Before we talk about the Regional Bank (KRE) chart, we will say up front that we do not trust this industry group. There are positive characteristics to the chart. In particular, today price broke out from a bullish falling wedge. The PMO is rising on an oversold Crossover BUY Signal. We also have a positive OBV divergence (rising bottoms on OBV, declining bottoms on price). Stochastics are rising strongly above net neutral (50).
However, some of the most important "under the hood" indicators aren't showing real improvement. Granted this group was incredibly beat down on the prior decline, but we would want to see some participation before going all-in on this group.
The Silver Cross Index (SCI) fell (seen in the thumbnail) and hasn't turned back up. It is at an anemic 0.70%. The Golden Cross Index (GCI) is still falling. Remember, the SCI measures how many stocks have a 20-day EMA above the 50-day EMA and the GCI measures how many stocks have a 50-day EMA above the 200-day EMA. In order for those indicators to rise, we need a healthy number of stocks above both of those EMAs. We do see improvement for stocks above their 20-day EMA, but it ends there. We need to see these percentages rising to get us to that bullish 50%+ threshold. It's incredibly early to get involved with KRE, but we must say today's breakout is interesting.
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 bearish rising wedge was nearly compromised. By Friday, we will have some resolution as the price is now in the apex of the pattern. Regardless of what it does, it will breakout or breakdown simply because there is no more wedge to travel in. Today's candlestick was a bullish hollow red. The RSI and PMO are still positive and the OBV is showing rising bottoms.
Stochastics are still comfortably oscillating above 80. The VIX while very positive on our inverted scale, it is nearing the upper Bollinger Band. Typically punctures of the upper Band lead to short-term declines. With overhead resistance nearing at the 2023 high, it wouldn't be a surprise if we see a pause or pullback.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Highs contracted which is to be expected on a decline, small as it is. The 10-DMA of the High-Low Differential is rising again, but it is near-term overbought.
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 NEUTRAL.
Interestingly the STOs rose today. They are becoming a bit too indecisive so we aren't going to read too much into this, particularly given the negative divergences on the chart.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
We keep waiting on the ITBM/ITVM to turn lower, but with the strong rising trend in the intermediate-term they are persistent in their expansion. We note that %PMO Crossover BUY Signals has topped in overbought territory. The ITVM and PMO are both showing negative divergences.
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.
We still read the market bias as BULLISH in all three timeframes.
The Silver Cross Index (SCI) and Golden Cross Index (GCI) continue to rise with the GCI accomplishing a positive crossover its signal line. We have participation readings that are all above our 50% bullish threshold. We do note that negative divergences are visible on all of these indicators so it does take the shine off that bullish bias.
CONCLUSION: The market essentially paused today finishing mostly unchanged. However, price set a lower low and lower high today, a clear downturn. While today's candlestick is bullish, the VIX is about to puncture the upper Bollinger Band and that generally leads to a decline. The 2023 high is arriving. We do not expect a strong breakout, we expect a pullback given the numerous negative divergences visible on our indicator charts. We would continue to play defense.
Erin is 30% long, 2% short.
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BITCOIN
Yesterday's comments still apply:
"After breakout out above strong long-term overhead resistance, Bitcoin is having a textbook decline back toward the breakout point. The indicators were negative enough to expect this level of support to not hold. They are still weak given the PMO is on a SELL signal and Stochastics are still technically declining. We would look for some sideways movement here with a possible breakdown ahead. "
INTEREST RATES
Yields are rising. We expect them to continue to rise toward this year's highs. Bond will stay under pressure.
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 looks very bullish right now, part of the reason we are bullish on yields overall. The RSI is positive, rising and not overbought. The PMO is rising on an oversold Crossover BUY Signal. Stochastics are rising well above 80. We would look for a breakout above 3.7%.
BONDS (TLT)
IT Trend Model: BUY as of 3/17/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday's comments still apply:
"TLT held support today, but it didn't improve any of the indicators. We could certainly see this short-term trading range extend, but we would look for a test of the bottom of the intermediate-term trading range at 98.50. We believe the 20-year yield will move higher from here."
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 3/28/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: The Dollar continues to meander its way through a declining trend channel. The RSI is negative, but now rising on today's rally. The PMO nearly triggered a Crossover BUY Signal today and Stochastics, while decelerating somewhat, are rising in positive territory. As we noted yesterday, we don't expect much out of the Dollar, but the bias does appear to be bullish based on improving indicators.
GOLD
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold lost ground on a rising Dollar. The indicators are really beginning to weaken. We now have a PMO Crossover SELL Signal. While the RSI is still holding positive territory, Stochastics have dropped into negative territory and continue lower. We consider Stochastics an early detection indicator. If it has gone negative, we should expect the decline to continue.
$GOLD Daily Chart: Yesterday's comments still apply:
"Investors are getting more bearish on Gold given discounts on PHYS are expanding. That isn't helping. At this point we believe Gold will drop lower and test the February high. We will have to reevaluate at that time, but it is certainly vulnerable to testing the longer-term rising bottoms trendline."
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners dropped heavily and are about to test very strong support. If we hadn't seen such a drop in participation of stocks above their 20/50/200-day EMAs, we would expect a rebound. However, this decline really slashed participation so we would look for an upcoming breakdown.
CRUDE OIL (USO)
IT Trend Model: BUY as of 4/10/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil has begun slipping after setting a new 2023 high. Overhead resistance is stronger than we thought. Price does remain above the 200-day EMA, but it has already begun closing the breakaway gap. Additionally the indicators are in decline suggesting it's time for USO to make a trip back to the bottom of the trading range.
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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