The market was off to a strong start, but it reversed downward when about 1:30 ET a report was released that Apple (AAPL) would be slowing down hiring and spending in some of its divisions. It is fair to say that the market was already losing some of its early enthusiasm before the AAPL news, so we think that the widely held premise that the bulls are back in charge is incorrect.
(Thank you for your continued patience as we sort through our family's medical issues. We will continue to be very brief)
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 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: $ONE Benchmark
Daily: The daily RRG is all over the place right now, but one thing is clear, aggressive sectors are beginning to outperform while defensive sectors are losing steam. XLE has turned to a bullish northeast heading, alongside aggressive sectors as well as XLB and XLF. XLI reversed its bullish heading into a bearish southwest heading.
Weekly: The longer-term RRG shows most sectors improving with XLC in the strongest position as it is the first sector out of the Lagging quadrant. Energy is the only sector with a bearish southwest heading. XLB is still looking weak with a westward heading. All other sectors are showing strong northward headings toward the Improving 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: SELL as of 5/5/2022
SPY Daily Chart: We're giving AAPL credit for today's setback for the bulls, but we need to see how the market digests the news overnight. We have a bearish engulfing candlestick which suggests a decline tomorrow.
While the VIX didn't puncture the upper Bollinger Band, it came very close and is now topping. That suggests diminishing internal strength. The RSI has also topped in negative territory. On the bright side the PMO and Stochastics are still rising.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: With today's push and pull, we didn't see many New Highs or New Lows. The 10-DMA of the High-Low Differential continues to rise which is bullish.
Climax* Analysis: There were 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 are at their core exhaustion events; however, at price pivots they may be initiating a change of trend.
Short-Term Market Indicators: The short-term market trend is NEUTRAL and the condition is NEUTRAL.
STOs rose again today, but participation of stocks above their 20-day EMAs and %Stocks with rising momentum tipped over.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is MIXED.
The ITBM fell slightly while the ITVM moved swiftly upward. We still have nearly 3/4ths of the index with PMO BUY signals, but that contracted slightly today in overbought territory.
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 rose slightly again today, but the GCI continues lower. Participation contracted slightly.
The short-term bias is still bullish, but deteriorating given their are more stocks above their 20/50-day EMAs than those with "Silver Crosses". It's deteriorating because the participation of stocks > 20/50-day EMAs is falling somewhat.
The intermediate-term bias is bearish with slight improvement given the SCI is at such a low reading, but rising somewhat.
The long-term bias is very bearish. There are much lower percentages of stocks > 50/200-day EMAs than stocks with "Golden Crosses". This means the GCI has no room for improvement.
CONCLUSION: While in our live trading room this morning (click HERE to attend live Mondays at Noon ET) the market was demonstrating that Friday's upside initiation climax was seeing follow-through. However, Apple upset the apple cart (couldn't resist) and pulled the market down. It caused a bearish engulfing candlestick to form. Rather than look for a breakout tomorrow, we would prepare for more downside.
Erin is 40% exposed to the market.
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BITCOIN
Bitcoin has formed a rising trend channel. The indicators suggest it will continue higher, but overhead resistance at the 50-day EMA has been sturdy. Price hasn't been above it since the March top. It might be time for it to test the bottom of this thin rising trend channel.
INTEREST RATES
Rate inversions continue. Long-term rates are in declining trends while the 1-month/3-month yields soar higher toward long-term rates.
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.
10-YEAR T-BOND YIELD
$TNX rallied and nearly broke its declining trend. Indicators are mixed. Stochastics turned up again and while the RSI rose today, it is still in negative territory. A breakout and close above the 20-day EMA would have us more bullish.
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 pulled back further today. The bearish filled black candlestick fulfilled its promise of decline. The PMO and Stochastics have topped with Stochastics dipping below 80. Support is arriving at the 20-day EMA and horizontal support at $28.25.
GOLD
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: A weak Dollar should be helping Gold, but it really isn't. Today Gold did rally, but it formed a bearish filled black candlestick. GLD barely closed higher after bears pulled price down from the open.
GOLD Daily Chart: The RSI is oversold, but we aren't seeing much improvement on other indicators. In fact, Stochastics have turned down in oversold territory and the PMO is mostly flat. A trip to support at $1675 seems likely.
GOLD MINERS Golden and Silver Cross Indexes: If you look at a very long-term chart of GDX, you'll know that the bounce right here is coming off strong support. However, the declining trend is intact and there is no real heartbeat in participation. We saw a little over 3% make their way above their 20-day EMAs (likely the ones that are still holding onto "Golden Crosses"). We wouldn't throw bait out into this pond yet.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Today's breakout from the bullish falling wedge is suggesting the correction is over. However, we've seen this set up on the prior two rallies with the RSI and Stochastics bottoming and then failing. The PMO is flat and not confirming. We wouldn't get too excited until price gets back above resistance at the 20/50-day EMAs.
Beware of a possible reverse island setting up.
BONDS (TLT)
IT Trend Model: NEUTRALas of 1/5/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The 20-year yield had a decent day and that caused TLT to top below the 50-day EMA and resistance at the prior July top. This could be setting up a short-term double top. The indicators are deteriorating. The RSI is positive, but will likely dip into negative territory soon. Stochastics have topped and the PMO is preparing to follow suit. There isn't much upside potential even if it does rally as there is a strong resistance zone waiting for it between $117.50 and $120.
Good Luck & Good Trading!
Erin Swenlin and Carl 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:
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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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