The Gold (GLD) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. This follows yesterday's Golden Cross of the 50-day EMA and 200-day EMA. We'll discuss Gold in more detail later.
The Financial Sector ETF (XLF) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL Signal. Major support has been lost on today's decline. Given the poor participation, falling PMO and negative RSI, we should see support tested at 31.00 with a high likelihood that price will fall to 30.00.
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: NEUTRAL as of 9/22/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: The market was up earlier in the day but finished with a breakdown below support. The RSI is negative and the PMO is falling after topping well below the zero line. That is a very bearish configuration.
The VIX continues to puncture the lower Bollinger Band on the inverted scale, but we note that have begun to push the Bands apart. Readings are oversold, but we've seen the VIX read much higher than it currently is. More fear is needed to fuel a reversal. Stochastics are falling and signaling internal weakness. Strong support is arriving at 415, but given the indicator configuration, we should expect that level to be broken.
Here is the latest recording 10/23:
S&P 500 New 52-Week Highs/Lows: New Lows expanded greatly, taking out the rising trend that was giving bulls some hope. The 10-DMA of the High-Low Differential also topped on the decline.
Climax* Analysis: There were no climax readings today. Friday's downside exhaustion climax did not result in higher prices.
*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) accelerated lower. The good news is that this has pushed them into somewhat oversold territory. We'll need to see them reverse before we can get bullish. Participation is slim at best with only 12% holding above their 20-day EMAs and only 18% showing positive momentum. Readings are somewhat oversold but can accommodate more downward price action.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM and ITVM are moving lower. They never were able to reach positive territory which tells us how internally weak the market is in the intermediate term. As we would expect given only 18% of stocks have rising momentum, we are seeing a decline in PMO BUY Signals among component stocks. None of these indicators are oversold.
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.
Participation of stocks above their 20/50-day EMAs is very thin and not likely to support a reversal at this time. The Silver Cross Index is falling vertically below its signal line. The best we can say is that other than the Golden Cross Index, these indicators are very oversold. In a bull market oversold can mean that support is close at hand. In a bear market oversold can warn of a bottomless pit for prices. Support is here, if we drop below 415, it could be a pit of despair.
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 the Golden Cross Index on Communication Services (XLC) crossed above its 20-day EMA moving its Long-Term Bias to BULLISH.
Also, the Silver Cross Index for Retail (XRT) crossed below its 10-day EMA moving its Intermediate-Term Bias to BEARISH.
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CONCLUSION: The market's rally stalled this afternoon bringing price down below support. Price has also dropped below the 200-day EMA. This area marked a pivot point for the market last time around, but we don't think it will pivot this time. The STOs are declining and haven't reached oversold extremes yet. We definitely don't like the break in New Lows and the topping High-Low Differential. The bias is clearly bearish in all three timeframes. Earnings season could goose the market into a bounce, but internals are very weak. We wouldn't pile in on any rally. It is likely an opportunity to sell into some strength.
Erin is 20% long, 6% short.
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BITCOIN
Bitcoin broke through important overhead resistance today. It is now extremely overbought, but the strong PMO and Stochastics tell us that condition is likely to persist.
The resistance that was broken was a multi-year level of resistance. We now have to determine where the next level of resistance will be. At this point we would look to 40,000 to 41,000 levels.
INTEREST RATES
Treasury yields are backing off and definitely need time to cool. We don't see this as the beginning of a stronger decline. More than likely just a pause before they head higher again.
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
The second parabolic formation was broken with today's sharp decline in the 10-year yield. This has caused the PMO to top as well as Stochastics. The picture is not bleak by any means. The RSI remains positive and $TNX is very resilient right now.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT halted the decline as the 20-year yield pulled back along with other long-term yields. This looks like a good spot for it to rally again, but we would expect to see prices turned away at near-term resistance at around 88.
This is likely a temporary rally.
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 continues to digest the multi-month rally. It looks like a double top is forming. The PMO continues to decline. Stochastics have failed. They are fairly good 'leading' indicators so we would look for price to follow them down.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: We would normally expect Gold to be up on a day that the Dollar was down, but as you can see, the correlation between the two is nonexistent. It continues to show relative strength against the Dollar, it just didn't do a good job of that today. Price has hit overhead resistance so we aren't surprised to see a small decline.
GOLD Daily Chart: The PMO is back in positive territory and Stochastics are oscillating above 80. We see Gold as internally strong right now, but likely to consolidate the prolonged rally out of this month's low.
GOLD MINERS Golden and Silver Cross Indexes: With Gold and the market falling today, we aren't surprised that Gold Miners declined too. We are seeing some participation bleeding off %Stocks > 20EMA, but the reading is well above our bullish 50% threshold. Resistance was hit so a pause in the rally makes sense.
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 is still holding a short-term rising trend and believe that will remain. The PMO is working toward a Crossover BUY Signal and Stochastics are above 80. Fundamentals also suggest Crude will continue rising. We would be careful with your Energy positions. The sector has been hit especially hard on any decline in Oil which suggests to us the sector is internally weak.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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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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