Today the NYSE Composite Index ($NYA) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL Signal. Today's decline took price below short-term support. The indicators look terrible. The PMO has topped beneath its signal line in negative territory. The RSI is below net neutral (50) and Stochastics have topped well below 80. Not to mention, the Silver Cross Index has topped multiple times beneath its signal line. Broad market participation and price strength is very weak.
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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: Another drop today. This time it broke support at the 20-day EMA. The PMO which topped yesterday, triggered a Crossover SELL Signal today. We discussed how large-caps have carried the market higher. This becomes crystal clear when you compare how well it is performing against the equally-weighted SP500 ETF (RSP).
The VIX penetrated the bottom Bollinger Band on our inverted scale. Usually this leads to some upside. We don't think it will this time around. The Bollinger Bands had squeezed tightly together so it wasn't that difficult for it to move below it. Stochastics are tumbling vertically lower. Internal weakness is a problem right now.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: Today we did see an expansion in New Lows as we would expect. As noted yesterday, the mega-cap stocks finally showed failure. The broad market is following their lead.
Climax* Analysis: Today there were unanimous climax readings on the four relevant indicators, so we have a downside initiation climax.
*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.
Swenlin Trading Oscillators (STOs) reacted strongly to today's decline by dropping quite a bit. The STO-V could join the STO-B shortly in negative territory. We now have about 1/4 of the index holding rising PMOs. Getting the market to run higher with so few stocks showing positive momentum will be very difficult.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
Both the ITBM and ITVM dropped precipitously lower today. As expected we continued to lose PMO Crossover BUY Signals.
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 BEARISH in all three timeframes.
We saw a huge drop in stocks above their 20/50/200-day EMAs. The Silver Cross Index continues to fall. Now the Golden Cross Index has topped beneath its signal line which is very bearish. With anemic participation, both the Silver Cross Index and Golden Cross Index will continue to fall.
CONCLUSION: Today's decline turned indicators particularly negative and brought forth a PMO SELL Signal and a downside initiation climax. The VIX is hinting that maybe we will see a pause tomorrow, but we think this decline is only getting started. There is no participation to support an upside reversal given many of the mega-caps are losing ground and there is no rising momentum among the rest. Look at your investments with scrutiny. Consider whether they have positive momentum and rising Stochastics. Look for broken support and set stops.
Erin is 14% long, 7% short.
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BITCOIN
Finally something to write about on Bitcoin. Today it closed beneath support. The RSI was already negative and now it is falling. The PMO is topping beneath its signal line in negative territory. Stochastics are also topping in negative territory. We would look for a breakdown below support at the 200-day EMA.
INTEREST RATES
Yields rose on the day after yesterday's brief pause.
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 holding support. The RSI is positive, rising and not overbought. The PMO is rising and Stochastics are oscillating above 80. Look for yields to continue to rise.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With yields rising and concern about the debt ceiling, Bonds are getting hit hard. We would look for a test of 98.50 given the negative indicators across the board.
DOLLAR (UUP)
IT Trend Model: BUY as of 5/18/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: Yesterday's comments still apply:
"The Dollar is on the move higher and given the positive indicators, we expect overhead resistance to be tested at the March top. A Golden Cross is on the way as the 50-day EMA narrows on the 200-day EMA."
GOLD
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: GLD is holding support despite the Dollar rally today. Indicators look absolutely terrible so we wouldn't count on this level holding. The PMO is approaching the zero line. The RSI is negative below net neutral (50) and Stochastics actually topped beneath 20 which is very bearish.
GOLD Daily Chart: Unfortunately we don't have today's PHYS discount reading. Interestingly, so far traders aren't that bearish on Gold given reduced discounts. $GVZ was below its moving average most of the day and that implies internal weakness. We believe Gold will find favor soon, but the chart is too negative to get into this metal.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners were hit particularly hard today with a double whammy of Gold declining and the market declining. We have zero percent with price above their 20-day EMAs and the rest of the participation numbers look very weak. The Silver Cross Index has topped beneath its signal line. Support is now available but with the PMO moving below the zero line today, we think this is going to be a drawn out 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 pushed past the 50-day EMA. This is territory not seen since the decline began. The RSI just hit positive territory and the PMO is on a new Crossover BUY Signal. Stochastics are above 80. $OVX is also echoing internal strength as it trades above its moving average on the inverted scale. The Energy sector is about the only sector showing good relative strength.
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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