The Nasdaq ($COMPQ) fell twice as hard as the SPY today. The tech-heavy index had already seen a very deep correction off the all-time highs. This week's rally was strong, but it came no where close to new all-time highs. The SPY on the other hand nearly saw all-time highs. The PMO topped below its signal line, making an about face before price even came close to the signal line. It appears we have an island reversal readying. These are characterized by a gap up and then a gap back down, essentially forming a price "island".
The STOs look VERY different from the SPY's which you'll be able to view later in this report. The SPY saw the STOs hit overbought territory on the rally this week. Meanwhile the Nasdaq STOs barely made it into positive territory before contracting today. The ITBM hit oversold territory and has been contracting which is the only bright spot on the chart. The ITVM has camped out in neutral territory.
Spoiler alert, the SPY had a downside initiation climax today. Look for prices to continue lower on all of the indexes.
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: We are still seeing the defensive sectors in the Leading category and the more aggressive sectors, XLK has reached Weakening and XLY has now entered Lagging. XLE and XLF hooked back into a bearish south to southwest heading. XLV looks the most bullish as it is nearing Leading. XLC, XLI and XLB are working their way toward Improving, but are still in the Lagging category.
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 PMO also topped below the signal line on the SPY. This can be considered especially bearish. The RSI is also weakening. The VIX is struggling to stay above its moving average on the inverted scale which suggests more volatility ahead.
Price topped before testing the top of the rising trend channel which is also bearish.
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 inched slightly higher. Interestingly the GCI maintained its reading from yesterday.
S&P 500 New 52-Week Highs/Lows: New Highs are contracting, but we didn't see any New Lows. The 10-DMA of the High-Low Differential is flat and attempting to bottom which is generally good for the market.
Climax* Analysis: Today Net A-D Volume and the DOWN/UP Volume Ratio indicators reached what we consider to be climax levels, but just barely. SPX Total Volume contracted and was well below the one-year daily average. Nevertheless, we think we can call this a climax day -- downside initiation. It is a marginal setup, and we'll probably know if it is the correct call when the market opens tomorrow. As it stands, we'll expect more downside until shown otherwise.
*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.
All of these indicators have topped in overbought territory which is bearish in the short term.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
IT indicators are still on the rise coming out of oversold territory. This is encouraging.
Bias Assessment: Participation tipped over which is bearish, but percentages of stocks > 20/50-EMAs are still higher than the SCI which leaves us with a more neutral bias. The SCI is about to cross above its signal line which gives us a bullish bias in the intermediate term. Long-term deterioration suggests the bullish long-term bias is deteriorating.
CONCLUSION: Two days ago we had an upside exhaustion climax and now we have a downside initiation climax. The STOs contracted sharply out of oversold territory. This tells us to expect lower prices ahead. Given the intermediate-term bias is neutral to bullish, the rising trend channel should hold up, but... that trend can be maintained even with a drop to $445 on the SPY. If intermediate-term indicators begin to turn back down in negative territory, we should prepare for a drop out of that rising trend. Continue to play defense and remember that your investment horizon has been shortened given weak indicators. Longer-term investments should be considered short-term. Time to babysit or consider sitting out. Erin is only 15% exposed to the market with 85% in cash.
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BITCOIN
Bitcoin managed to push past the 200-EMA, but never could recapture its prior rising trend. It is failing again. The indicators are negative. Expect another test near $42,500.
INTEREST RATES
Rates are rising again in unison.
10-YEAR T-BOND YIELD
It looked like $TNX was going to break from the bearish rounded top. Instead the 20/50-EMA held as resistance. The RSI topped below net neutral (50) which is bearish, but the PMO is flat and hasn't really turned down. If the market moves lower as we expect it to, Bonds will likely be the vehicle of choice which would mean lower yields.
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 rebounded somewhat. There is now a short-term declining trend. We now have a flat bottoms and declining tops which is a bearish descending triangle. You can still make out a double-top as well. At this point the 20-EMA is holding up and the RSI is positive. The PMO is on a SELL signal, but its flattened out.
The chart is mixed so at this point we expect to see support tested at $25.60.
GOLD
IT Trend Model: SELL as of 12/7/2021
LT Trend Model: SELL as of 12/3/2021
GLD Daily Chart: GLD broke its very tenuous short-term rising trend. Indicators had begun to look more bullish, but now have a distinctly bearish bias with the PMO and RSI continuing to move further into negative territory.
GOLD Daily Chart: Discounts are paring back which means investors are slightly less bearish on Gold. Look for $1760 to be tested.
GOLD MINERS Golden and Silver Cross Indexes: Miners were starting to recuperate somewhat but the "under the hood" indicators told us it could be another fake out breakout. Right now there is barely a pulse.
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 fell hard today after getting back above the 20-EMA. Gap resistance held up. The RSI is quite negative, but the PMO didn't sustain much damage. We could be looking at a bullish cup with handle forming.
Support at the July highs didn't hold so USO is vulnerable to a larger decline.
BONDS (TLT)
IT Trend Model: BUY as of 11/8/2021
LT Trend Model: BUY as of 11/5/2021
TLT Daily Chart: TLT was up as yields were lower, but the PMO is still negative. The RSI did get back into positive territory. As noted earlier, if the market moves lower as we expect it will, look for a bounce off the 50-EMA.
Price is also holding above the January low. This should provide sturdy support, but we'd like to see the PMO turn back up.
Technical Analysis is a windsock, not a crystal ball.
--Carl & Erin 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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