The Golden Cross Index (GCI) is powerful indicator that Carl developed a few years ago. The GCI measures how many stocks within a sector or index have a 50-day EMA above the 200-day EMA or better said, how many stocks are on a golden cross. We feature the SPX GCI in every DP Alert, but I thought it was time to review it on the Nasdaq and NYSE as well.
You'll note that the SPX has the highest GCI reading of the bunch, but it is at a paltry 55% (we consider 70% or higher to be bullish). However, the SPX's GCI is much higher than its brethren's. The NYSE is at 44%. The worst is the Nasdaq at 26%. What is important to note is that even the Nasdaq's GCI isn't that oversold when compared to the 2020 bear market reading. The NYSE and in particular, the SPX are not at all oversold right now. This is an "official" bear market (down 20%+) for at least the Nasdaq. However, if one index is in an official bear market, I would consider the rest to be at least vulnerable to following suit. The GCI readings tell the story. They need to move even lower in order to reach oversold conditions and that will only happen with further decline.
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.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
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.
RRG® Chart: Financials (XLF) and Industrials (XLI) are getting interesting right now. Both are in the Improving quadrant and both have bullish northeast headings. They are moving quickly toward the Leading quadrant.
The most bearish sectors are Technology (XLK), Consumer Discretionary (XLY) and Communication Services (XLC). They are not only in the Lagging quadrant, they all have bearish southwest headings.
The remainder of sectors are very bullish, all moving further into the Leading quadrant and none are at risk to lose their position within that quadrant.
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: It was a good news/bad news kind of day. The SPY finished lower on the day, but it broke out from the tight trading range of the past week. It now has the task of breaking above the declining tops trendline. The RSI and PMO are flat and neutral, so they aren't particularly helpful.
With today's close above the 20-day EMA, the SPY whipsawed back into an IT Trend Model "Silver Cross" BUY signal. Total Volume was average. The VIX is back above its moving average on our inverted scale. With the Bollinger Bands shrinking it will be easier for it to puncture the Bands. Upside punctures generally lead to price moving higher with the opposite being true for downside punctures. Stochastics are encouraging.
Here is the latest recording (4/18):
Topic: DecisionPoint Trading Room
Start Time: Apr 18, 2022 09:00 AM PT
Meeting Recording Link.
Access Passcode: April#18th
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S&P 500 New 52-Week Highs/Lows: New Highs popped as long-term winning stocks got stronger. New Lows increased very slightly, suggesting weaker stocks didn't lose much ground. The 10-DMA of the High-Low Differential has turned up which is very encouraging given it is coming off a price low.
Climax* Analysis: 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 indicate either initiation or exhaustion.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is SOMEWHAT OVERBOUGHT.
STOs popped higher today which bodes well for the market in the short term. We now have bullish readings on %Stocks > 20-day EMA and %PMOs Rising. This chart suggests more upside ahead.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM/ITVM are moving higher but we only have 50% of the SPX stocks with PMO BUY signals. That needs to move higher.
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 was flat today, but remains above its signal line. It is below our 70% bullish threshold. This gives us a somewhat bearish intermediate-term bias.
Short term, we see an appreciably higher percentage of stocks above their 20/50-day EMAs than the SCI percentage. I read this as a bullish bias in the short term.
The GCI was flat today and remains below the 70% bullish threshold. There are a slightly higher percentages of stocks above their 50/200-day EMAs. I read this as a neutral to bearish bias in the long term.
CONCLUSION: Yesterday's upside initiation climax resulted in a higher intraday high, but not much in the way of price performance. I'd would be more confidently bullish if price had closed higher on the day and we'd seen a breakout from the short-term declining tops trendline, but STOs are rising again, we have a bullish short-term bias and IT indicators are showing improvement. I believe we will see some more upside. If we don't, we know that the bear market technicals are applying downward pressure. I'm cautiously optimistic in the short term.
I am 15% exposed to the market, but I will be expanding my portfolio from my DP Diamonds Reports' "Diamonds in the Rough" if this bullish bias holds up and my stocks/ETFs of choice react well on the 5-minute candlestick charts tomorrow or Friday.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact support@decisionpoint.com for more information!
BITCOIN
Bitcoin is trying once again to confirm the bullish cup with handle pattern. I was ready to scrap the pattern, but given the rally of the past three days, I'm giving it more time. The indicators are now showing improvement and price did pop above the 20-day EMA briefly.
INTEREST RATES
Yields pulled back today, but we don't see any real relief ahead.
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.
Don't miss Carl's take on interest rate inversions in Monday's recording of the DecisionPoint Show. Here is a link to the YouTube video.
10-YEAR T-BOND YIELD
$TNX pulled back today. We could see this short-term rising wedge resolve to the downside as expected. however, I would look at this as a pause before it moves higher. The RSI and PMO are very overbought and need to unwind and consolidation or more downside should correct that problem.
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 finally fell to earth after rallying nearly all of April. There's been only one other down day this month! It was only a -0.70% decline, but it helped the RSI clear overbought territory. Stochastics are still comfortably above 80. The PMO, however, is now topping in overbought territory. I would look for a test of the 20-day EMA at a minimum.
Price is now reentering the longer-term rising trend channel.
GOLD
IT Trend Model: BUY as of 12/29/2021
LT Trend Model: BUY as of 1/12/2022
GLD Daily Chart: Sorry to say, but it appears we have a bearish rising wedge on Gold. It was a nice rally today, but other than the RSI, indicators are still negative with the PMO on a SELL signal and Stochastics falling.
GOLD Daily Chart: The longer-term Gold chart shows a bullish cup with handle. However, I might scrap the pattern if we see Gold drop below the tenuous rising bottoms trendline in conjunction with a negative RSI.
GOLD MINERS Golden and Silver Cross Indexes: Miners rebounded with Gold. I still like this group but we do note a bearish rising wedge that has developed. The PMO is still on a SELL signal and Stochastics are falling, but the RSI is still firmly positive and participation is still very strong. This rebound today bounced off horizontal support at the May/June highs.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/3/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Crude Oil was up on the day and is still traveling within a symmetrical triangle. That's a continuation pattern so we expect an upside breakout. We need to see the PMO and Stochastics improve. Otherwise, USO is vulnerable to a break down from the pattern.
BONDS (TLT)
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With yields falling today, TLT benefited with an over 2% rally. The PMO is flat, but Stochastics and the RSI are rising again. We don't see this rally lasting given price broke down from a bullish falling wedge and rates are in a steep rising trend.
Good Luck & Good Trading!
Erin Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl 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.
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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