI will continue to rise. 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: It was an auspicious start to the trading week as price sailed lower. The PMO has topped, so we know that on top of momentum being lost internally, it is now being lost on the index as well. All of our indicators are moving lower and participation is shrinking. Throw a downside initiation climax on top and the conclusion becomes obvious--the decline will continue. $390 is the next level of horizontal support, but we doubt that will hold.
Erin is 10% exposed.
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BITCOIN
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.
INTEREST RATES
Rates reversed to the upside strongly today putting new downside pressure on Bonds.
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 rallied strongly and is currently holding the support zone between the October low and June top. The negative PMO suggests we will soon see a test of the longer-term rising trend.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: After printing a bearish engulfing candlestick on Friday, UUP surprised with a rally today that helped put it back above the 200-day EMA. However, overhead resistance held at the prior November lows. Certainly the Dollar is oversold. The PMO is trying to bottom, but we'll want to see some confirmation of a renewed rally by Stochastics. They are rising, but are still ensconced in oversold territory.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: The rally in the Dollar was about 0.8%, but Gold dropped over 1.5%. That tells us there was quite a bit of selling pressure outside of the Dollar's rally. We have a rising wedge that is about to execute as expected to the downside. The PMO has topped alongside Stochastics. The RSI is positive, but falling.
GOLD Daily Chart: Unlike GLD, $GOLD didn't test the bottom of the wedge. We saw a huge increase in the discount for PHYS today. Discounts mean bearish sentiment. Very high bearish sentiment is good for Gold as sentiment in general is contrarian. We would be careful here as Gold looks ready to break down further.
GOLD MINERS Golden and Silver Cross Indexes: Gold pulled back, the market pulled back so inevitably, Gold Miners pulled back. We are about to see a negative crossover on the Silver Cross Index. While participation overall is strong, that pending crossover on the Silver Cross Index has us very concerned. The PMO is overbought and has topped. While Stochastics and the RSI are in positive territory, we would be very careful within this group. Erin is about to close her Mining position to book in profit while it is available.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/21/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Giant bearish engulfing candlestick on USO. Seeing a top well below overhead resistance and a failure to confirm what was a short-term double-bottom, has us very bearish on Crude right now. The Energy sector as a whole has a giant rounded top. The RSI is negative and falling. The PMO has topped beneath its signal line. Stochastics tipped over before even reaching positive territory. We see more downside ahead for Oil.
BONDS (TLT)
IT Trend Model: BUY as of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With today's decline, a new price top was formed. It fits conveniently in a new rising trend channel. The PMO is near-term overbought, but we know the range is at least +2 on the upside so it isn't that overbought. Stochastics are oscillating above 80. It's a strong chart and with yields looking weak overall, we expect to see Bonds continue higher after a test at the bottom of the rising trend channel.
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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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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