The inflation numbers released this morning showed some small improvement, and investors went crazy with optimism, driving SPY up nearly +3%. But the party didn't last long, and prices gradually headed lower and never recovered. This activity formed a bearish filled black candlestick that you'll see on our 5-month SPY chart. These are one-day patterns that suggest a decline will follow the next day.
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: Besides the wild swing in prices today, SPX Total Volume was extra high, no doubt due to heavy short-covering. The offending filled black candlestick dominates the chart. Notice that price hit overhead resistance at $410 and promptly fell away. The PMO turned back up today. The margin is thin between it and its signal line so we could see a whipsaw BUY signal.
Technically, today's high did puncture the long-term declining trend that began this bear market, but given the weak finish today, we shouldn't put much emphasis on it. The VIX saw much lower readings, but still managed to puncture the lower Bollinger Band on our reverse scale. This could be the start of more upside based strictly on the VIX, but given the emotions of the day, we wouldn't trust it.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential turned up today as we saw a pop in New Highs. This gives us a bullish bias on that indicator.
Climax* Analysis: There were no climaxes 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 DOWN and the condition is NEUTRAL.
STOs did not disappoint today as they rose alongside the market. They are now in neutral territory which can be dangerous, but they are at least rising. We now have over half of the SPX showing rising momentum. That is definitely needed to fuel any follow-through on today's rally.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
We have a small reversal on the ITBM/ITVM. Additionally given the new momentum we discussed on the prior chart, there was an upside reversal on %PMO BUY signals which is good.
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: Yesterday's upside initiation climax fulfilled on the open. We think that is about all we'll get out of that climax given the price decline that followed. There are a few positives. The ITBM/ITVM's upside reversal and rising STOs suggest some follow-through. However, this appears to be a short-covering rally and a possible bull trap. We see far too many overbought and topping PMOs throughout the market. Those conditions need to be relieved. Tomorrow we hear what the FOMC's plans are regarding the next interest rate hike. It's hard to say how investors will respond. We aren't looking for a giant rally unless the FOMC surprises with a lower rate hike than expected.
Erin is 10% exposed with a 5% hedge.
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BITCOIN
We didn't see a big breakout as likely; we were obviously wrong. Today's breakout put price not only above horizontal resistance, but also above the 50-day EMA. Indicators are now more decisive. The RSI is positive and the PMO is accelerating its rise. Stochastics are above 80. Indicators tell us to expect more upside.
INTEREST RATES
Interest rates took a hit today. We had seen signs they were ready to reverse higher, but the declining trends are still mostly intact.
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
After reaching the declining tops trendline, $TNX turned lower, leaving the declining trend intact. The PMO had just started to rise, but has now topped beneath the signal line. Stochastics are still technically rising, but clearly they took a hit today. The RSI turned down before reaching positive territory. We do believe the long-term rising trend will hold, but a little more decline to test support may be needed.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Despite the OBV positive divergence we identified yesterday, the Dollar sunk. Until the OBV moves below its prior lows, the positive divergence will still be in effect. The PMO is flat, but the RSI and Stochastics are negative. Price is right on support at $28. If it's going to reverse, it needs to do so quickly. Indicators tell us more downside or at least sideways consolidation is ahead.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Gold benefitted from the decline in the Dollar and then some. Given the Dollar was down -0.88% and $GOLD was up +1.85%, we know there were extra buyers in there. We ended up with a bearish filled black candlestick as it reached the top of the bearish rising wedge and fell back. Price is above horizontal support at the August top and it held above. The PMO is rising and the RSI is positive and not overbought. Stochastics are a bit wishy washy, but overall we see them as positive given they aren't falling.
GOLD Daily Chart: With a new bottom being put in on today's rally, we've redrawn the bottom of the bearish rising wedge. Discounts moved higher today in spite of the rally so while there were more buyers of Gold today, sentiment remains bearish. $GVZ (gold volatility index) popped above the upper Bollinger Band. That can be dangerous as short-term declines often follow.
GOLD MINERS Golden and Silver Cross Indexes: Gold's gain was Gold Miners gain. With both the market and Gold up, GDX rallied strongly on a gap up. We find this industry group suspect nonetheless. The PMO is overbought and could trigger a crossover SELL signal at any moment. The Silver Cross Index is topping in very overbought territory. This could turn out to be a bearish reverse island. That pattern would be confirmed with a gap down, leaving price alone on an island. We would still be very careful with this group.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/21/2022
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Just when we thought Crude Oil was on the ropes, it decides to rally. This could be a second bottom of a longer-term bullish double-bottom, but the chart still needs some work.
The RSI is negative and the PMO isn't really rising yet. Stochastics certainly suggest the rally will continue. We see that the upper Bollinger Band was penetrated by $OVX. That usually leads to a decline. As with Gold Miners, we would be very careful here. The Energy sector (XLE) still looks very toppy and bearish so this rally could be short-lived.
BONDS (TLT)
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT finished higher again today and formed another bearish filled black candlestick. While the PMO and RSI look healthy enough, Stochastics which we consider an early warning system have topped and are continuing lower. As we've said numerous times, we believe the correction in yields is about to end. TLT could eke out more upside, but it will likely slip when it encounters the 200-day EMA.
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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