We were somewhat surprised today when we reviewed the index ETFs. Two ETFs actually show rising momentum. Don't get too excited, there are problems on both of their charts. For comparison, SP500 (SPY), Dow (DIA), Nasdaq 100 (QQQ), SP100 (OEX) and Nasdaq (COMPQ) all have negative momentum and are on SELL signals. Those are just a few, I'm sure we could dig up others.
First is the SP400 (IJH). Notice that not only is the Price Momentum Oscillator (PMO) rising, it just hurdled the zero line. The RSI turned up on today's rally, keeping it in positive territory and the OBV is rising with price. Additionally, the StockCharts Technical Rank (SCTR) is above 70 or in the "hot zone". The "hot zone" is territory above 70%. That indicates that based on trend and condition in the intermediate and long terms, a stock or ETF is in the top 1/3rd of its universe. In this case, the universe is ETFs.
Two problems here: 1) Stochastics have topped and moved below 80 and 2) The short-term rising trend has been broken and even with today's rally, not recaptured.
Second is the SP600 (IJR). The PMO is decelerating, but still rising toward the zero line. The RSI remained positive with today's rally. Unfortunately, like IJH, Stochastics have topped and are below 80 and the short-term rising trend as well as horizontal support have been broken and not recaptured. IJR also has the issue of a SCTR that is well below the "hot zone" above 70%.
While it may appear that small- and mid-caps are a great place to be, looking at the Russell 2000 (IWM), this is not the case. When you add all of the other "cats and dogs" that are in IWM, the picture is not so bright. There is a rounded top, the RSI is negative, the PMO is on a SELL signal and declining. Stochastics have turned up in oversold territory, but it is way too early to trust them. The relative strength line tells the story of IWM and gives us a pretty good idea where it is headed.
Conclusion: While IJH and IJR look somewhat bullish, IWM is a disaster. A rising tide may lift all boats, but we don't see IJH and IJR leading that charge.
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.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
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 continues to defy gravity by staying above support at $390 and technically above the bottom of the bearish rising wedge. The RSI did move higher on today's rally which kept it in positive territory. However, the PMO was unfazed and continues lower on its overbought SELL signal.
If you draw the rising bottoms line from the October low, you can see that price is still below it, even with today's rally. The VIX nearly punctured the lower Bollinger Band on our inverted scale as the fear factor increased greatly. The good news is that this very bearish sentiment usually leads to some upside. Stochastics ticked up, but it's too early to rely on it. We will need confirmation from the PMO.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential was flat today. The hope would be an upside reversal this week.
Climax* Analysis: There were unanimous climax readings today, giving us an upside 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 DOWN and the condition is OVERSOLD.
Excellent news from our Swenlin Trading Oscillators (STOs). They have both moved higher. We saw some expansion in rising momentum, but we need to see more stocks join in. Almost 3/4ths of the index have price above their 20-day EMA, not overbought, not oversold.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
Unlike the STOs, both the ITBM and ITVM continue lower. We also lost more PMO BUY signals. With the increase in %PMOs Rising, we should see a bottom on %PMO BUY signals 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. We have fewer stocks above their 20/50-day EMAs than Silver Crosses.
The intermediate-term bias is BEARISH. While the SCI is at a favorably high reading, it has topped and could see a negative crossover soon.
The long-term bias is BULLISH. The GCI continues to rise and we have more stocks above their 50/200-day EMAs than we have golden crosses. We could see the GCI move even higher. To clarify, the bias may be bullish right now, but we do not believe this bear market is over.
CONCLUSION: While we saw an upside initiation climax on a strong rally, we would be very careful, this feels like a bull trap or blowoff event given its arriving before economic reports are out. The CPI number will be released tomorrow (Twitter-verse suggested today's rally occurred as a result of a leaked report). The Fed meeting minutes arrive on Wednesday. The market's reaction is anyone's guess, but if we see more than a 50bps raise, the market will likely fall fast. If inflation numbers look good tomorrow it will fly higher with investors believing the Fed could halt rate hikes or pare them back. The STOs and climax suggest a small rally so we'll rely on the technicals. That said, expanding exposure when there is so much up in the air is risky at best.
Erin is 10% exposed with a 5% hedge.
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Not much change in Bitcoin as it travels in a tight trading range. The 20-day EMA has not really held as support; the new support level is around $16,700. While the PMO is and has been rising, obviously it hasn't resulted in higher prices overall. It is moving back toward the mean of zero, not likely implying a breakout. Stochastics are favorable but below 80 again. The RSI has been completely unhelpful as it hugs net neutral (50). If the PMO does begin to top, a breakdown will be imminent. We don't see enough bullish evidence to look for a breakout.
The correction in interest rates appears to be ending. However, most declining trends are intact.
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
As noted in the yield section above, $TNX is one of the rates that is still in a declining trend. Today's pop did challenge the declining trend. The RSI is negative, but both the PMO and Stochastics are making moves. The PMO bottomed and Stochastics are rising vertically. We sense the correction in interest rates is about over.
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is stagnating in a tight trading range. Indicators are all flat, but we do see rising bottoms on the OBV paired with flat bottoms on price. We consider that a slight positive divergence; meaning, we would look for a breakout before we'd look for a breakdown.
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: The bearish rising wedge is about to be confirmed on Gold. GLD basically closed right on the rising bottoms trendline. The RSI is still positive, but the PMO is topping out, as have Stochastics. Based on the $GVZ, sentiment moved very bullish in the short term. If $GVZ tops here or punctures the upper Bollinger Band on the inverted scale, a decline is sure to follow.
GOLD Daily Chart: As far as $GOLD, the bearish rising wedge has executed. While $GVZ suggests new bullish sentiment, discounts for PHYS do not. Discounts are a more longer-term indicator v. $GVZ which is ultra-short-term. The bearish extremes for discounts in mid-November led into the November/December rally (more intermediate-term sentiment). Just remember that sentiment is contrarian. If we are seeing strong ultra-short-term bullish sentiment that is bearish for the metal. In the longer term, discounts are very bearish, suggesting that overall, Gold should stay above the September/October lows.
GOLD MINERS Golden and Silver Cross Indexes: With Gold likely on the ropes, Gold Miners are already feeling the pinch. participation is whittling down and the SCI is very overbought and looking toppy. Stochastics are trending lower and the PMO is about to trigger a crossover SELL signal. Might be a good time to tighten up those stops are take some profit while it is still there.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/21/2022
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Very nice rebound off support for Crude Oil. It's at the bottom of a well-established trading range which does give it a bullish bias. $OVX is about to puncture the upper Bollinger Band on the reverse scale. That is often times where you will see downside reversals. Still, Stochastics and the RSI are beginning to rise again, but the PMO is declining. Maybe another day or two of rally, but we are looking for a breakdown below this support level and a move to about $58.
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We've stated already that we believe the correction in yields was overdone and it is likely to reverse. That will put Bonds at a serious disadvantage, TLT included. While support held today, TLT printed a bearish filled black candlestick. While the rising trend drawn from the November low is still intact, we see a breakdown ahead. Stochastics did top and the PMO is beginning to decelerate in overbought territory.
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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