Natural Gas (UNG) had a small breakout today. We have been talking about UNG in our trading rooms for awhile. It is a chart that is being watched closely by investors and the two of us. Full disclosure, we both own a position in UNG.
Since December, UNG has fallen a stunning 68%. UNG hit all-time lows last week after logging them for days. We thought we had the reversal when price held up the decline and started moving sideways. It turned out to be a bull trap. Today price closed above resistance from that small trading range. The magic of math is that the percentage down is not the same as the percentage gain. We aren't saying that UNG will move up 200%+, but if it regains that December price top it would be.
Indicators are now firming up. The RSI is about to finally hit positive territory. The PMO is on a crossover BUY signal and has bottomed above the signal line after price bottomed last week. Stochastics are rising strongly above 80. UNG should rally much higher. Keyword: should.
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 1/12/2023
LT Trend Model: BUY as of 2/9/2023
SPY Daily Chart: The bearish filled black candlestick yesterday fulfilled with today's decline. Unlike the last decline which was a hollow red candlestick, this is a filled red candlestick which tells us that price closed below the open and below yesterday's close. It isn't good to see on a drop out of a bearish chart pattern (rising wedge) that takes price below support at the 200-day EMA.
Indicators are bearish across the board. The RSI is below net neutral (50), the PMO is nearing negative territory on a SELL signal and Stochastics are below 20. To add insult to injury, the VIX is below its moving average on our inverted scale which suggests internal weakness.
Here is the latest recording (2/27):
S&P 500 New 52-Week Highs/Lows: New Highs/New Lows were even today. Since the top, New Highs have been trending lower and New Lows are beginning to expand.
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 DOWN and the condition is OVERSOLD.
Considering we saw a decline today, we were startled to see that the STOs have both begun to rise. %PMOs Rising fell again so participation continues to thin.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
IT indicators did not confirm the reversal on the STOs. %PMO BUY Signals continue to contract. With only 11% showing rising PMOs, this indicator will continue to fall.
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.
Yesterday's comments still apply:
"The overall market bias is BEARISH.
We don't need to separate out the timeframes because all three timeframes show bearish biases. We have a very low number of stocks above their 20/50-day EMAs and no improvements are being made. The Silver Cross Index is falling and will continue to fall as long as we keep seeing fewer stocks above their 20/50-day EMAs. The Golden Cross Index rose slightly, but with far fewer stocks holding above their 50/200-day EMAs, it is going to be very difficult for it to rise much further."
CONCLUSION: Yesterday we wrote that we would be keeping an eye on short-term indicators as they were getting very oversold and a their reversal would shift our thinking. It has to some degree. Seeing these indicators rising on a down day was definitely notable. We would like to see confirmation from IT indicators and of course, the PMO, but this has our attention despite of the loss of support today. Other short-term indicators are still falling and could get more oversold, but we think an upside reversal is beginning to brew.
Erin is 22% exposed.
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BITCOIN
Bitcoin is traveling within a large bearish rising wedge. Indicators have turned bearish. The RSI is now below 50, the PMO is moving lower and Stochastics have topped and dropped below 50. Price is begging to breakdown, but as we know Bitcoin likes to be a rule breaker.
INTEREST RATES
Rates continue to trend higher after forming, and in some cases executing, bullish double-bottom chart patterns. The rising rate environment should continue.
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:
"After breaking out above the confirmation line of the bullish double-bottom, price is consolidating. Indicators are still bullish so we would expect the rally to get going again soon."
DOLLAR (UUP)
IT Trend Model: BUY as of 2/27/2023
LT Trend Model: BUY as of 2/24/2023
UUP Daily Chart: UUP bounced off support at the January high but at the same time broke down below the short-term rising trend. The indicators are very favorable and support did hold so we would expect the Dollar to continue to rise.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold managed a rally even though the Dollar was up. This implies more buyers and a strengthening of Gold. Indicators want to be positive. The RSI is rising and the PMO is decelerating. Stochastics are gently rising. However, fighting the Dollar will be difficult.
GOLD Daily Chart: No real change in discounts on PHYS. They are still bullishly high, but it hasn't yet resolved with a rising trend yet.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners had a decent day and indicators are looking a smidge less bearish. The RSI bottomed and is back above 30. The PMO is decelerating and the Silver Cross Index has steadied with Stochastics rising again. We wouldn't wade back in here yet. We need to see improvements to participation of stocks above their 20/50-day EMAs.
CRUDE OIL (USO)
IT Trend Model: SELL as of 2/2/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil remains in a trading range, but today saw a bearish filled black candlestick. These don't always resolve to the downside. It is arriving as price hits overhead resistance at the 20/50-day EMAs. Indicators are completely flat and neutral. Given price isn't quite halfway up into the trading range, we would expect it to move higher. The indicators just need to start hinting at which direction USO might go.
BONDS (TLT)
IT Trend Model: SELLas of 2/21/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT isn't giving up. Today saw a big bullish engulfing candlestick that not engulfed yesterday's candle body but also Friday's. The 20-year yield still looks bullish so while TLT is making a valiant effort, we believe it will eventually fail. We do reserve the right to change our minds if indicators turn bullish; the RSI is already moving away from negative 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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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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