We haven't looked at sentiment for some time and we thought it a good time to visit two of our sentiment charts. Both of these charts are available to you in the DPA ChartList on our website. You'll find the link at the top of the lefthand side of the Blogs and Links page.
Investment managers as polled from the National Association of Active Investment Managers (NAAIM) have once again pulled back their exposure to the market. Exposure is still on the high side, but it is interesting to see what big money managers are doing. These are technical analysts who manage money. They tend to be correct.
The Rydex Ratio is still overbought (we have seen higher ratios on our inverted scale), but admittedly could get more overbought. What we noticed was a decline in Bull + Sector Funds assets that was noticeable. That reading can get more elevated, but that typically occurs have a long bull run like in 2021. We see this pullback as an indication that selling is beginning to pick up. We also have a slight rising trend in Money Market assets. Bullish sentiment is finally beginning to crack a bit. We see this as the beginning of the selling.
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
For Today:
For the Week:
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.
For Today: 
For the Week:
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 did close above the open so we have a bullish hollow red candlestick sitting on support. Indicators are bearish with the PMO continuing its fall and the RSI sitting in negative territory.
Stochastics look particularly negative having topped below 20. The VIX is rising on our inverted scale, but remains below its moving average. The market is internally weak.
Here is the link to the last trading room on 8/7:
SPY Weekly Chart: The decline which started last week saw follow-through this week. The weekly PMO is beginning to top which suggests more downside in the intermediate term.
New 52-Week Highs/Lows: New Highs contracted greatly today but we didn't see an expansion of New Lows. New Lows really haven't made a strong appearance, but we expect to see that indicator expand soon. The 10-DMA of the High-Low Differential is declining steadily and isn't even near-term oversold yet.
Climax Analysis: There were no climax readings today. This week saw only one climax, an upside initiation climax. We did not see upside movement after that so we have a bullish signal that didn't execute as expected.
*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 have been puzzled by the Swenlin Trading Oscillators as they began to rise this week. We aren't seeing much expansion in participation, but %PMOs Rising is holding steady in somewhat oversold territory. Given participation and rising momentum are weak, rising STOs are not being confirmed.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
IT indicators all continued lower this week and none are oversold yet. Given all are declining, there is no confirmation on rising STOs.
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PARTICIPATION and BIAS Assessment: The following table 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 following table summarizes participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation. There are three groups: Major Market Indexes, Miscellaneous Sectors, and the eleven S&P 500 Sectors.
NEW SECTORS ADDED! We have begun collecting SCI and GCI data for four new sectors: Biotechnology (IBB), Regional Banking (KRE), Retail (XRT), and Semiconductor (SMH).
Don't let the very high IT Bias on Regional Banks (KRE) fool you. That industry group is beginning to weaken. It isn't showing up on the Silver Cross Index, but we know that participation has tanked and we will see it decline more rapidly next week.
The lowest IT Bias goes to Gold Miners (GDX) which have been struggling. Both the SCI and GCI have lost significant percentage points. We are seeing some signs of life in the group, but not enough to look for a reversal just yet.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
The Energy sector is clicking so it is no surprise to see the 100% reading on the SCI. One problem, the only place left for it to go is down. However with the strong bullish bias, we expect that overbought condition to persist.
Utilities (XLU) lost 40 percentage points on its SCI. Although this is a defensive sector, it doesn't have any internal strength.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
Semiconductors (SMH) hold the top GCI reading, but given the loss of points on the SCI, we expect this reading to begin moving lower soon.
Energy gained 13 percentage points on the GCI this week and given how this sector is clicking, we expect it to reach 100% like we see on the Silver Cross Index.
The following chart objectively shows the depth and trend of participation in three time frames.
The market bias is BEARISH.
The short-term bias is BEARISH.
The intermediate-term bias is BEARISH.
The long-term bias is BEARISH.
The market bias deteriorated this week so that all three timeframes are bearish. We see a deterioration in %Stocks > 20/50/200EMAs and those percentages are all below the SCI and GCI readings. This means that the SCI will continue lower out of overbought territory. The GCI has topped and will likely move lower given fewer stocks are above their 50/200-day EMAs than have Golden Crosses. Clearly the bias is bearish in all three timeframes now.
CONCLUSION: The bias is bearish in all three timeframes now. While STOs are rising, all other indicators are trending lower and not confirming STOs. Support essentially held this week, but given the continued deterioration of participation and falling IT indicators, we expect to see it broken next week. This is a pullback, but we see a correction ahead. It is important to assess your portfolio and look for broken support and falling momentum. Those positions are already weak and a market decline will not help. Stops should already be in place for protection. Hedges can be put on by investors who have the ability to be nimble should the winds shift quickly back to bullish.
Erin is 20% long, 4% short.
Calendar: Next week is options expiration. It is not an end-of-quarter event, so we do not expect unusually high volume associated with it. Typically, there is low volatility on Thursday and Friday.
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BITCOIN
Bitcoin popped earlier in the week, but spent the rest of the time taking back the gains. The RSI and PMO are neutral and Stochastics are bearish. More than likely this consolidation will continue and eventually meet the rising bottoms trendline. We will assess the probability of a bounce at that time. We foresee a drift through it.
This chart is to show where some of the support/resistance lines come from.
INTEREST RATES
Yields popped higher to end the week. We believe rates will continue to rise into next week which will continue to put pressure on Bonds.
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 emerged above resistance today after spending much of the week moving lower. It has formed a strong base in the cup formation. It should continue to rise given the positive RSI, PMO Surge above the signal line and rising Stochastics which reversed in positive territory.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount. As buying power has been shrinking, home prices have come under pressure.
--
This week the 30-Year Fixed Rate changed from 6.90 to 6.96.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: A reverse flag formed this week which suggests more downside. The breakdown has begun out of the pattern. Stochastics turned down in deeply negative territory. The RSI and PMO both are confirming this decline.
We should be prepared for a decline to the 2022 low around 90.
TLT Weekly Chart: The weekly chart confirms our shorter-term analysis. The weekly RSI is negative and weekly PMO is in decline and increasing the margin between it and its signal line. The weekly PMO topped below the zero line giving this chart a decidedly bearish bias.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 7/13/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar is about to reach overhead resistance and given the very positive indicators, we would look for a breakout. It simply isn't showing any weakness and it is not overbought based on the RSI.
This is very strong overhead resistance, but we believe this fourth test of that level will be the charm.
UUP Weekly Chart: The weekly PMO also suggests that we will see a breakout here. It gave us a new Crossover BUY signal. This did happen before and it didn't result in a breakout, but as noted above, we are expecting a breakout this time around.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: BUY as of 1/5/2023
GOLD Daily Chart: The strong Dollar is doing no favors for Gold which continues in its declining trend. It did halt the decline today on the 200-day EMA, but we see nothing on this chart to imply a reversal here. The RSI is negative and the PMO is in decline below the zero line. Relative strength against the Dollar is falling steadily. That is a very bad condition given the strong rally for the Dollar.
The large symmetrical triangle on $GOLD does imply an upside breakout given the prior trend was up, but we have a strong feeling it will break below it and test 1900 due to negative indicators, relative weakness and even a puncture of the upper Bollinger Band by $GVZ on the inverted scale. It's not time to look for a reversal.
GOLD Weekly Chart: The weekly PMO continues lower after bearishly topping beneath the signal line. Support does appear strong at 1900. We also note that sentiment is beginning to look a little less bearish. That could be good for Gold and indicate a reversal could be possible at 1900.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are holding support and do appear to be getting a heartbeat as far as %Stocks > 20/50/200EMAs. The SCI did stop declining, but the PMO and RSI are weak and Stochastics are holding in negative territory. We see this group as more vulnerable to a breakdown, but improvement in participation does raise our eyebrows. Should the SCI turn back up, you could think about wading in, just remember that GDX topped right when participation got good last time.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: USO continues travel within a bearish rising wedge. The PMO topped in overbought territory so it might be time for Crude to pause. Given the strong RSI and Stochastics, we wouldn't look for a major breakdown. Support should hold at 72. We also note that $OVX is holding above its moving average on the inverted scale and that implies internal strength.
The next level of overhead resistance arrives at 78. We expect it to reach that level, but the rally is likely to cool somewhat before that happens.
USO/$WTIC Weekly Chart: The weekly chart is very favorable with a positive weekly RSI and rising weekly PMO. The rally will continue in the intermediate term based on this chart. The daily chart suggests consolidation beforehand in the short term.
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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