Today the Materials Sector (XLB) 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. Again this signal change is a whipsaw brought on by price being in a trading range for the last year, and it has low credibility on that basis. Nevertheless, it is on the down side of a rounded top formation, and action anticipating a continued decline could be considered. Gold and Gold Miners look bullish, but not enough to carry this sector higher. Both rallied strongly with little effect on the sector.
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 Market Index, Sector, and Industry Group 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: We have a short-term bearish double-top visible on the SPY chart now. Price has landed right on the confirmation line. Given the deterioration of the RSI and PMO, we expect the decline will continue, likely to the 380 level. Price did manage to close above the 50-day EMA, but just barely.
The VIX did puncture the lower Bollinger Band with gusto today and that typically leads to a pause or snapback. Stochastics suggest a pause rather than a snapback as they tumble vertically lower.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Lows expanded greatly and New Highs were almost non-existent. The 10-DMA of the High-Low Differential fell today in overbought territory.
Climax* Analysis: There was only one indicator climax reading today, so we don't have a climax day.
*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 NEUTRAL.
We finally saw the Swenlin Trading Oscillators (STOs) get on board this decline with a contraction themselves. Participation continues to shrink in the short term. Not even one-quarter of the SPY have rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
As expected all of these indicators continued lower. The ITVM has now reached negative territory. Note the strong negative divergence on this indicator. A similar look to the PMO's negative divergence. This suggests to us a longer-term decline ahead. Only 39% hold PMO BUY Signals right now, but given only 24% have rising PMOs, we know that percentage will move lower. It is not oversold at all.
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 short-term bias is BEARISH.
The intermediate-term bias is BEARISH.
The long-term bias is BEARISH.
The bias is clearly BEARISH in all three timeframes. The SCI has topped beneath its signal line which is especially bearish. Given there is a lower percentage of stocks above their 20/50-day EMAs than the SCI, the SCI will likely continue lower. %Stocks above their 20/50/200-day EMAs are all below our bullish 50% threshold. The GCI has topped and now we wait for a negative crossover its signal line.
CONCLUSION: The STOs have now topped and the already declining IT indicators are confirming. We can only point to one indicator that would suggest a pause or rally pop tomorrow and that is the VIX which punctured its lower Band on the inverted scale. That indicator does have weight, but ultimately with every other indicator in decline, this isn't over by a long shot. Stay defensive, stick to industry groups showing relative strength and of course, keep your stops in play. Inverse ETFs offer an excellent way to hedge your current positions. The SPY will likely hit 380.
Erin is 18% long, 7% short.
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BITCOIN
Yesterday's comments still apply:
"As we noted yesterday, Bitcoin is indecisive and is forming a symmetrical triangle. These are continuation patterns. The prior trend was up overall before this pattern began forming so we would eventually expect a breakout from the pattern. The PMO is still in decline though, but the RSI has moved back into positive territory and Stochastics are now turning up. We thought this would be a breakdown ahead, but given improving indicators, we would look for more sideways action."
INTEREST RATES
A market decline had the effect we expected, a flight to Bonds which has depressed interest rates.
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
Yesterday's comments still apply:
"$TNX has seen indicators do an about face. The RSI has moved back into negative territory and the PMO topped today. Stochastics completely tipped over. We had expected rates to continue rising...barring a deep market decline. The market decline is beginning in our opinion, so Bonds will likely overpower yields."
BONDS (TLT)
IT Trend Model: BUY as of 3/17/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The flight to safety didn't help TLT today as the 20-year yield rose. This put TLT just above its 20-day EMA. We would expect this level to hold given Stochastics are rising, but the PMO is flat and unresponsive and the RSI is barely in positive territory above net neutral (50). We have a feeling that the flight to Bonds will likely head into shorter-term Bonds v. longer-term Bonds.
The bullish ascending triangle (flat tops, rising bottoms) is still intact. More market decline could push Bonds above overhead resistance.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 3/28/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: The intermediate-term symmetrical triangle has basically been busted. We did get a slight breakout, but it is now back to testing support. The indicators are weak with the RSI in negative territory and Stochastics falling quickly into negative territory. The PMO is unhelpful as it kept yesterday's reading which came off a decline for the indicator. We expect more sideways movement.
The longer-term daily chart reveals a large symmetrical triangle. These are continuation patterns. The break from the triangle is determined by the prior trend. In the case of the Dollar, it is up. An upside breakout should be expected, but debt ceiling worries could prevent this from happening in the near term.
GOLD
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold rallied to new all-time highs today and we expect it will continue to set new highs. The flight to safety is working in Gold's favor and given we don't think the decline is over, neither do we think the rally in Gold is over. The RSI is positive and not overbought. The PMO is nearing a Crossover BUY Signal. Stochastics just moved above 80.
GOLD Daily Chart: The strength of Gold is apparent given the inverse correlation between Gold and the Dollar is lessening. Note also the jump in relative strength to the Dollar. We mentioned it yesterday, but another item that is working in Gold's favor is its volatility index ($GVZ). It has now punctured and closed beneath the lower Bollinger Band on the inverted scale. That implies more upside ahead.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are at it again, flouting the market decline with a strong rally. Given the big bull flag this rally is confirming, we think they have much higher to go. Participation is expanding and today the Silver Cross Index saw a positive crossover its signal line. With Gold looking very bullish, this industry group will likely continue higher in spite of a market decline.
CRUDE OIL (USO)
IT Trend Model: SELL as of 5/3/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil paused the decline just as it was about to test long-term lows which the March low lands on. It appears too early to look for a reversal given the very negative PMO and Stochastics. The RSI rose slightly because price did. The Crude Oil Volatility Index ($OVX) punctured its lower Bollinger Band on the inverted scale like Gold. Typically these punctures do lead to higher prices. However, until the PMO at least decelerates its decline, we would expect a move to 58.00.
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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Price Momentum Oscillator (PMO)
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