Today Moody's downgraded the credit rating of 10 regional banks, and 17 others were reviewed unfavorably. After things had settled down from the Silicon Valley Bank debacle, we thought that would not be the end of it, and this may be the start of the second wave. The Regional Banking ETF (KRE) inevitably saw downside price movement that set up a bearish double-top formation just below resistance at the 200-day EMA. KRE was showing excellent internal strength based on the high percentages of participation and nearly 100% on the Silver Cross Index, but now we are seeing deterioration in %Stocks above their 20-day EMA which suggests more downside to come.
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: Price is holding short-term support but the declining PMO and falling RSI could indicate a breakdown ahead. The 50-day EMA is ready to swoop in as support, but we would look for a test of 430 eventually.
Yet another puncture of the lower Bollinger Band for the VIX appeared as volatility has expanded. Stochastics are in negative territory which tells us the market is still internally weak.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Lows expanded to the highest level we've seen since May. New Highs contracted.
Climax* Analysis: There were no climax readings today. Yesterday's upside initiation climax didn't see the desired upside move.
*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) continued to decline, but we still don't consider them oversold yet. We now have less than a quarter of the index with rising momentum. This indicator is oversold, but we have seen lower readings.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
No surprises here, all of our IT indicators declined today, confirming the decline in the short-term indicators. %PMO BUY Signals is not yet oversold and should see lower readings because only 24% holding rising PMOs.
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 the short and intermediate terms.
The market bias is NEUTRAL in the long term.
Today saw a pick up in %Stocks > 20/50/200-day EMAs, but readings continue to trend lower overall. Readings are not oversold yet. The Silver Cross Index continues lower after a "BEAR SHIFT" on the cross below its signal line. We are leaving the long-term bias NEUTRAL given the Golden Cross Index is rising. We do expect the GCI will begin to decline now that there are fewer stocks with price above their 200-day EMA versus the GCI.
CONCLUSION: The failure of yesterday's upside initiation climax suggests bearish forces at work. Apple (AAPL) was up so it didn't contribute to the decline, the broader market did. While price held support today, indicators are bearish in the short and intermediate terms and suggest the decline will see follow-through. Two defensive sectors (Healthcare and Utilities) saw positive closes today. We will want to monitor sector rotation more closely as rotation into defensive areas of the market usually precedes or accompanies broad market declines. Stay defensive and set those hard stops!
Erin is 20% long, 4% short.
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BITCOIN
We were looking for more consolidation given mixed indicators but today Bitcoin rallied. We're not sure if the news that PayPal would launch a U.S. dollar-denominated stablecoin on the Ethereum blockchain had anything to do with it, but maybe it did. Overall Bitcoin remains in a trading range. We do like the newly positive RSI and the PMO is turning back up just above the zero line. Stochastics have also reversed higher. A test of the top of the range is likely.
INTEREST RATES
Yields are pulling back after strong rallies higher. We think this is temporary.
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 lost support on today's dip. The recent decline is pushing the PMO and Stochastics lower. We don't see an end to rising rates; it may be time to form a handle on this large cup shaped base.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT looks to be forming a bearish flag. Indicators are attempting to reverse, but we don't see enough evidence to look for a longer-term rally. Overhead resistance will likely turn price away.
The next level of strong support lies at 90.00.
DOLLAR (UUP)
IT Trend Model: BUY as of 8/3/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar gapped up today but did form a bearish engulfing candlestick. Stochastics are essentially declining so a down day tomorrow wouldn't surprise us. We still are looking for a breakout at overhead resistance given the positive PMO and RSI.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Indicators remain weak on GLD and do suggest we will see a test of the 200-day EMA. We are looking for a reversal on Gold, but the strong Dollar isn't helping. For now we would look for price to test the June low.
GOLD Daily Chart: The PMO is nearing a Crossover SELL Signal on $GOLD. The RSI has now moved into negative territory and Stochastics are in decline. Relative strength to the Dollar is continuing lower so despite not being so correlated to the Dollar, Gold could really struggle. The correlation does Gold a favor when the Dollar moves down. If it is weak against the Dollar, the lack of correlation could result in Gold moving lower even on a falling Dollar. This condition needs to change soon before we expect much out of Gold.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"Gold Miners are holding support in spite of negative indicators. We aren't seeing any expansion in participation under the surface so more than likely a breakdown is ahead for GDX. Support looks strong at 26.00, but we wouldn't look to reenter this group until participation gets back to where it was before."
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: Crude Oil rallied and formed a large bullish engulfing candlestick. Indicators are very favorable with the exception being that they are overbought. Given the breakout that is holding up, overbought conditions will persist. One slight negative in the very short term would be the puncture of the upper Bollinger Band on the inverted scale by $OVX. As with the VIX, an upside puncture can lead to a decline over the next day or two.
Based on the one-year chart we see 78.00 as the next stop for USO should the rally continue as we expect it to.
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)
Swenlin Trading Oscillators (STO-B and STO-V)
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