What immediately stood out regarding today's action was the unexpectedly high volume -- SPX Total Volume was almost double the one-year daily average. There was no news identifying anything specific, so we looked around, and we noticed that AAPL, MSFT, and NVDA had very high volume days. Nvidia was also interesting in that it is down -10% from yesterday's price high, and it also has an island reversal setup. One possible interpretation is that the recent gains from hype of AI stocks may be about to see some giveback.
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Today the Consumer Staples Sector (XLP) 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. This signal is generated as price breaks down from a bearish rising wedge formation, so more downside is probable. There is obvious support at 70.50.
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.
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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: Today's decline landed price on near-term support, but it also could be setting up a bearish double-top. If you had any doubt the previous rally was narrowed to the mega-caps, just take a look at the incredible rising strength the SPY has versus equally-weighted RSP.
There was a positive development, Stochastics managed to move past bullish 80. The RSI fell as expected. The PMO is flat.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: Today the 10-DMA of the High-Low Differential topped. The negative divergence has been sealed with today's decline as it created a price top.
Climax* Analysis: Only SPX Net A-D had a climax reading today, but SPX Total Volume was nearly double the one-year daily average, which is significant. A single indicator climax wouldn't normally rate declaring a climax day, but the volume really carries some extra weight, so we are calling a downside initiation climax. Not sure what it means, but it tells us to be especially alert tomorrow.
*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 OVERSOLD.
Interestingly, both STOs rose on the day. We don't see it as significant based on our other indicator charts. We also see that participation continues to shrink and more stocks are losing rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
Unlike the STOs, both the ITBM and ITVM contracted. At this time, only 1/3rd of the index have PMO Crossover BUY Signals. It means that 2/3rds have PMO Crossover SELL Signals. Knowing that only 28% of PMOs are rising, we know that SELL Signals will be going up.
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 bias is BEARISH in all three timeframes.
We have participation numbers all coming in less than our 50% bullish threshold. The Silver Cross Index is below its signal line and is flat. The Golden Cross Index is falling and will likely continue to fall as long as we have fewer stocks above their 50/200-day EMAs than we have Golden Crosses within the index.
CONCLUSION: A warning shot was fired and no one is talking about it. Mega-cap stocks saw some high volume selling today. The market has been propelled higher by mega-cap stocks and now we will see if the silent herd can pick up the slack. Highly doubtful given anemic participation percentages. We read today as a downside initiation climax for good reason. While STOs inched a bit higher, the rest of our participation charts are negative and have stark negative divergences. Play defense.
Erin is 10% long, 7% short.
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BITCOIN
Just as things were looking up for Bitcoin, it failed to produce. The bearish rounded top is having its way with it. The RSI moved back into negative territory, the PMO is about to whipsaw into a sell signal and Stochastics completely tipped over. With indicators wobbly, we would look for more sideways movement. If the declining trend is broken, we'll revisit a Bitcoin rally.
INTEREST RATES
Bonds are seeing life and it has taken the wind out of the sails of interest rates. We expect this trend to 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
Apparently we were right about the debt ceiling deal inviting investors back to Bonds. This pulled yields down significantly so far this week. We expect more of the same. We would look for a test of the bottom of the bullish falling wedge.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We had thought that the 20-day EMA would pose problems. Mega-caps lost on high volume and Bonds are becoming vogue again. We now expect a move to test resistance past the 200-day EMA.
DOLLAR (UUP)
IT Trend Model: BUY as of 5/18/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: The Dollar resumed the rally, but formed a bearish filled black candlestick. Indicators are very positive, but the RSI is overbought. Another day or two of consolidation would bring it back down. Stochastics are oscillating above 80 and the PMO is rising strongly. We expect a breakout after a pause.
GOLD
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold managed a positive close as it tentatively bounces off support. Indicators are attempting to move bullish, but are still definitely in the bearish category. We do expect Gold to move higher on a market decline.
GOLD Daily Chart: Yesterday's comments still apply:
"The rebound of the long-term rising bottoms trendline is encouraging. If price can stay above the 50-day EMA, a Dark Cross of the 20/50-day EMAs could be avoided. $GVZ is at the top of the upper Bollinger Band on our inverted scale which many times will lead to decline in the very short term."
GOLD MINERS Golden and Silver Cross Indexes: A market decline will likely see Gold move higher. Miners should benefit. Today's rally, while encouraging, isn't supported by bullish participation numbers. As noted, this is a perfect place for a rally, but we'd be very careful until we see better participation.
CRUDE OIL (USO)
IT Trend Model: SELL as of 5/3/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: The rally in Crude Oil was abruptly ended yesterday on a breakaway gap down. This promised more decline and that is exactly what we got. This speedy decline suggests support will be tested at 58.00 (and likely not successfully tested).
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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