We're including this chart as a reminder that the 36-year bond bull market is over and that the excess continues to unwind. The long-term rising trend line for bonds is history, and we believe that a very long-term decline is ahead of us. For nearly four decades investors have made certain assumptions regarding bonds. In our opinion those assumptions need to be reversed. We can see that bonds have had a bounce since October, but a closer look in the Bonds section of this commentary will show that the short rally appears to be over.
Erin discussed the Interest Rate Hedge (PFIX) in today's DP Diamonds Report for "ETF Day". It is a way to take advantage of the rising rate environment.
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.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
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: Price formed a bullish engulfing candlestick today which suggests a breakout ahead from the short-term declining trendline. The RSI is staying comfortably within positive territory above net neutral (50) and the PMO is inching higher. We still would like to point out that there is a bearish rising wedge visible in the intermediate and long term.
Stochastics are rising again after bottoming in positive territory and the VIX is above its moving average on the inverted scale. Both suggest there is internal strength.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Highs expanded on the rally which is bullish. However, the 10-DMA of the High-Low Differential is declining again in near-term overbought territory. If the bear market is still lingering, we will see that indicator continue lower since it is overbought. However, if it breaks out, that would be a sign that we are indeed in a bull market now.
Climax* Analysis: There were no climax readings 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.
Every short-term indicator rose today which is good to see given yesterday they had reversed lower. We would like to see at least 50% of stocks with rising momentum. That could potentially keep the rally moving.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
All intermediate-term indicators also fell today. Only 44% are holding PMO crossover BUY signals. Based on the prior chart, we have 45% of stocks with rising momentum, so that could slow this indicator's descent.
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.
The intermediate-term bias is BEARISH.
The long-term bias is BULLISH.
We have a lower percentage of stocks above their 20/50-day EMAs as compared to the Silver Cross Index and those percentages are shrinking. The intermediate-term bias is BEARISH given the SCI has topped and had a negative crossover in overbought territory. The long-term bias is BULLISH since we still have more stocks above their 50/200-day EMAs compared to the Golden Cross Index percentage. This implies we will see the Golden Cross Index rise.
CONCLUSION: All of our primary indicators are in decline. The PMO is barely rising. Participation must improve. Stocks are losing support levels at key moving averages. While more stocks saw rising momentum today, the reading is less than 50%. This puts the market at a tipping point and given the bias is bearish currently, we are preparing for prices to move lower. Today's bullish engulfing candlestick does suggest higher prices tomorrow. Remember there is a bearish bias if you are considering expanding your exposure.
Erin is exposed 15%.
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BITCOIN
Today saw a stunning rally by Bitcoin. Yesterday's chart only hinted at higher prices based on support holding. The RSI and Stochastics were barely positive and the PMO was still declining yesterday. Indicators now suggest we will see follow-through on this rally.
However, you should note that the long-term daily chart shows overhead resistance already here.
INTEREST RATES
We are seeing bullish double-bottoms on interest rates. A few of these patterns have been confirmed given breakouts at confirmation lines across the middle of the "W" in their patterns.
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 has broken its declining trend and is forming a bullish Adam & Eve double-bottom. The RSI is positive and the PMO has now reached positive territory. Stochastics are set strongly above 80. It appears rates will be making another run at new 52-week highs. PFIX is the interest rate ETF that follows yields."
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 has formed a less steep rising bottoms trendline. Today saw a gap up, but price did form a bearish filled black candlestick as price closed below the open for the day.
Today's gap up pushed price out of its declining trend channel. We like the Dollar given the positive RSI, rising PMO and Stochastics above 80. We expect it to continue rising.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: GLD is now testing the next line of support at December highs. It shouldn't surprise us that Gold is basically an inverse of the Dollar chart right now given they hold a near perfect inverse correlation.
GOLD Daily Chart: The indicators are opposite the Dollar's. The RSI is negative and falling further. The PMO is accelerating its decline and Stochastics are declining. We would look for a test of the 200-day EMA at a minimum.
GOLD MINERS Golden and Silver Cross Indexes: Price is now crossing the 200-day EMA and given the negative RSI, falling PMO and Stochastics, we wouldn't expect a reversal. Participation is very thin with 0% of stocks above their 20-day EMA. The Silver Cross Index is moving vertically lower as a result. Next support level is $27.00.
CRUDE OIL (USO)
IT Trend Model: SELL as of 2/2/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Price is consolidating sideways. The PMO is still relatively healthy given it is rising and not overbought. The RSI is positive, barely. Stochastics are topping. Price has topped before hitting overhead resistance at $72 and that does suggest more downside. However, all is not lost for Crude, price appears to be forming a bull flag.
BONDS (TLT)
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds have lost their short-term rising trend and indicators are negative. Stochastics may have flattened and may even be rising, but they are well below 20 which suggests internal weakness. The PMO is declining and the RSI is negative. Strong support is arriving at the December low and rising bottoms trendline, but if price moves there, it will form a big bearish double-top.
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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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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