Natural gas use has become a hot button in the United States as bans begin to be discussed or enacted in certain states and cities. Whether you believe this is good or bad, it is news. A subscriber recently asked us to review natural gas (UNG) and today seems a good day to do just that given its giant -6.48% decline.
We doubt that the news is causing problems for UNG. It doesn't matter. The technicals on the weekly chart of UNG look terrible. Natural gas prices dropped more than 79% from the 2018 high to the all-time low. On the flip side, it rallied over 300% out of that all-time low. All-time lows are about to be reached. More than likely our subscriber is eyeing this one on thoughts of getting in on a possible big gain when it reverses. We get it, but beware, it still has another 18% it can decline before reaching all-time lows.
Unfortunately, there's no good news on the technical horizon. The weekly relative strength index (RSI) is now below 20. It's oversold, but still retreating. The weekly DecisionPoint Price Momentum Oscillator (PMO) is now in oversold territory but is showing no signs of a reversal ahead. Worse yet, the StockCharts Technical Rank (SCTR) is at 0%. This means there are no exchange-traded funds (ETFs) worse than this one.
Conclusion:
Natural gas prices look like they're about to reach all-time lows. But it's not a reversal candidate yet. The indicators are still weak. Add to that the low SCTR, it may be a while before you can load up on natural gas. Keep it on your ChartList. We have it on ours and will notify you when natural gas begins to look interesting again.
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
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 1/12/2023
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: Price closed above 400 today, but did not achieve a higher high than Monday. The indicators are healthy given the RSI is holding in positive territory above net neutral (50). The PMO is still on a gentle rise. However, price is forming a bearish rising wedge which would imply a drop below the short-term rising bottoms trendline.
Price starting to get above the longer-term bear market declining tops trendline, but at this time we see it as a "drift" sideways rather than a true breakout. Stochastics are still oscillating above 80 and the VIX is oscillating above its moving average on the inverted scale. Both imply internal strength.
Here is the latest recording from Monday (1/23):
S&P 500 New 52-Week Highs/Lows: New Highs contracted quite a bit on today's mostly unchanged trading day. Technically, the 10-DMA of the High-Low Differential is rising, but really we see it as flat and unresponsive.
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 UP and the condition is NEUTRAL.
STOs moved higher with gusto putting them both back in positive territory. They still have plenty of room to accommodate more rally. It isn't surprising to see very little change in rising momentum within the index given it finished only a tad higher.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT.
The ITBM/ITVM continue to rise which confirms the short-term indicators' bullish stance. There is one problem though and that would be the contraction of PMO BUY signals. It was only by 2%, but we were just getting revved that it had bottomed above the signal line. Now we could be looking at a negative crossover occurring tomorrow.
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 BULLISH.
The intermediate-term bias is BULLISH.
The long-term bias is BULLISH.
Yesterday's comments still apply:
"This second day of rally has pushed all timeframes into bullish biases. We have a solid amount of stocks above both their 20/50-day EMAs and the SCI has bottomed above the signal line. There are more stocks above their 50/200-day EMAs than those with Golden Crosses (50-day EMA > 200-day EMA). This means the already rising Golden Cross Index will likely continue higher."
CONCLUSION: We are still seeing internal strength and a bullish bias in all three timeframes. If you want something to worry about, there is a rising wedge developing combined with a loss of both New Highs and PMO BUY signals. However, if we lean into our PMO, Swenlin Trading Oscillators (STOs) and ITBM/ITVM for direction, we must remain bullish, but we also are cautious given the worries we've stated above. This is why we use the phrase, "climbing the wall of worry".
Calendar: There is an FOMC meeting next week with the announcement on Wednesday. The Fed is expected to raise rates again, but by only 25 basis points this time.
Erin is 15% exposed.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact support@decisionpoint.com for more information!
BITCOIN
Bitcoin had another strong breakout. Apparently the memories of the FTX crash have been left behind. The big problem for Bitcoin is that it is terribly overbought based on the RSI and PMO. At the same time, volume is expanding based on the OBV and Stochastics are above 80. As we often say, overbought conditions can persist in a bull market. Bitcoin is definitely in a bull market.
INTEREST RATES
Yields are attempting to break declining trends, suggesting we could see another test of 2022 highs.
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
Yesterday's comments still apply:
"$TNX fell today but remains comfortably above support and the intermediate-term rising bottoms trendline. We consider this a symmetrical triangle. These are continuation patterns which implies an upside breakout given the prior trend was up. The PMO is trying to turn up, but the RSI is still very weak. Stochastics are rising, but have quite a bit of ground to cover before we would consider them bullish. We believe this support level will hold and an upside breakout will occur."
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is now beginning to drift lower. It hasn't dropped below last week's intraday low, but it is on its way. The indicators are still very weak with the RSI in negative territory and the PMO on a SELL signal, also drifting lower. Stochastics, which we consider an early warning signal, are still below 20 and declining. We expect more decline.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Yesterday's comments still apply:
"The Dollar's weakness is Gold's strength simply based on their near-perfect reverse correlation. However, you'll note that Gold is exhibiting strength against the Dollar as well. Now we are able to see a rising trend channel. We are bullish on Gold, but it could see a test of the bottom of the rising trend channel on its way higher. The RSI and PMO both tell us that Gold is overbought so a small decline would help."
GOLD Daily Chart: $GVZ Bollinger Bands are extremely tight so deciphering internal strength based on location above or below the moving average or punctures of the Bands doesn't really work. Discounts have held steady, also not enlightening. Based on the PMO and Stochastics as well as Gold's strength against the Dollar, we believe the rising trend will hold. A small pullback would be useful though.
GOLD MINERS Golden and Silver Cross Indexes:
Editor's Note: Today was "ETF Day" in DecisionPoint Diamonds. GDX was a pick today. Here is the write-up from that report. If you want to add Diamonds, you'll get it at your current price tier, not the new pricing.
Predefined Scans Triggered: New CCI Buy Signals, Moved Above Upper Keltner Channel, Moved Above Upper Price Channel and P&F Double Top Breakout.
GDX is up +0.24% in after hours trading. This is one strong group. You may recall that I brought GDXJ, Junior Gold Miners ETF (I own GDXJ) to the table in early November. It follows the same path as GDX. Both charts look great, but I have more information on GDX as far as 'under the hood' indicators so I selected it this time. Today's breakout was excellent, bringing it above the June top. Next up is 40.00 and I believe it can make it there. The RSI is positive and not quite overbought. The PMO has bottomed above its signal line. It is on the overbought side, but I'll talk about that in a minute. Stochastics are oscillating above 80 and the OBV is steadily rising. As far as overbought conditions, you'll note that participation is very overbought with nearly 100% of stocks above their 20/50/200-day EMAs. The Silver Cross Index is above 96%. The Golden Cross Index isn't overbought and it is at a healthy 69%. Note back in February and March how overbought the indicators were. Notice they held that condition for weeks and weeks. In a bull market (which GDX is in), overbought conditions can persist. The stop is set at 6.9% around 30.97.
Everything is going well on the weekly chart as well, suggesting this could turn out to be an intermediate-term trade as well as a short-term trade. The weekly RSI is positive and not overbought. The weekly PMO is rising and is no where near overbought. The StockCharts Technical Rank (SCTR) is at an outstanding 99.3%. The SCTR tells you how the ETF ranks among all other ETFs that are tracked by StockCharts as far as trend and condition primarily in the intermediate to long terms. Upside potential is over 23%.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/23/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: USO finished higher on the day, but set both a lower low and a lower high. It is acting very "toppy". Fortunately, indicators are all positive. The RSI is sitting comfortably within positive territory. The PMO is rising, but is decelerating somewhat. Stochastics are oscillating above 80, but are falling. $OVX is above its moving average on the inverted scale suggesting internal strength. There are definitely some mixed messages, but overall we believe the indicators are bullish and USO should resume its rise.
BONDS (TLT)
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT is attempting a comeback after bouncing off the 20-day EMA and support at the mid-December low. Stochastics are beginning to see some improvement. The RSI is positive and the PMO is still on a BUY signal even if it isn't rising strongly. We still believe this is a last gasp for Bonds. A breakout above the 200-day EMA would raise our eyebrows though.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
(c) Copyright 2023 DecisionPoint.com
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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.