We know it is bad out there -- we don't have to tell you that. But the technicals are now proving to us how bad it really is. Just so you know, these two industry groups' Price Momentum Oscillators (PMOs) only began rising today; so prior to today, EVERY industry group had falling momentum... EVERY SINGLE ONE.
Every Friday for DecisionPoint Diamonds subscribers, I provide a "Sector to Watch" and an "Industry Group to Watch". This week was a challenge. As I clicked through each of the 90 industry groups covered in the Industry Group Summary on StockCharts.com, I was shocked to see that none had rising momentum... I had to call up the actual charts to examine if the PMO had maybe turned up, as it was an eye test. If it looked remotely like the PMO had turned up, I had to call up a "thumbnail" on the chart.
<Drum roll> Envelope, please... and the two industry groups with rising momentum are... Diversified REITs ($DJUSDT) and Renewable Energy ($DWCREE)!
Let's review the charts.
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We have a strong positive divergence that led into this current rally on this industry group, which suggests the rally will get legs. Without a thumbnail, you wouldn't really know the PMO is rising at all. The RSI is still negative, but is rising now and Stochastics look good as they move up out of negative territory. It is a clear winner against the SPY. In the Diamond Mine trading room, we picked out a few stocks in this area that had potential, but I'll keep mum in respect of my subscribers.
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This looks promising for Renewable Energy, but I have to say that I wouldn't want to jump into this area in a bear market. It is already volatile. The PMO may have turned up on $DWCREE, but on the Solar ETF, TAN, it has not. However, this chart is shaping up. The RSI is nearing positive territory, Stochastics are rising again and, this week, it was a clear outperformer against the SPY. It's extremely early to call it, but it does look like a bullish double-bottom is developing. Looking at the relative strength line, though, you can see how volatile it is.
Conclusion: We knew it was bad, but not how bad. Prior to today, there were NO industry groups with rising momentum. Today, we now have two rising PMOs. Usually we will see "pockets of strength" among the industry groups. Given we are not seeing pockets, it is a clear indication of how oversold and beat down this market is. Unfortunately, we believe there is much more downside to absorb with occasional bear market rallies. As usual, we will keep our subscribers updated.
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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