Today the Consumer Discretionary Sector (XLY) 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating an LT Trend Model BUY Signal. We saw a pop this week in the Golden Cross Index. This is because many of the stocks within XLY look much like XLY. It got a Golden Cross and therefore, many others did too. However, notice that the Silver Cross Index continues lower as does participation as a whole. We expect overhead resistance will be too much at the February top.
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: The market rallied strongly on what was perceived as good economic data. The rally basically extinguished the double-top that was starting to develop on yesterday's decline. Primary indicators are bullish. It is important to note the rise in relative strength of the SPY v. RSP. It tells us that mega-caps are still the primary contributors to this rally.
Stochastics actually topped on today's market action which was a surprise. The VIX punctured its upper Bollinger Band. Typically those punctures lead to a decline over the following day or two. Internal strength is still visible given the location of both the VIX and Stochastics.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential topped yesterday and continued lower again today. Considering the voracity of today's rally, there weren't many New Highs. The negative divergence is still in play.
Climax* Analysis: Whereas, yesterday we had a downside initiation climax, today we got an upside initiation climax. There were only two indicator climax readings, and they weren't robust, but they were backed up by solid volume. We should note, however, that the last two climax days failed to generate any follow through.
*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.
STOs rose strongly today with the STO-V hitting positive territory. Still, we note that participation didn't expand by much.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
IT indicators are confirming rising STOs as both the ITBM and ITVM rose today. We didn't pick up many new 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 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 falling. The Golden Cross Index ticked upward today, but given we have fewer stocks above their 50/200-day EMAs than golden crosses, it won't likely continue that rise.
CONCLUSION: Technicals still tell the story of limited participation and narrow rallies, but given today's upside initiation climax and rising STOs, we have to take a few baby steps backward on our bearish stance. Participation and numerous negative divergences still scream for a decline so we are bearish. We are often asked, "What will it take for you to get bullish?" The answer is bias. We need to see expanding participation that will challenge our 50% bullish thresholds or at least enough to erase negative divergences. Until then, we would continue to play defense.
Erin is 10% long, 7% short.
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BITCOIN
Yesterday's comments still apply:
"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
Yesterday's comments still apply:
"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: TLT broke above overhead price resistance, but it failed to hold above the 50-day EMA. We still expect the rally to continue for long Bonds as the debt ceiling deal was mostly reached this week. Today we did see a bearish filled black candlestick so a pause may be in order but given bullish indicators we do expect the rally to continue.
DOLLAR (UUP)
IT Trend Model: BUY as of 5/18/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: Today's low for UUP looks weird, but it is probably correct -- other services are carrying it. We still think it is a fluke, and we will ignore it for charting purposes until more clarity is achieved. Ultimately, the Dollar was turned back at overhead resistance. Yesterday's filled black candlestick implied a down day, but certainly not of this magnitude given the bullish indicators we had previously. Indicators have turned south quickly suggesting this decline will continue.
GOLD
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: A falling Dollar gave Gold a shot in the arm and if the decline continues on the Dollar as we believe it will, Gold will benefit greatly. Indicators are improving, but we'd really like to see the PMO rising deliberately, it's completely flat right now even after four days of rally.
GOLD Daily Chart: It appears Gold will avoid a Dark Cross of the 20/50-day EMAs now that price is above both moving averages. If the Dollar does slide quickly, Gold will benefit based on the near perfect inverse correlation they share right now. Notice also that discounts have pared back considerably which tells us that traders are more bullish on Gold than they have been in some time.
GOLD MINERS Golden and Silver Cross Indexes: Participation is now confirming the current rally in Gold Miners, but overhead resistance is approaching quickly at the 20/50-day EMAs and at the April low. The PMO isn't rising yet and the RSI is still negative. The Silver Cross Index needs a shot in the arm. If Gold and the Dollar continue to cooperate, this could get price back to earlier highs around 36.00. Be careful with this group by setting proper stops.
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 rallied strongly today after two days of terrible decline. This could be setting up a bullish reverse island formation. Stochastics, which usually are great early detection indicators, didn't move to the upside so we would take this rally with a grain of salt.
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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