Today the Utilities Sector ETF (XLU) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL Signal. This is the third LT signal in five months and is more of a function of sideways price movement than it is of serious downside pressure. That is why we emphasize that mechanical signals should be considered information flags, not calls for immediate action. The PMO is flat, potentially about to bottom, so no action is appropriate until we see how price action develops.
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 remains in a very short-term declining trend. The last rally didn't result in a test of the top of the rising wedge. This is bearish given it couldn't summon enough energy to even test the February highs. The good news is that it is holding the intermediate-term rising trend and still has room before testing the longer-term rising bottoms trendline. The PMO did top today, but managed to stay above its signal line, for now.
Stochastics topped and the VIX moved below its moving average on our inverted scale. These implies internal weakness is seeping in.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: In spite of the big decline, we saw slightly more New Highs than New Lows. A problem remains, the 10-DMA of the High-Low Differential is topping and moving lower.
Climax* Analysis: Today there were climax readings on three of the four relevant indicators, giving us a downside initiation climax. SPX Total Volume was strong enough to be confirming but not climactic.
*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.
The Swenlin Trading Oscillators (STOs) rose again today which is bullish given today's big decline. Unfortunately, the important piece, momentum, is deteriorating as we now have only 27% of stocks with rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM and ITVM did not confirm the STOs as they continue to move lower. They are still in overbought territory. %PMO Buy signals is not in overbought territory, it is in neutral territory. We know that number is going to get worse given only 27% have rising PMOs.
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 NEUTRAL.
The long-term bias has moved to neutral now that we have fewer stocks above their 50-day EMA than those with Golden Crosses. 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 giving us a short-term bearish bias. The intermediate-term bias is BEARISH given the SCI has topped and had a negative crossover in overbought territory.
CONCLUSION: The market is looking decidedly weak as price failed to test prior February highs. The bias based on participation is bearish in the short term. STOs may be rising but IT indicators are declining and not confirming. We also have a downside initiation climax that tells us to expect lower prices over the next day or two. Your positions will likely be fighting a bearish market tide. Exercise caution.
Calendar: Tomorrow is the last trading day before options expiration, so we should expect low volatility and normal market volume.
Erin is exposed 20%.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact support@decisionpoint.com for more information!
BITCOIN
Bitcoin started out with a continuation of yesterday's breakout, but ended up finishing lower on the day. Indicators are bullish enough for it to break out, but we would expect a digestion period first with today being the first day of it. If indicators tumble, we will reevaluate, but for now it looks like an upside continuation is likely after some consolidation.
Note that the long-term daily chart shows overhead resistance here. That could explain today's negative finish.
INTEREST RATES
Yesterday's comments still apply:
"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
$TNX is holding its rising trend and is about to test the confirmation line of the bullish double-bottom pattern. This could be a place where we will see a slow down in the rally. We do expect the breakout given the positive RSI, rising PMO and very strong Stochastics. PFIX is the interest rate hedge ETF.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: SELL as of 1/31/2023
UUP Daily Chart: Price formed another bearish filled black candlestick today. Yesterday's didn't cause harm so we don't think this one will be a problem either. The RSI is positive and the PMO is rising nicely. Stochastics are very bullish. Overhead resistance is nearing, but we expect the Dollar will break out there.
Price has broken out of the long-term declining trend channel.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Yesterday's comments still apply:
"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: Bearish sentiment is showing itself as discounts begin to expand on PHYS. The strength of Gold to the Dollar is fading. We continue to look for Gold to reach the 200-day EMA and August high.
GOLD MINERS Golden and Silver Cross Indexes: Price has crossed below the 200-day EMA and given the negative RSI and falling PMO, we don'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. Price could even test $26 soon.
CRUDE OIL (USO)
IT Trend Model: SELL as of 2/2/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: USO is in an intermediate-term trading range. We do not like that price was unable to reach overhead resistance at the January highs. It is holding above the 20/50-day EMAs, but the PMO has topped and the RSI is now below net neutral (50). Stochastics are positive and we do see a small bull flag, so it isn't over for Crude. We would still exercise caution on any crude oil related trades.
BONDS (TLT)
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: This really looks like a giant bearish double-top. It won't be confirmed until price drops beneath the confirmation line at the December low. We believe it will confirm given the weak RSI, falling PMO and Stochastics beneath 20 and falling. The minimum downside target of the pattern would almost magically fall on support at the October low.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
(c) Copyright 2023 DecisionPoint.com
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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.