The Energy Sector (XLE) was slammed after already suffering heavy losses. The damage caused the Golden Cross Index (GCI) to drop beneath its 20-day EMA giving us a Bearish Bias on Energy. Participation has disappeared under the hood with 0% having price above their 20/50-day EMAs. A large number of stocks lost support at their 200-day EMAs as well.
The Silver Cross Index (SCI) was already feeling the stress, but it is now accelerating lower.
The damage isn't likely over given there are no stocks to support a reversal at this time. We don't see price stopping until it reaches support at 81.00. Crude Oil ran hot and it is cooling. This sector was very overbought. This correction was needed. Now we wait for a heartbeat as far as %Stocks > 20EMA.
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
CLICK HERE for Carl's annotated Market Index, Sector, and Industry Group charts.
THE MARKET (S&P 500)
IT Trend Model: NEUTRAL as of 9/22/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: The market rallied off the 200-day EMA and support at 420. The PMO is still declining but has decelerated quite a bit. The RSI is negative. This is a strong support level, but remains vulnerable.
The VIX punctured the lower Bollinger Band on the inverted scale again today but closed above as yesterday. We expected to see a rally based on yesterday's puncture and we got it. We could see the same tomorrow. Stochastics still look negative, but they are trying to rise again.
Here is the latest recording from 10/2:
S&P 500 New 52-Week Highs/Lows: New Lows did pare back as we would expect on a rally day, but we still saw quite a few. The 10-DMA of the High-Low Differential is getting more oversold, but looks uninterested in an upside reversal.
Climax* Analysis: There were no climax readings today.
*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 SOMEWHAT OVERSOLD.
Now that we have a second price low we are able to annotate a positive divergence between price and the Swenlin Trading Oscillators (STOs). This is a very good sign, but...
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
...we don't have confirmation from IT indicators which are in decline and don't show any positive divergences with the ITBM and ITVM. We do see a small positive divergence developing on %PMO Xover BUY Signals.
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.
The best we can say about the bias chart is that %Stocks > 20/50EMAs are oversold. Past that we note very little participation with the Silver Cross Index moving lower alongside the Golden Cross Index. Both the SCI and GCI could continue lower given their percentages are higher than %Stocks indicators. Additionally, while the SCI is getting oversold, it isn't as oversold as it could be. The GCI has plenty of room on the downside.
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.
Today, XLE's Golden Cross Index dropped below its 20-day EMA, moving the Long-Term Bias to Bearish.
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CONCLUSION: We mentioned yesterday that we were beginning to look for positive divergences. We now have some with STOs and %PMO Xover BUY Signals. However, our primary IT indicators, the ITBM/ITVM, do not have positive divergences and are continuing lower. This tells us that we should look for a short-term rally, but given the bearish bias and declining IT indicators, we wouldn't count on it to last. We would hesitate to add longs to your portfolio given we don't see a lasting rally ahead. All positions should have stops.
Erin is 10% long, 4% short.
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BITCOIN
Stochastics are the big problem with the Bitcoin chart. The rest of it is very bullish. This tells us that we should expect overhead resistance to hold at 29,000 should it rally as the PMO and RSI suggest it will.
INTEREST RATES
We note that the yield curve is beginning to flatten, but this is not because the shorter durations are falling, but because longer durations are rising.
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:
"We see a parabolic rise in the 10-year yield that begs for a breakdown to bring it back to the original rising trend line. The RSI is very overbought as well. Stochastics turned back up and the PMO continues to rise so while we see the need for a breakdown, it isn't out of the question that they will continue vertically higher. We're just waiting for the big breakdown that is overdue."
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT paused the decline, but we don't see this as a springboard to a lasting rally. The RSI is very negative and Stochastics continue to oscillate below 20 suggesting extreme internal weakness.
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 took a breather but the decline didn't damage the indicators at all. We expect the rising trend to continue.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Even a falling Dollar couldn't help Gold salvage a rally. The indicators are incredibly negative suggesting more of the same.
GOLD Daily Chart: Discounts remain very high suggesting bearish sentiment is still going strong on Gold. 1800 is arriving soon as a support level and given these high discounts we think there is an outside chance we'll start seeing a rally at that level.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners were back in the dog house today. Lower lows and a lower high put GDX in a distinct downtrend. We have zero participation in the %Stocks indicators. The Golden Cross Index still has room to fall so we believe the decline will remain in force, at least until Gold makes some kind of miraculous recovery.
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 tumbled today breaking the intermediate-term rising trend. We are at support at the August top, but given Stochastics and the declining PMO, we don't think the decline is over yet. Production is still an issue, but today it was noted that U.S. gasoline consumption is at the lowest level in 22 years seasonally. Inflation is taking its toll and lower demand means lower prices. This does look overdone, but we will wait for Stochastics to turn up to flag us to a possible upside reversal. For now, look for it to continue lower.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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