The Fed raised interest rates by 50 basis points, causing some chopping around of prices, but the day ended with a minor decline. The FOMC suggested that rate hikes will continue next year as they continue to combat runaway inflation. Investors weren't thrilled by the news, but as noted, we didn't see as much damage as we could have.
Also today, the Utilities Sector (XLU) 50-day EMA crossed up through the 200-day EMA (Golden Cross) generating an LT Trend Model "Golden Cross" BUY Signal. XLU has been one of the few sectors holding up. The bearish rising wedge suggests this won't hold up forever. The PMO is still technically rising, but sure looks toppy. Participation is strong, but we note the Golden Cross Index (GCI) may be topping. The RSI is positive and not overbought and Stochastics just moved above 80. We should see some more upside, but the rally could come to a halt soon based on the rising wedge.
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.
CLICK HERE for Carl's annotated Sector charts.
THE MARKET (S&P 500)
IT Trend Model: BUY as of 11/15/2022
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: The market hit overhead resistance yesterday and immediately pulled back. Today the decline continued but price does remain within the bearish rising wedge. The PMO was in the process of turning up yesterday, but today accelerated lower. The RSI remains positive above net neutral (50), but it is on the decline.
On a positive note, the VIX is back above its moving average on our inverted scale and Stochastics continue to rise out of oversold territory. That suggests there is some internal strength.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential turned back down today.
Climax* Analysis: There was only one climax reading today and that was on SPX Net A-D Volume. This is not nearly enough to call a climax day. We do note that Total Volume was above its annual average on 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 NEUTRAL.
Interestingly, STOs are still rising. %PMOs Rising took a big hit today so now we have only a little over 1/3rd of the SPX showing rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
IT indicators shifted lower today after only one day rising. %PMO BUY Signals has topped below the signal line. All bad news.
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 short-term bias is BEARISH. We have fewer stocks above their 20/50-day EMAs than Silver Crosses.
The intermediate-term bias is BEARISH. While the SCI is at a favorably high reading, it is toppy and could see a negative crossover soon.
The long-term bias is BULLISH. The GCI continues to rise and we have more stocks above their 50/200-day EMAs than we have golden crosses. We could see the GCI move even higher. To clarify, the bias may be bullish right now, but we do not believe this bear market is over.
CONCLUSION: After yesterday's giant bearish filled black candlestick, we aren't completely surprised that the market continued to decline today. STOs may still be rising, but seeing both the ITBM and ITVM along with the 10-DMA of the High-Low Differential turning back down, we expect this decline will likely continue and confirm the bearish rising wedge. It's not too late to see a Santa Claus rally, but given the bearish indicators, including a PMO that is accelerating lower, we aren't optimistic.
With options expiration ahead, we expect low volatility for the next two days. Nothing guaranteed, but that is the tendency that facilitates the rolling over of options positions.
Erin is 10% exposed with a 5% hedge.
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BITCOIN
Bitcoin tested overhead resistance at the September/October lows. It appears it is heading back to the territory it was trading in before the collapse of FTX. Indicators are mostly positive so we think a breakout is entirely possible by the end of the week.
INTEREST RATES
Interest rates were lower or unchanged on the day. We believe it's time for an upside reversal, but we aren't seeing it gel just yet.
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 remains in a declining trend with 3.4% holding as support. Price will soon encounter the long-term rising bottoms trendline and 3.2%. The indicators suggest that will be broken. There is a negative RSI and ominous tops by Stochastics and the PMO below its signal line. As noted in the section above, we do believe a reversal in rates is imminent. We are watching for a significant break from the declining trend.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar continued its decline. The PMO has now topped below its signal line which is especially bearish. The RSI is very negative and Stochastics are declining below 20. It appears there is more downside ahead for UUP.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Despite a decline by the Dollar, both GLD and $GOLD moved lower. There is a bearish rising wedge on both charts. Indicators don't look that bad and with the Dollar looking very weak, Gold has an opportunity to show us what it's got.
GOLD Daily Chart: The PMO is still rising but definitely looking toppy in overbought territory. Still, the RSI is positive and Stochastics remain above 80. Discounts are still historically high which is bullish for Gold, but we do note $GVZ popped well above the upper Bollinger Band on the inverted scale. That generally will lead to a day or two of downside.
GOLD MINERS Golden and Silver Cross Indexes: The PMO nearly triggered an overbought crossover SELL signal today. The SCI is flat but very overbought. Participation is still strong based on %Stocks > 20/50-day EMAs. Stochastics are indecisive but at least they are sitting above 50. We still would advise caution based primarily on the bearish configuration of the PMO.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/21/2022
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: The rally continued for Crude Oil. Price still closed beneath the 20-day EMA. It's now going to be tested more significantly as the 50-day EMA and declining tops trendline arrive soon. Indicators are improving, but $OVX punctured the upper Bollinger Band on the reverse scale again today. Punctures of that band generally mean a downside reversal over the next day or two.
BONDS (TLT)
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT rallied as the 20-year yield fell. Support at the June low is holding and indicators are very favorable. Stochastics turning up alongside a rising PMO and rising RSI suggest TLT will see more rally.
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.
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Price Momentum Oscillator (PMO)
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