We said yesterday: "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." So much for expectations -- it doesn't get much more volatile than what we had today. Just goes to show, what usually happens doesn't always happen.
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The Nasdaq Composite ETF (ONEQ) 20-day EMA crossed down through the 50-day EMA (Dark Cross), generating an IT Trend Model SELL Signal because the crossover took place below the 200EMA. Notice also that the PMO aborted a crossover BUY signal and instead fell back to a SELL signal. The OBV is confirming the decline with declining OBV tops and declining price tops. Support has also been broken.
Also for context, both the $NDX and $COMPQ had negative PMO crossovers so we should look for the same on ONEQ tomorrow barring a big rally.
We will discuss the implications of a negative Silver Cross Index downside crossover its signal line in the Bias Assessment section.
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: It took more time than we thought, but support has been broken at $390. The bearish rising wedge was also confirmed with the breakdown below the rising trend that forms the bottom of the wedge. The PMO is now accelerating lower. It has now topped beneath the signal line which is especially bearish.
The RSI just moved into negative territory below net neutral (50). Stochastics turned down in negative territory. The VIX also moved back below its moving average suggesting internal weakness.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential continues lower as we saw a small expansion in New Lows and fewer New Highs.
Climax* Analysis: Today there were strong, unanimous climax readings. SPX Total Volume confirmed. We will call this a downside initiation climax. That implies a few more days of decline, if not more.
*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 turned back down before really making much headway in positive territory. Participation is dropping like a rock. Only 11% of the index hold rising momentum and less than 1/3rd are above the 20-day EMA.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
As we would expect, the ITBM/ITVM continued lower. With the loss of so much rising momentum, it isn't surprising to see the vertical drop today in %PMO BUY Signals. That indicator is not oversold yet so more damage can be absorbed.
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.
Our early warning system is flashing red as the SCI moved below its signal line in extremely overbought territory. We see this as adding to an already bearish intermediate-term bias. We don't see these negative crossovers often so we should heed its warning.
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. The SCI had a negative crossover.
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: While the expectation of low volatility has been blown out of the water, end-of-quarter options expiration will cause very high volume tomorrow. Today's negative crossover by the SCI casts a pall over the entire market environment. The Dark Cross on ONEQ is just the beginning of the deterioration we expect to see in the coming days. In the very short term, the downside initiation climax suggests today's decline will get legs. The PMO has turned down below its signal line and primary indicators are falling. The bias is bearish. There is only one conclusion-- this breakdown will probably keep Santa away from the financial markets this Christmas, but... we do believe he'll be taking care of the kiddos as he usually does.
Erin is 12% exposed with a 5% hedge.
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BITCOIN
In spite of very positive indicators yesterday, Bitcoin tanked and lost support at the earlier December high. It's still holding above the 20-day EMA and the PMO is technically rising with a positive RSI. Stochastics usually provide early warning and with them declining vertically, we believe the outlook for Bitcoin has moved to neutral at best.
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
Yesterday's comments still apply:
"$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 managed to rally today. We've noticed a short-term bullish falling wedge that implies the Dollar will have an upside breakout soon. Indicators are mostly neutral and unhelpful, but there is now a high likelihood that today's rally will continue over the next few trading days.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: The Dollar's rally pushed Gold lower today so the bearish rising wedge has been confirmed. with Stochastics turning over, the RSI nearing negative territory and the PMO topping in overbought territory, we would expect to see Gold test the late November lows.
GOLD Daily Chart: The rising wedge on $GOLD also was confirmed. We discussed yesterday that a puncture of the upper Bollinger Band by $GVZ suggested a decline. It remained above the upper Band on our inverted scale today which also tells us to expect lower prices.
GOLD MINERS Golden and Silver Cross Indexes: The PMO had a crossover SELL signal generate today. Participation of stocks above their 20/50/200-day EMAs tanked today so we should see a negative crossover by the SCI tomorrow. Price does remain above support at the 200-day EMA and August top, but with the decimation of participation, look for a move closer to bring price closer to $26.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/21/2022
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: We mentioned that $OVX had punctured the upper Bollinger Band on our inverted scale and that generally leads to decline. It happened. The 20-day EMA held as resistance. Given price didn't touch the declining tops trendline before turning down, it is likely it will continue lower. This could be a small flag setting up, but the RSI topping in negative territory and the PMO top below the signal line so we doubt it's a flag. Stochastics are still favorable, but that's about it.
BONDS (TLT)
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday's comments still apply:
"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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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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