This is the chart that everyone is watching, the daily chart of United States Natural Gas Fund (UNG). We discussed it on Wednesday and have now had two days of price action. What was looking somewhat bullish is now looking bullish. We're not selling you natural gas, but we know many are waiting to see what will happen.
Currently the RSI is still in negative territory, but it has risen to a level higher than we've seen since it dropped below 30. The PMO had been angling upward, but now it has triggered a crossover BUY signal. Stochastics did stall so UNG still has some work to do. Relative strength is at least flat now rather than traveling lower. We are still vulnerable to an over 10% decline should UNG decide to test support one more time. Get out the Tums, this one could cause heartburn with its volatility.
(Full Disclosure: Carl and Erin own UNG)
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 1/12/2023
LT Trend Model: BUY as of 2/9/2023
SPY Daily Chart: The SPY spent much of the day consolidating sideways in negative territory, but by the end of day it managed to peek above resistance, but ultimately was confined to the range. On the bright side it finished higher and the 5-minute PMO looks pretty good going into Monday.
Price so far is successfully holding above the 20-day EMA. However, we don't expect it to hold. More than likely we have more pullback ahead. Right now price is in a short-term bearish rising wedge and an intermediate-term bearish rising wedge.
The RSI is still holding in positive territory above net neutral (50), but the PMO has topped and Stochastics are falling quickly. One good thing, the VIX punctured its lower Bollinger Band and that usually leads to a day or two of upside. However, we wouldn't count on that simply because the Bands have been squeezed together. It didn't take much to have push through the bottom Band.
SPY Weekly Chart: We can see that the SPY stalled this week, but is still holding above the bear market declining tops trendline. The weekly RSI is positive, albeit declining. The weekly PMO looks very bullish given it has now risen above the zero line.
SPY Monthly Chart: This month price continued the breakout we saw in January. Price broke through the bull market threshold of 20% to the upside, informing us we have a new bull market. The monthly chart has some work to do given the monthly PMO is still on its way down. We'd have liked to have seen more positive movement from it given the breakout.
New 52-Week Highs/Lows: Hew Highs are confirming this short-term decline as they decline too.
Climax Analysis: There were no climax readings today. We saw only one climax day this week, a downside initiation climax that was quite prescient.
*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 SOMEWHAT OVERSOLD.
Given the rally, we would've expected more expansion in rising momentum. STOs are mixed. They are somewhat overbought, but have plenty of downside available based on the December lows. We want these indicators to move into deeply oversold territory quickly so we can look for a rally.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
These indicators are still overbought and falling. They definitely have more downside available. With only 31% of stocks having rising PMOs, we aren't surprised to see the dive in the number of PMO BUY signals. That indicator is in neutral territory and has much further to fall before reaching oversold territory.
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PARTICIPATION and BIAS Assessment: The following table 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. There are three groups: Major Market Indexes, Miscellaneous Sectors, and the eleven S&P 500 Sectors.
NEW INDUSTRY GROUPS ADDED! We have begun collecting SCI and GCI data for four new industry groups: Biotechnology (IBB), Regional Banking (KRE), Retail (XRT), and Semiconductor (SMH).
The IT Bias as whole are positive which is bullish for the market. It means the Silver Cross Index is stronger and could imply improvement in the long term ahead. Currently the top spot goes to Real Estate which is at a +60. 100% have a 20-day EMA above their 50-day EMA (SCI reading of 100). This sector could see longer-term improvement.
The weakest is Energy (XLE) at -34. This sector has been weak, but we know it is starting to show signs of life. We can confirm its recovery with an SCI that is greater than its GCI.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
The biggest improvement on the SCI goes to industry group, Regional Banks (KRE). It not only saw improvement in the SCI it also saw improvement in the Golden Cross Index of +2. This implies this group could see some upside after the end of week decline.
The weakest link this week was Utilities (XLU). It is losing ground on both the SCI and GCI so expect this group to continue lower.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
Long-term strength goes to Semiconductors which saw a +16 improvement. 100% already have a 20-day EMA above their 50-day EMA. This group may see a reversal of this week's pullback.
The weakest is again Utilities (XLU).
The following chart objectively shows the depth and trend of participation in three time frames.
The market bias is NEUTRAL to BEARISH.
The short-term bias is BEARISH.
The intermediate-term bias is BEARISH.
The long-term bias is BULLISH.
Serious deterioration occurred on our bias chart this week. Worst was the negative crossover by the Silver Cross Index below its signal line in clearly overbought territory. Next would be there are fewer stocks above their 20/50-day EMAs than those with Silver Crosses. This means the SCI could continue lower. The long-term is holding up but deteriorating somewhat as stocks are slowly losing support at their 200-day EMAs. The reason the GCI is continuing higher is that there still are more stocks above their 50/200-day EMAs than there are stocks with Golden Crosses.
CONCLUSION: The textbook 20% rally occurred last week, purportedly sending us into a new bull market. We could be on the cusp of another rally, but the market is not solid. The bias in the short and intermediate terms are bearish based on participation. The declining trend continues in the short term. With two bearish rising wedges for price to fight and the short-term weakness, we would look for consolidation at best, but more than likely this declining trend will continue. However, if we really are in a new bull market phase, the market should shrug off the current short-term decline as soon as indicators get more oversold.
Calendar: Next week is options expiration. We should expect low volatility toward the end of the week.
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BITCOIN
Bitcoin formed a rounded top and then collapsed back to support at the November and January highs. Certainly Bitcoin could consolidate and reverse, but the indicators are very negative right now, showing no signs of improvement. We would avoid Bitcoin.
This chart is to show where some of the support/resistance lines come from.
INTEREST RATES
Rates climbed higher this week with the 1-year yield continuing to set new 52-week highs. There are two formations and both are bullish, a double-bottom and bull flag. Rates are likely to continue much higher.
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
We alluded to a favorable outlook for yields above. $TNX is a good example of why we see them continuing to rise. Friday saw a strong breakout from the declining tops trendline that forms the top of a symmetrical triangle. The PMO made it out of negative territory, the RSI is positive and not overbought, and Stochastics are oscillating above 80. This chart says the 10-year is on its way higher.
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 has been shrinking, home prices have come under pressure.
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This week the 30-Year Fixed Rate rose from 6.09 to 6.12.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: SELL as of 1/31/2023
UUP Daily Chart: The Dollar saw consolidation of the breakout from last Friday. Indicators remain bullish with the RSI settling in positive territory and the PMO rising on an oversold crossover BUY signal. Stochastics are oscillating above 80 so expect the Dollar to resolve this consolidation with an upside move.
UUP Weekly Chart: The longer-term declining trend is being tested but essentially remains intact. However there are signs of life. The weekly RSI is nearing positive territory above net neutral (50) and the weekly PMO is showing signs of deceleration of its decline. Combining the short-term outlook with this intermediate-term outlook, we see a short-term rally ahead that could likely take hold and bring prices even higher.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GOLD Daily Chart: Indicators are not favorable for GLD as it inches sideways along support at the 50-day EMA. The RSI is negative, the PMO is falling and Stochastics are stuck well below 20.
With our bullish outlook on the Dollar, we have to be bearish on Gold given the near perfect inverse correlation between the two right now. We also note that the strength of Gold against the Dollar is flat. Another indication the reverse correlation is getting stronger.
GOLD Weekly Chart: The weekly RSI is positive and the weekly PMO is rising. Unfortunately both are flattening as price looks to break below the shorter-term rising trend. Discounts are trending higher in the long term suggesting investors aren't liking Gold right now.
GOLD MINERS Golden and Silver Cross Indexes: The PMO gave us plenty of warning that Gold Miners were on the way to a correction with its crossover SELL signal arriving near the last major price top. We then got confirmation from participation as it fell off a cliff. Stochastics turned lower beneath 20. We think the correction in Gold Miners will continue.
CRUDE OIL (USO)
IT Trend Model: SELL as of 2/2/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: It was a good week for Crude Oil as it rallied four out of the five days. The RSI moved back into positive territory and the PMO turned up just under the zero line. Stochastics are rising. There is little doubt that we will test overhead resistance at 72.00, but it has been range bound so we aren't bullish enough on price action to call for a breakout to November highs yet.
USO/$WTIC Weekly Chart: The short-term price range is causing a "drift" through the rising bottoms trendline. That isn't as bearish as an actual break lower. We still have a higher low than the late 2022 low. We think USO will continue in this range for a bit longer. This break of the long-term rising bottoms trendline isn't bearish enough.
BONDS (TLT)
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The rally in yields put a damper on last week's attempt at a breakout. We now have what looks like an Adam & Eve double-top forming and price is losing the intermediate-term rising trend. Indicators are bearish with the RSI in negative territory and falling, and the PMO on the decline after an overbought SELL signal. Stochastics offer a tiny glimmer of hope, but they are oscillators that must oscillate so we wouldn't ready too much into this deceleration and possible bottom.
The rising trend is the bottom of a symmetrical triangle. Given these are continuation patterns, we should expect further downside on this breakdown. This is far more ominous than the 'drift' we saw on Crude Oil.
TLT Weekly Chart: If you couldn't see the double-top on the daily chart, you can definitely see it here. The weekly RSI has turned lower in negative territory and the weekly PMO is already flattening. TLT should at least test 100.00.
Good Luck & Good Trading!
Erin Swenlin And Carl Swenlin
Erin is 20% exposed.
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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