It was a terrible day for the market or should we say the "markets". The declines were heavy and they were spread across the board. No one was immune. We've posted the chart below to give you a sense of the destruction. One of the main reasons for the decline was Fed Chairman Powell's hawkish remarks in Jackson Hole. When the chairman uses words like "pain", "premature loosening" and "forcefully attack", investors head for the doors.
We were already seeing dying momentum across the sectors. Today's declines only worsened an already bearish short-term picture. The one shining light would be Energy. It's the only sector with rising momentum and strong participation. However, the Crude Oil (USO) chart doesn't inspire confidence for most of that sector.
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
For Today:
For the Week:
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.
For Today: 
For the Week:
RRG® Daily Chart ($ONE Benchmark):
The daily RRG turned very bearish in just one week. Below is last week's:
This week saw a major shift as every sector has a bearish southwest heading. Energy is the clear leader even when you don't see it on an RRG, so it isn't surprising that it remains in the Leading quadrant. Its heading tells us that the bear market is pressuring every sector not just a few.
RRG® Weekly Chart ($ONE Benchmark):
The weekly RRG gives the bulls ammunition. In this longer-term RRG, every sector has a bullish northeast heading. This is reflective of the intermediate-term rally off the June lows. If price continues to fall here, look for this RRG to get bearish. For now, it does give us hope that this is not the beginning of a big down leg.
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 8/2/2022
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: Whereas, Fed Chairman Powell usually sounds like Casper Milquetoast, today he sounded like Rambo. He sounded extremely hawkish. For weeks we have watched as analysts explained how the Fed would surely get soft by next month, but no such luck. We're in for some tough love. As a result, yesterday's nascent rally turned into today's crash. The SPY fell -3.38%. SPX Total Volume expanded somewhat, but declines don't need volume to confirm conviction -- prices can fall on their own. Adding insult to injury, the SPY formed a giant bearish engulfing candlestick.
Indicators had been looking positive, but today the PMO topped beneath the signal line in overbought territory. The RSI entered negative territory and Stochastics turned back down. One possible bright spot would be the VIX puncturing the lower Bollinger Band on our inverted scale. Typically that does mean relief ahead.
Below is the latest recording from 8/22:
SPY Weekly Chart: We had a breakout from the falling wedge as expected. We were hoping to see the bear market declining trend broken to the upside, but last week there was a warning shot fired. Today the cannon ball hit the ship. The weekly RSI is back in negative territory and the weekly PMO is topping already.
SPY Monthly Chart: We are going to do monthly charts next week, but we thought that it was worth a reminder that the SPY monthly PMO is currently very negative for the long-term picture. It topped in December, and crossed down through the signal line in March. It is not final for the month yet, but it is likely to remain negative (trending downward).
New 52-Week Highs/Lows: New Lows not surprisingly expanded today. New Highs have been trending lower with price. The 10-DMA of the High-Low Differential topped last week. It is now accelerating downward.
Climax Analysis: Yesterday's upside initiation climax failed to initiate anything -- you will remember that we were not happy with the weak SPX Total Volume. Today we got strong climax readings across the board, giving us a downside initiation climax. SPX Total Volume was still weak, but as we said earlier, we don't need volume to lead in a decline.
*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 DOWN and the condition is OVERSOLD.
STOs were close to unchanged, but technically both did continue to rise. The destruction of rising momentum has put this indicator in oversold territory. However, it isn't out of the question for %PMOs Rising to get even closer to 0%.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERBOUGHT.
The ITBM and ITVM are overbought. Yesterday the ITVM rose, but the ITBM continued lower. Now both are back in decline. %PMO BUY Signals fell savagely this week but is not oversold yet.
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 following table summarizes participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation.
The following table summarizes participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation.
We have had four weeks where the SCI expanded, and all but one index SCI had bull market readings (above 50). This week most of the SCIs turned down. We expect this decline in SCI readings to continue.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of participation. Energy is climbing the table.
The bias in all three timeframes is shifting quickly.
The short-term bias is bearish: Participation of stocks > 20/50-day EMAs has tanked and readings are now well below the SCI reading.
The intermediate-term bias is neutral: The SCI is at a strong reading of 75%, but it is about to have a negative crossover its signal line.
The long-term bias is bearish. The GCI is at a paltry 37.8%. While we have slightly more stocks above their 200-day EMA, it is deteriorating quickly; meaning, the GCI won't be able to turn back up soon.
CONCLUSION: We think there is little doubt that the bear market rally is over. Seeing price turn back down severely before breaking the bear market declining trendline suggests the bear market itself is not over. Energy remains the only bright spot, but even it was carried lower today. Erin noted that of all the industry groups covered by StockCharts, only 12 have positive momentum (and that counts the five groups in Energy). Be very critical of stocks and ETFs in your portfolio. Make no excuses if they are turning over. Very few will be immune to the downside that is likely ahead.
Erin is 40% exposed to the market, but still divesting.
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BITCOIN
Bitcoin broke through the bottom of its current trading range. The RSI is very negative and the PMO has topped below the zero line. Stochastics have also turned over in deeply negative territory. Nothing on this chart suggests a rally for Bitcoin next week.
This chart is to show where some of the support/resistance lines come from.
INTEREST RATES
Yields are still holding rising trends. Inversions continue. That is bad for the market, particularly Financials.
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
There is a bearish rising wedge on $TNX. Stochastics have turned over suggesting we could see that breakdown. However, the PMO and RSI are positive so we believe this short-term rising trend that forms the bottom of the wedge should hold.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount. As buying power shrinks, home prices will come under pressure.
--
This week the 30-Year Fixed Rate rose from 5.13 to 5.55.
DOLLAR (UUP)
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP hit overhead resistance this week and was turned away. It didn't lose much and today we have a bullish engulfing candlestick. Indicators are very healthy. We could also classify this as a bull flag.
UUP Weekly Chart: This is a strong area of overhead resistance based on the weekly chart so it makes sense that price would choose to pause beneath it. The weekly RSI is positive and the weekly PMO has turned up above the signal line. We expect a breakout.
GOLD
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GOLD Daily Chart: Gold was starting to show some strength as we saw a rally this week that appeared to be executing a bullish cup with handle pattern. Now we are focused on the likelihood that the "handle" is actually a flagpole with this week's rally forming the flag. Reverse flags are continuation patterns so we expect more downside.
Discounts are very high suggesting extreme bearish sentiment toward Gold. However, those conditions can persist. The RSI tipped over negative territory, the PMO is on a new crossover SELL signal and Stochastics have turned down in deeply negative territory.
GOLD Weekly Chart: The weekly chart does not inspire confidence. The weekly PMO has topped below its signal line and the weekly RSI remains negative. We will be testing the long-term rising trend again soon. We do find it curious that this bear market hasn't resulted in higher prices and bullish sentiment. While that is interesting, we don't see it as bullish for the market. We continue to believe that Gold will ultimately be the winner in this mired economy.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners were showing a great deal of promise. Unfortunately today's drop in Gold combined with the excessive market decline kicked GDX in the teeth. Participation has completely vanished and indicators couldn't look much more bearish. Another PMO top beneath the zero line is very concerning.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/8/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: We now see a symmetrical triangle in the short term on USO. These are continuation patterns so in this case, the expectation would be a breakdown. The one sector showing relative strength is Energy. A breakdown in Oil prices will likely take XLE down with it. Indicators are still positive. The PMO is rising and the RSI is positive. Stochastics remain above 80, although they have topped. We actually favor an upside breakout, but a big deterioration in our indicators would shift our opinion.
USO/$WTIC Weekly Chart: Price is holding above the 43-week EMA and the weekly RSI is positive. However, the weekly PMO is far from healthy. Energy is the last bastion of hope so a breakdown here would leave us little to no pockets of strength in the market.
BONDS (TLT)
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: This rally reminds us of Gold's. The indicators are trying to improve, but this looks very much like a reverse flag in the making. We know that long-term yields are in rising trends so upside will be limited.
TLT Weekly Chart: The weekly chart suggests price will test prior 2022 lows. Yes, the weekly PMO is on a BUY signal, but it is also decelerating. The weekly RSI is negative and trending lower. We do note that a bottom right now would give us a possible reverse head and shoulders, but it is too early to call it.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl 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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