The S&P 600 ETF (IJR) saw the 20-EMA cross below the 50-EMA. This is the opposite of a "Silver Cross" so we have named it a "Dark Cross". This triggered an IT Trend Model Neutral signal on IJR. It isn't a SELL signal because the 50-EMA is still above the 200-EMA (it's on a "Golden Cross").
Here are our "under the hood" indicators for IJR. You'll find this chart as well as other sector and broad market indexes in our "Golden Cross/Silver Cross ChartList" available in the upper left-hand corner of our "Blogs and Links" page. Participation of stocks above their 20/50/200-EMAs is skinny. Less than a third of the stocks are above their 20/50-EMAs. Compare that to the SCI which is at 47.5% for IJR. This gives us a very bearish bias in the short and intermediate terms. Only 54% have price above their 200-EMA. That is far less than the GCI reading giving IJR a bearish bias in the long term as well. Be sure and watch today's DecisionPoint Show when it is released (I should have it ready for tonight's DecisionPoint Newsletter) as we did an "under the hood" review of the Nasdaq. Those numbers are even worst.
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, and only 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.
RRG® Chart: The only sectors in the "Leading" quadrant are defensive. XLK had looked promising going into this week, but as I mentioned on Friday, if the market was not going to break out, XLP would be the sector to watch. XLE is losing strength. XLI and XLB are moving in the north, northeast direction which is bullish. XLF and XLC look less promising and XLE is moving south. It is in Improving, but with that heading it could slip back into Lagging.
CLICK HERE for an animated version of the RRG chart.
CLICK HERE for Carl's annotated Sector charts.
THE MARKET (S&P 500)
IT Trend Model: BUY as of 10/18/2021
LT Trend Model: BUY as of 6/8/2020
SPY Daily Chart: Price is stuck below all-time highs. The rally looked promising on Friday as price closed at all-time highs, but with today's big decline, the PMO has topped below its signal line which is an especially bearish condition. Total Volume expanded today and the VIX reading was higher, suggesting nervousness among market participants.
Price has now turned back before testing the top of the rising trend channel. That is bearish and suggests price will succumb and test the 50-EMA at a minimum.
PARTICIPATION: 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 SCI had a positive crossover its signal line and is nearing a 60% reading which is still bullish. The heartburn that Carl and I have is the continued deterioration of the GCI. Given price is testing new all-time highs, we shouldn't see so many stocks on "Death Crosses". Nearly one quarter of the SPX is correcting in the long term.
S&P 500 New 52-Week Highs/Lows: New Highs popped higher today, but these are intraday readings so the total is likely much less after the SPX pulled back on the close. The 10-DMA of the High-Low Differential is now rising which is usually bullish in the intermediate term.
Climax* Analysis: Carl and I agree that we had a downside initiation climax that is a continuation of our last downside initiation on Thursday. The Down/Up Volume Ratios confirm this as a climax. Granted the Down/Up Volume Ratio for the SPX was below the 3.0 threshold, but breadth was elevated, as was Total Volume.
*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 indicate either initiation or exhaustion.
Short-Term Market Indicators: The short-term market trend is UP and the condition is OVERBOUGHT.
We had a thrust to the upside on Friday, but we saw no follow-through. Instead the STOs have pulled back from overbought territory. Participation is sliding lower with just a little over half of the SPX holding rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
IT indicators we somewhat mixed. The ITBM hit positive territory, but the ITVM was flat. We do see %PMO BUY signals on the rise, but remember only 55% have PMOs that are rising so improvement on that indicator is going to be very limited.
Bias Assessment: On Friday we had a somewhat bullish bias, but with participation percentages dropping below the SCI reading, the short- to intermediate-term biases are moving bearish. The long-term bias is bearish given the GCI is in decline and there are few stocks with price > 200-EMA.
CONCLUSION: The sectors that are currently leading are all defensive. Sector rotation models tell us that when these sectors rally, the market is nearing a strong decline. Today's downside initiation climax suggests we will see lower prices in the next day or two. Given that price is unable to push past overhead resistance and STOs have moved bearish, we should see lower prices throughout the week. The Fed comments are Wednesday, so as investors anticipate the prospect of "tightening" fiscal policy and the highest inflation reading since the 80's, we expect investors to continue to head for the exits. I had considered expanding my exposure this week, but given the bearish bias in all three timeframes, I'll continue to sit out. I'm 10% exposed to the market.
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BITCOIN
Bitcoin continues to flounder. It's been over a week that it has tried to recapture the rising trend and support at the 200-EMA. Indicators are very bearish with a PMO top below the signal line and the RSI/Stochastics oscillating in negative territory below net neutral (50). Expect another test near $42,500.
INTEREST RATES
Rates dropped significantly today. However, with the Fed planning on tightening and raising rates, we expect this decline will be reversed in the short term.
10-YEAR T-BOND YIELD
The 10-year yield lost more than 4 basis points. The RSI and Stochastics turned down before reaching positive territory and the PMO has topped below the signal line. 13.5 should hold as support, but the indicators are very bearish right now.
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar finished higher but remains in a pennant formation. Given the pennant is sitting on a flagpole, we would expect an upside breakout. The PMO is on a SELL signal, but it has flattened out. The RSI and Stochastics are looking good.
GOLD
IT Trend Model: SELL as of 12/7/2021
LT Trend Model: SELL as of 12/3/2021
GLD Daily Chart: Gold is rallying a bit. Indicators are showing improvement. Given there is a bullish spin to the Dollar chart, we would expect Gold will be rallying with a headwind. We are bullish on Gold, but upside potential is limited.
GOLD Daily Chart: Stochastics are rising, albeit very slowly. We have a cup and handle-ish pattern on $Gold. Discounts have been getting higher and that generally happens near reversals to the upside. We've seen deeper discounts but this is encouraging.
GOLD MINERS Golden and Silver Cross Indexes: Miners are clinging to support right now. If we get a rally, that would set up a nice double-bottom, but we don't have a solid reversal yet. The SCI has flattened and appears ready to turn back up, but that won't be possible if more stocks don't get above their 20/50-EMAs. Participation is very weak and Stochastics are very negatively configured.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/30/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Crude Oil has formed a bullish flag formation. Price is up against layers of resistance at the 20-EMA, gap resistance and the 50-EMA. If it can move past those levels, it still has to push past the September top.
The PMO is somewhat promising, but it is flattening out. The RSI can't seem to find its way back into positive territory. Overall we do expect to see prices breakout, it just may be slow going.
BONDS (TLT)
IT Trend Model: BUY as of 11/8/2021
LT Trend Model: BUY as of 11/5/2021
TLT Daily Chart: TLT not surprisingly had a strong day. This has the RSI in positive territory. The PMO is avoiding a crossover SELL signal and Stochastics are rising again.
However, price is already up against very strong resistance and the 20-year yield is nearing support at 1.75%. Rising yields mean falling Bonds.
Technical Analysis is a windsock, not a crystal ball.
--Carl & Erin 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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