Today the Nasdaq Composite (ONEQ) 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating an LT Trend Model BUY Signal. This signal has a weak technical underpinning due to OBV and PMO negative divergences.
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 3/30/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: The rising trend how now been broken, but price so far is managing to stay above support at 405. Indicators are beginning to falter. The RSI is falling and the PMO is decelerating. None of this is surprising given the pullback. If we're fortunate, price will form a bull flag before resuming the rally.
Stochastics did top, but they remain above 80. The VIX is staying above its moving average so both Stochastics and the VIX suggest internal strength is still available.
Here is the latest recording 4/3:
S&P 500 New 52-Week Highs/Lows: New Highs continue to contract. The 10-DMA of the High-Low Differential is flattening. We do not want to see that indicator move negative again.
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 UP and the condition is OVERBOUGHT.
STOs have pulled back sharply on these two days of decline. This is actually good. They were getting very overbought and needed some relief. Rising momentum continues to decrease internally, but a reading of 72% is still above our 50% bullish threshold.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL to OVERBOUGHT.
We are happy to report that the ITBM and ITVM are still rising and are not yet overbought. We did see %PMO BUY Signals top, but that was really inevitable given we have fewer rising PMOs than BUY signals. If the PMO is not rising, it is vulnerable to a crossover SELL signal and therefore likely to move %PMO BUY Signals lower.
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 market bias is BULLISH in all three timeframes, although we could say Neutral in the short term.
Yesterday's reasons still apply:
"We have more than 50% of stocks above all three key moving averages which gives us a bullish short-term bias. The SCI had a positive crossover and is rising, so although it isn't above 50% yet, it is moving in the right direction on a positive crossover its signal line. The GCI isn't over the 50% bullish threshold yet either, but it has turned back up and given there are far more stocks above both their 50/200-day EMAs than those with Golden Crosses, we would expect the GCI to continue rising bullishly."
CONCLUSION: Yesterday's downside initiation climax did fulfill with a decline today. Although it wasn't a dastardly decline. STOs continue to fall and have just about reached 'neutral' territory. That's good as it avails them the opportunity to rise without getting overbought right away. IT indicators are still rising so all of this seems natural for a pullback. We do think more downside is likely in the short term based on STOs so we should manage our positions carefully either by tightening stops or adding a hedge.
Erin is 26% long, 2% short.
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BITCOIN
Bitcoin still has a rounded top look, but today it did break a very short-term declining tops trendline. Given the new PMO SELL signal today, we would expect more consolidation above current support at best. Stochastics are trying to turn up in positive territory, but not enough to consider it a sign of a rally to come.
INTEREST RATES
After promising bounces of support, long-term rates are falling again. Horizontal support at 3.4 is nearing for long-term rates. The 10-year yield did break below this support level today. We expect rates to continue lower as a market pullback could move investors back toward Bonds.
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 dropped below support and stayed there all day. We do now see a possible longer-term bullish falling wedge. If it breaks below that wedge it will be especially bearish. Given the configuration of the indicators, there is a high likelihood of failure. The RSI is very negative and the PMO topped below its signal line below the zero line. That is very bearish. Stochastics are pointed vertically lower.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 3/28/2023
LT Trend Model: BUY as of 2/24/2023
UUP Daily Chart: The Dollar rallied, but set a lower high so the declining trend is still intact. Indicators are still weak and support is wobbly. We would expect price to remain in the declining trend channel.
GOLD
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold has formed a bearish rising wedge. While the outcome expected is a break of the rising bottoms trendline, there are various levels of support available. Also, if the market continues to decline, Gold will find favor as a 'safe haven'. It is likely struggling here as new all-time highs approach.
GOLD Daily Chart: Unfortunately the discount/premium data was not available at publishing. We will go back and update this chart later tonight in the DPA ChartList. Indicators are strong, but the PMO is getting overbought. Stochastics and the RSI are very positive and rising. We would look for more pause ultimately ending with a breakout.
GOLD Weekly Chart: We're going to sneak a weekly chart in here to emphasize the gold is approaching all-time highs.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners just won't stop. The RSI is very overbought so it is due for a decline. If Gold pauses, as we believe it will, and the market continues this decline, GDX should pause too. Internals are incredibly strong so it is a matter of taking a break not declining deeply.
CRUDE OIL (USO)
IT Trend Model: SELL as of 2/2/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil continues to digest the gap up rally. We could be looking at the formation of a reverse island which would imply a gap down ahead. However, we disagree, the indicators look very good with the PMO just now reaching positive territory. The RSI is positive and not yet overbought. Stochastics are well above 80. Even the Crude Volatility Index ($OVX) is above its moving average on the inverted scale suggesting internal strength. Overhead resistance at 72.50 is nearing, but as we said, indicators are very positive so we expect a breakout.
BONDS (TLT)
IT Trend Model: BUY as of 3/17/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds continue to rally but are now up against overhead resistance. Bond ETFs have been coming up in Erin's Diamond Scans so we do expect a breakout here. The 20-year yield broke below the March lows which bodes well for TLT. The RSI is positive and the PMO is rising slightly. Stochastics moved above 80 today which is very bullish. Given the strength of this overhead resistance, the breakout may not occur quickly. Price may need consolidate the last five days of rally.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
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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