We were all set to do a "Monthly Wrap" today when we were rudely awakened by the fact that the market is open tomorrow. Apparently because the end of the month lands on Friday, the market is open (all those accountants and analysts will have to put together end of year reports). Nothing like finding out you don't have the three day weekend you were counting on...ah well, good thing I love what I do!
No holiday observed, pursuant to NYSE Rule 7.2, NYSE American Rule 7.2E, NYSE Arca Rules 7.2-O and 7.2-E, NYSE Chicago Rule 7.2, and NYSE National Rule 7.2.
Today the 20-day EMA crossed above the 50-day EMA on XLF. That is a "Silver Cross" which translates into an Intermediate-Term Trend Model BUY signal. However, both of those moving averages are "braiding", meaning we could see it whipsaw if price drops below the 50-day EMA. The chart is favorable given the rising PMO, positive RSI and Stochastics above 80. We also have a short-term bullish bias given %Stocks > 20/50-day EMAs is higher than the SCI percentage. However, participation is beginning to top somewhat. My other issues with XLF are its inability to breakout above the December high and its declining relative strength line.
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.
Short-term (Daily) RRG: We have only three sectors that are "Leading" with XLV and XLRE shifting toward a southward heading toward Weakening. Materials is the newcomer to Leading and looks great moving into next week. XLK is nearing Lagging as it travels in the bearish southwest direction. XLF is unsure as to where it wants to go. XLY is about to enter Improving. XLI and XLE have made it into Improving. XLC was our "sector to watch" last week in DP Diamonds Recap. It is still looking bullish on its chart and this week's Diamonds "Darling" was from this sector.
RRG® charts show you the relative strength and momentum for a group of stocks. Stocks with strong relative strength and momentum appear in the green Leading quadrant. As relative momentum fades, they typically move into the yellow Weakening quadrant. If relative strength then fades, they move into the red Lagging quadrant. Finally, when momentum starts to pick up again, they shift into the blue Improving quadrant.
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: The market is now consolidating after its breakout to new all-time highs. Indicators are still mostly positive although Stochastics are beginning to top. Total Volume reflects holiday trading.
The problem we see now is that price turned back down before testing the top of the rising trend channel and we have a strong OBV negative divergence with price.
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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 continues to rise bullishly, but there is still a negative divergence with price. The GCI crossed above its signal line and is reading at a bullish 79.4%. The GCI also is in a negative divergence with price.
S&P 500 New 52-Week Highs/Lows: New Highs are still in overbought territory. The High-Low Differential still looks bullish as it rises higher and isn't overbought yet.
Climax* Analysis: No climax today. The VIX Bollinger Bands are contracting somewhat, but the readings haven't reached the upper Band on our inverted scale. The VIX is moving mostly sideways at a complacent 17.33 reading.
*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 EXTREMELY OVERBOUGHT.
The STOs are both topping in overbought territory suggesting a price decline in the making. Of course, the mid-October overbought STOs didn't result in any damage whatsoever. We do not see negative divergences at all on this chart. Participation is topping somewhat but both %Stocks > 20-day EMA and %PMOs Rising are at bullish 86% readings.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM is now clearly overbought. The ITVM is elevated but not quite overbought yet. Both the ITBM and ITVM have negative divergences. 80% of stocks have PMO BUY signals. That reading is unfortunately overbought and still carries a slight negative divergence with price tops, but ultimately it is still rising strongly which is bullish.
Bias Assessment: The bullish bias continues in all three timeframes. There are far more stocks above their 20/50-EMAs than there are Silver Crosses. This means the SCI should continue rising which gives us a short-term bullish bias. The SCI reading is bullish at 63% and continues to rise so there is also an intermediate-term bullish bias. Long term, the GCI reading is below the %Stocks > 200-day EMAs which suggests a bullish long-term bias as well.
CONCLUSION: The market has begun to consolidate after a strong rally to new all-time highs. Sideways price movement is what we'd expect during holiday trading, but we would also expect it after a strong breakout rally. Short term there are problems with overbought readings and topping indicators so we do need to stay alert. IT indicators are very bullish but they carry negative divergences. Basically there are problems under the surface that will eventually have to be addressed by the market. Regardless, we currently have a bullish bias in all three timeframes. Tomorrow we expect Total Volume to be even lower than we've already seen. If we thought the market was closed, I imagine others did too!
Tomorrow we will do a "Monthly Wrap" and review weekly and monthly charts that have gone "final" in addition to the charts we look at daily.
I'm 10% exposed to the market. I have decided not to expand my exposure but will reevaluate after the holiday given the negative divergences and overbought short-term indicators.
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BITCOIN
A symmetrical triangle has formed on Bitcoin. These are continuation patterns so we should expect a breakdown from the pattern since the prior trend was down. The PMO is still headed toward a crossover SELL signal below the zero line, the RSI is negative and Stochastics look terrible as they accelerate further into negative territory.
INTEREST RATES
Rates are now in rising trends suggesting Bonds are not an ideal investment.
10-YEAR T-BOND YIELD
$TNX finally broke out from the rounded top and key moving averages. The indicators are positive despite today's nearly two basis point decline. Our expectation is that rates will continue to rise. Typically a rising rate environment is good for Financial stocks which does go hand in hand with today's Silver Cross BUY signal on XLF.
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 broke down from the symmetrical triangle but found purchase on the 50-EMA and late November low. The RSI has drifted into positive territory and Stochastics are turning up in oversold territory. However, the PMO is still moving lower and isn't quite oversold.
The Dollar overall is sitting in "neutral" and likely will continue to move sideways given the mixed indicators.
GOLD
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: SELL as of 12/3/2021
GLD Daily Chart: Gold rallied strongly. The indicators look great. If price can remain above the 200-day EMA, we should see a "Golden Cross" soon.
$GOLD Daily Chart: Discounts remain elevated suggesting investors are still bearish on Gold. That should work to its advantage given sentiment is contrarian.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners continue to look very bullish. This was my "Industry Group to Watch" last Thursday and it has followed through. The RSI is positive, the PMO is rising and Stochastics are oscillating above 80--all of this is bullish. The indicators under the hood are quite favorable. Participation is improving and the SCI is beginning to rise. Since participation readings are rising and are much higher than the SCI, we have a strong short-term bullish bias.
Check out $DJUSMG (Mining industry group). I don't have "under the hood" indicators for this one, but you can see the chart is also very bullish.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/30/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: The rally continues for Crude Oil and given the bullish indicators, we would expect to see price continue higher. We even have a "Silver Cross" BUY signal in the making.
BONDS (TLT)
IT Trend Model: BUY as of 11/8/2021
LT Trend Model: BUY as of 11/5/2021
TLT Daily Chart: TLT managed to bounce off the 200-day EMA and the intermediate-term rising bottoms trendline. Indicators are trying to turn positive, but given the rising 20-year yield, downward price pressure remains.
Happy Charting!
-Erin Swenlin
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"Technical Analysis is a windsock, not a crystal ball." -Carl Swenlin
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)
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