I apologize up front for the "eye test" CandleGlance, but you need to see the PMO on all eleven sectors at once. Notice that all of the PMOs are configured negatively. The few that look like they are bottoming are Consumer Staples (XLP), Real Estate (XLRE) and maybe Utilities (XLU).
I did the homework for you by reviewing those three sector charts and none of them have rising PMOs. The one sector I'm bullish on, XLP, saw the PMO top beneath its signal line today. XLRE and XLU PMOs are still trending lower. (You'll find these charts in the Sector ChartList. The links are on the lefthand side of the Blogs and Links page on the website).
Now that we've looked at the PMOs, sit back and take in the price patterns on all of these charts. XLC continues to be beat down and most of the others had failures at key moving averages. The only "kind of" okay price patterns are on XLP (possible symmetrical triangle), XLE (holding above 50-day EMA, but failing at 20-day EMA) and XLU (holding 200-day EMA as support).
The market is exceedingly weak. A review of the CandleGlance above tells you how bearish it really is. Carl and I continue to hear that we shouldn't be calling this a bear market because the SPX hasn't lost 20% yet. Dear subscriber, would you want us to wait until the market drops 20% before announcing a bear market? I think the signs are clear. I'm now on the lookout for bear market rallies.
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 most bullish sectors on the short-term RRG are XLB, XLF and XP. They all have bullish northeast headings and the are Leading.
XLI also looks encouraging as it is Improving and has the bullish NE heading. XLY was beginning to see some outperformance, but is moving south. It may still reach Leading, but only as it makes its way lower.
XLK and XLV are very Weak based on heading and location. XLC, XLRE and XLU are traveling toward Improving, but none are really traveling eastward and they are residing in Lagging.
XLE is an outlier and has been for some time. It is so far away from the center point because it has been outperforming the SPY by leaps and bounds. It is time for a pause on XLE. You can see in the CandleGlance above that it has just triggered a PMO SELL signal. I realize it is headed toward Lagging, but it has quite a bit of distance to get there and it could easily begin heading northward when the pullback/pause is over.
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: NEUTRAL as of 1/21/2022
LT Trend Model: BUY as of 6/8/2020
SPY Daily Chart: On Friday we mentioned the potential for a double bottom, but let us emphasize that it isn't a bottom until it's a bottom. That would mean, at the very least, that we get a day when price closes higher than the prior day, and preferably a price break above the steepest short-term declining trend line. A higher intraday low would help too. Until then, a continued decline is most likely.
Indicators are very negative. The RSI is negative/well-below 50. The PMO is falling/negative and on a SELL signal. Stochastics are still in decline. The VIX is interesting. I'll address that later.
S&P 500 New 52-Week Highs/Lows: This chart became very popular over the past week as I revealed how New Highs/New Lows indicators called the 2020 bear market low. Today we saw an expansion in New Lows. The 10-DMA of the High-Low Differential is nearing zero. We will want to see it begin to bottom as that generally precedes market lows.
Climax* Analysis: There was strong climactic activity today, giving us a downside exhaustion climax. Volume Ratios were elevated, Total Volume was well-above the annual average and breadth was higher to the downside. The VIX looks very good right here especially given it is arriving on a downside "exhaustion" climax. Typically a puncture of the lower Bollinger Band on the inverted scale leads to some form of higher prices. After the last VIX bottom we did see higher prices but only two days.
*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 DOWN and the condition is SOMEWHAT OVERSOLD.
STOs are mixed today. We see participation of stocks > 20-day EMA continues to thin, but is not oversold yet. Looking at the opening CandleGlance of the sectors, it isn't surprising to see only 19% of the SPX having positive momentum. Again, none of these indicators are really oversold--we saw much lower readings last month.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM/ITVM are falling fast again. They are somewhat oversold, but comparing today's readings to the 2020 readings--they are barely oversold. %PMO Crossover BUY signals is not oversold either.
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 SCI topped beneath its signal line and continues lower. It is near-term oversold. The GCI has fallen below the bullish 70% reading and is also moving lower. %Stocks > 20/50-day EMAs are below the SCI suggesting a bearish short-term bias and a bearish IT bias based on the low SCI reading itself. The long-term bias is also bearish given %Stocks > 200-day EMAs is below the GCI percentage. When %Stock indicators move below SCI/GCI readings, it tells us that the SCI and GCI will have difficulty moving higher.
CONCLUSION: The world and therefore the market is plagued with instability. Today Russia invaded Ukraine or there are incursions in the East (potato, po-tah-toe). The market handled the Russia/Ukraine news very well given we only saw a 1% decline. Economic sanctions are on the horizon. Oh, and I forgot to mention Taiwan. The Olympics are over so expect fresh pressure by China to annex Taiwan. I digress.
The technical picture is weak. Most indicators are falling and none of them are as oversold as they can get. We did get a downside exhaustion climax today so we should see a pause in the decline, if not higher prices. If we see a market rally out of this, we can then consider the possibility a bullish double-bottom and bear market rally. Regardless... keep your defensive posture! If this level of support doesn't hold at last month's low, this could get much worse.
I have 8% exposure to the market.
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BITCOIN
Since it was tweeted by the White House that they are interested in figuring out how to regulate and/or control cryptocurrencies, Bitcoin has tumbled. This decline busted a short-term bullish head and shoulders. The PMO is on a new crossover SELL signal and the RSI is negative. There is some hope as the RSI and Stochastics are beginning to rise out of oversold territory. I am looking for a test of 30,000.
INTEREST RATES
Rates pulled back last week but we didn't see any rising trends broken. Today shorter-term rates rose while long-term rates paused.
10-YEAR T-BOND YIELD
The rising trend channel suggests that the 10-year yield will rebound soon. It is sitting on support at the 20-day EMA, the earlier February low and January top. The bottom of the rising trend channel also lines up with that support. Stochastics and the PMO aren't convinced this level will hold. I have to wonder as well given the flight to Bonds. I would look for rates to hold this level a bit longer, but we should prepared for a breakdown.
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 isn't doing much except bounce around the 20/50-day EMAs. The PMO did trigger a crossover BUY signal and Stochastics are rising and hit positive territory. Even the RSI has moved above 50. I'm bullish on the Dollar.
However, we do have a bearish rising wedge forming.
GOLD
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: I was sad to see a bearish filled black candlestick today. Typically they lead into price tops. There is also the possibility it is setting up an "island reversal" pattern. That implies a gap down ahead. Notice three times in the last six months price tops were island reversals on GLD.
GOLD Daily Chart: However, the indicators are still strong. The RSI is positive and not overbought, Stochastics are oscillating above 80 and the PMO is rising strongly.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners pulled back today after an unsuccessful test of overhead resistance at the November high. Participation is still strong as the SCI continues to rise, but we do see some deterioration on %Stocks > 20/50/200-day EMAs and Stochastics are topping. Overall the picture is still bullish for Gold Miners, just be selective when you choose one.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Big filled black candlestick on USO which is quite bearish. It is forming an island as well. The PMO is on a crossover SELL signal, but Stochastics and the RSI are improving. Russia/Ukraine will affect energy prices depending on sanctions. I won't venture a guess on 'what' and 'how'.
BONDS (TLT)
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: There is quite a bit of interest in Bonds right now as investors turn to them to hide out. This will see Bond prices move higher and yields likely move lower. The technicals look great on TLT right now, but we do have serious overhead resistance ahead at the January low and 20-day EMA. Indicators suggest a breakout as Stochastics and the RSI are rising and the PMO nears a crossover BUY signal.
Technical Analysis is a windsock, not a crystal ball.
--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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