Today the NYSE Composite ($NYA) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. In keeping with the whipsaws of other sectors and market indexes, this is the sixth 20/50-day EMA crossover in the last 12 months. The Price Momentum Oscillator (PMO) is now back in positive territory and isn't overbought. We could see price inch up further.
Also, the Materials Sector 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. Not to be outdone in the whipsaw department, this is the eighth 20/50-day EMA crossover in the last 12 months. XLB has been rangebound all year and we don't expect that to change much. Indicators and participation are strong enough to expect a move back to the top of the range.
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 is intact as is the short-term rising bottoms trendline drawn from the late March low. However, the closer it gets to its apex, the pattern's effectiveness lessens. If it keeps going, once the apex is hit, there will be a "breakout" or "breakdown" from the pattern regardless. That type of resolution can't be trusted.
The RSI is above net neutral (50) and the PMO continues to rise. Neither are overbought and could accommodate more upside. Stochastics are oscillating strongly above 80 and the VIX is above its moving average and below the upper Bollinger Band on the inverted scale. Both imply internal strength. However, we do note that the VIX is overbought near-term.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Highs did expand on today's rally. However, the 10-DMA of the High-Low Differential has decided to turn lower. That doesn't always spell disaster, but it does suggest a pullback or at least consolidation will occur.
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.
Both the Swenlin Trading Oscillators (STOs) are rising again. Participation is also expanding. The one problem with this chart are the clear negative divergences that came in on Friday.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
IT indicators are confirming rising STOs. They've been strong and haven't hesitated in their rise. We like seeing more PMO BUY Signals, but that indicator is overbought.
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.
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 is overbought and has hit overhead resistance. While it is maintaining a rising trend, it is time for a pullback. Negative divergences are plentiful, but admittedly the actual readings and direction of these indicators is positive. This seems the perfect place (right at overhead resistance) for the market to pause and pullback. If we work under the assumption that we are in a bull market, that decline shouldn't be too painful. Regardless of whether we are in a bull or bear market, the market is very vulnerable to decline. Entering new positions right now exposes you to this additional downside risk. Set stops. Honor your stops!
Erin is 30% long, 2% short.
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BITCOIN
After breakout out above strong long-term overhead resistance, Bitcoin is having a textbook decline back toward the breakout point. However, we see a possible breakdown here given the PMO triggered a Crossover SELL Signal and Stochastics are back below 80.
INTEREST RATES
Yields are rising together and we would look for them to rise further. This is likely to pull the market lower or at least Technology which is a sector that is sensitive to interest rates. Certainly Bonds are 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 is rising quickly after dabbling below support at the beginning of the month. The indicators couldn't be more positive. The RSI just moved back into positive territory and the PMO generated a Crossover BUY Signal. Stochastics are rising very strongly and should reach above 80 tomorrow.
BONDS (TLT)
IT Trend Model: BUY as of 3/17/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT is still holding support, but we doubt it will stay here. The RSI is falling in negative territory and the PMO is on a new Crossover SELL Signal. Stochastics are falling fast and the OBV shows positive volume bleeding off. Look for a breakdown.
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 is making a move to test key moving averages. It wasn't successful in holding above the 20-day EMA. Indicators are looking up, but they are not yet confirming given the RSI and Stochastics are still in negative territory and the PMO only turned up today. We see a bullish bias and expect a breakout above those key moving averages.
GOLD
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: The Dollar's rally over the last two days has pushed Gold lower. It is holding above support, but is clearly weakening. The PMO is about to trigger and overbought Crossover SELL Signal. The RSI is positive, but Stochastics are falling.
$GOLD Daily Chart: We see a large bearish rising wedge forming on the chart. Price hit the top of the wedge and has pulled back. The strength of Gold to the Dollar is still technically trending higher so it could avoid a trip all the way down to the bottom of the wedge. Regardless, expect Gold to move lower.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are pulling back and with Gold likely on the rocks, Gold Miners are vulnerable to more decline. As with Gold, support is nearing, but this group is already starting to show deterioration to participation--granted not a lot given readings are still 89%+, but this is the first we've seen since the rally got going again. Stochastics also dipped below 80. We believe both Gold and Gold Miners will lose near-term support.
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 hit the top of its trading range and stalled. Today last week's gap was filled. That usually means more downside. However, the indicators haven't broken down much. The RSI is positive and the PMO is still rising. Stochastics are above 80. $OVX, the volatility index for Oil is overbought. At this point, we expect gap support to be tested just below $70. Ultimately we favor a breakout after a period of consolidation above gap support. We will change our tune quickly if the PMO turns down because it is very overbought.
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.
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)
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