Today the Price Momentum Oscillator (PMO) for Consumer Staples (XLP) crossed below its signal line to trigger a PMO Crossover SELL Signal. We would expect to see a defensive area of the market to hold up through market weakness, but this market is sparing no sector. Even Energy looks vulnerable. This is one more reason to exercise caution in your portfolio.
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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MARKET/INDUSTRY GROUP/SECTOR INDEXES
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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: The market picked up speed to the downside. It did stop on support at the August low, but given the voracity of this decline, we wouldn't be surprised to see it drop much further. The PMO is now below zero and falling fast.
The VIX moved below its lower Bollinger Band and many times that leads to a relief rally. Stochastics are falling below 20 which is very bearish.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: As we would expect, New Lows expanded greatly. The 10-DMA of the High-Low Differential turned back down after a brief rise yesterday.
Climax* Analysis: There were unanimous and very strong climax readings on the four relative indicators, giving us a downside exhaustion climax for the day. This was the second in two days, but it was much stronger than yesterday's. SPX Total Volume was strong, confirming the climax day, but it was not strong enough to indicate a blowout.
*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 OVERSOLD.
Swenlin Trading Oscillators (STOs) moved quickly into oversold territory today. Participation was slashed. Only 18% of the index have rising momentum, which of course means that 82% have declining momentum. That's a tough train to turn around.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM declined again as expected, but unlike STOs they are not oversold yet. Only 1/3rd of the index hold PMO BUY Signals, but based on the chart above, we will see even fewer moving forward.
PARTICIPATION: 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.
Our bullish threshold of 50% is not being met by %Stocks > 20/50EMAs making the short-term bias Bearish. We also are seeing no improvement to those indicators. The Silver Cross Index has topped beneath its signal line and dropped on the day. The Golden Cross Index turned down today after a brief rise this week. We don't expect it to turn back up given the decrease in %Stocks > 50/200EMAs.
BIAS Assessment: The following table expresses the current BIAS of various price indexes based upon the relationship of the Silver Cross Index to its 10-day EMA (intermediate-term), and of the Golden Cross Index to its 20-day EMA (long-term). When the Index is above the EMA it is bullish, and it is bearish when the Index is below the EMA. The BIAS does not imply that any particular action should be taken. It is information to be used in the decision process.
The S&P 100 ETF (OEF) Golden Cross Index crossed down through its 20-day EMA changing the long-term BIAS to bearish. The Dow Industrial ETF (DIA) and Financial Sector ETF (XLF) Silver Cross Indexes crossed down through their 10-day EMAs changing their intermediate-term BIAS to bearish.
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CONCLUSION: The market corrected in a big way this week and as part of this, it has gotten very extended to the downside. This is exemplified by today's downside exhaustion climax. The VIX expanded quickly today and STOs dropped precipitously in one day. All of this suggests a pause or relief rally. It won't likely last, given IT indicators aren't oversold and participation isn't as weak as it can get. Don't get sucked into a pause or rebound as we expect the decline will continue shortly thereafter.
Erin is 35% long, 2% short.
** IMPORTANT ** There is a high likelihood that we won't be publishing the DP Weekly Wrap until Saturday due to Erin's travel schedule.
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BITCOIN
Bitcoin dropped below new support, but did finish the day on the support line. A Death Cross is now possible and won't be avoided unless price moves back above the 200-day EMA. The indicators haven't been damaged and still look bullish so the death cross may not materialize yet.
INTEREST RATES
Rates jumped higher today and put pressure on Bonds and the market alike. We expect them to continue higher.
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 gapped higher today pushing the RSI immediately into overbought territory. The PMO saw a Crossover BUY Signal in response. Stochastics are very strong. Unfortunately, we expect to see interest rates rise further.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With the major increase in the 20 year yield, TLT hit the skids with a big gap down. The RSI is negative and we have a new PMO Crossover SELL Signal. We expect to see TLT fall further.
Support is scheduled to arrive around 89 or 90.
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 broke out yet again, but did form a bearish filled black candlestick. The rising trend is strong and true and indicators remain very bullish. We have to expect the Dollar will rise further.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold gapped down on the day. We have been optimistic about Gold, but the deterioration of the indicators has us rethinking our position. The PMO is still holding a Crossover BUY Signal and support is available at the 200-day EMA. It simply may take one more trip down toward the August low before we get the rally we are looking for.
GOLD Daily Chart: Interestingly, price failed right at the declining tops trendline. As it travels within a symmetrical triangle, it will need to reverse quickly to avoid a breakdown from the pattern. The expectation is a breakout based on the chart pattern.
GOLD MINERS Golden and Silver Cross Indexes: GDX had a terrible day, just when it was looking especially bullish. Participation was slashed and Stochastics have turned down. The PMO still holds a BUY Signal so all is not lost. If Gold can get back on track, we should see the same for GDX. It is tough on GDX when both Gold and the market pullback strongly on the same day.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: Yesterday's comments still apply:
"It appears we are finally getting the pause that was needed. The RSI is finally out of overbought territory which is a big plus to today's decline. The PMO is now declining so this could turn into a pullback versus a pause."
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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