The recent Hussman Funds Semi-Annual Report lead with the following excerpt from the previous year's report:
By relentlessly depriving investors of risk-free return over the past decade, the Federal Reserve has spawned an all-asset speculative bubble that we estimate will provide investors little but return-free risk over the coming decade. (Emphasis mine.)
We agree with this statement entirely, but perhaps an exception to this outlook would be Treasuries. The chart shows that the 30-Year T-Bond Yield has recovered back to approximately where it was at the beginning of the Financial Crisis. The problem is that Treasuries may no longer be thought of as being risk free. To use another Hussman favorite word, the Fed and the administration are simply deranged in their policies, piling up debt that begs for a collapse.
A more important feature on the chart is that yield has broken a very long-term declining trend line, which implies that a long-term rising trend has begun. The monthly PMO is over five points higher than any other time in the almost 80 years shown, showing a powerful internal up thrust.
This is not the first time we have covered this subject, and it is not going to be the last. The takeaway is that people have acquired certain expectations regarding bonds in the last 40 years. Those expectations need to change.
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: Today's rally formed a big bullish engulfing candlestick that engulfed not only yesterday's candle, but also Tuesday's. We also saw a breakout of the small bullish falling wedge.
We're still not seeing total internal strength. The VIX did get above its moving average on the inverted scale, but Stochastics are still unresponsive.
Here is the latest recording (2/27):
S&P 500 New 52-Week Highs/Lows: Despite a rally, we saw an expansion of New Lows that still confirm the declining trend.
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 OVERSOLD.
STOs are hinting that this could be the beginning of a short-term upside reversal. We saw an excellent expansion in %PMOs Rising as well as an improvement in the number of stocks above their 20-day EMAs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
IT indicators are still not confirming the short-term indicators, although we did see more PMO BUY signals today.
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 overall market bias is BEARISH.
As noted previously, we don't need to separate out the timeframes because all three timeframes show bearish biases. We have a very low number of stocks above their 20/50-day EMAs and no improvements are being made. The Silver Cross Index is falling and will continue to fall as long as we keep seeing fewer stocks above their 20/50-day EMAs. The Golden Cross Index has had a negative crossover.
CONCLUSION: Short-term indicators suggest this is the beginning of a new upward trend. Unfortunately, we don't have confirmation from the ITBM/ITVM yet. Participation is improving, but not enough to change the bearish bias in all three timeframes. With today's bullish engulfing candlestick and the continued rise of the short-term indicators, we are looking for higher prices nonetheless. It is likely a bit early to consider a major expansion in your portfolio, but short-term traders may find a few candidates available that could take advantage of short-term strength. (DP Diamonds subscribers have been notified of new pockets of strength this week.)
Erin is 22% exposed.
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BITCOIN
Yesterday's comments still apply:
"Bitcoin is traveling within a large bearish rising wedge. The pattern is close to confirming, but we don't have much of a breakdown. Support is currently holding at 22,500, but the PMO and Stochastics are very bearish. We expect a breakdown."
INTEREST RATES
Rates continue to trend higher after forming, and in most cases are executing bullish double-bottom chart patterns. The rising rate environment should continue.
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 gapped up today as it makes its way toward the upside target of the bullish double-bottom pattern. The target is just above the October high. Indicators are very bullish (though the RSI is now in overbought territory) and suggest more upside ahead.
DOLLAR (UUP)
IT Trend Model: BUY as of 2/27/2023
LT Trend Model: BUY as of 2/24/2023
UUP Daily Chart: UUP righted the ship today with a gap up. Unfortunately, it did form a bearish filled black candlestick that suggests tomorrow will bring price down. The bearish rising wedge suggests the Dollar is weak and could see a breakdown soon.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold was down slightly today. The PMO is flattening and Stochastics are rising again, but we need to see a positive RSI. More importantly, price needs to get above the 20-day EMA to prevent a "Dark Cross" IT Trend Model Neutral Signal.
GOLD Daily Chart: The inverse correlation of Gold to the Dollar is still nearly a perfect -1.0 so we should expect these two to travel in opposite directions. Given the rising wedge on the Dollar and some bearish characteristics, we do think Gold has an opportunity to continue this new rising trend.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"Gold Miners are back on the move. Participation is improving quickly as more stocks rise above their 20/50/200-day EMAs. Stochastics have moved back above 20 and the RSI is rising out of oversold territory. Given Gold looks pretty good and the market could be on the cusp of a short-term reversal, GDX has potential to move much higher. The PMO hasn't turned up yet so this would be an early entry. We've certainly seen rallies fail quickly on Gold Miners."
CRUDE OIL (USO)
IT Trend Model: SELL as of 2/2/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Stochastics are perking up and the PMO is nearing a crossover BUY signal. The RSI is also positive. We expect another trip to at least test the February top. The 200-day EMA was a problem last time. Indicators look much the same so we can't count on a breakout.
BONDS (TLT)
IT Trend Model: SELLas of 2/21/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With yields jumping higher today, TLT broke its intermediate-term rising trend. Indicators are all moving lower so while price is on support at the December low, we expect it to breakdown.
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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