Today the S&P 400 Mid-Cap Index ETF (MDY) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL Signal. MDY has been in a confirmed downtrend in the intermediate term and the uptrend has been compromised with today's perilous drop. Support is nearing at 430. We believe it will likely hit that level before reversing given the weak participation and the Silver Cross Index's top beneath the signal line.
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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 lost short-term support and is now looking at support at 420 as a likely stopping point for this decline. The RSI is now in negative territory and falling. The PMO has topped and is nearing a Crossover SELL Signal.
The VIX closed beneath the lower Bollinger Band, a condition that generally leads to a day or two of upside. Stochastics are dropping nearly vertically so we do see internal weakness as a problem.
Here is the latest recording from 10/16:
S&P 500 New 52-Week Highs/Lows: New Lows did expand as we expected, but we still see a rising trend. We do expect that to change with any followthrough on this decline.
Climax* Analysis: There were climax readings on three of the four relevant indicators today, giving us a downside exhaustion climax. SPX Total Volume expanded, but not quite to blowout levels.
*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 UP and the condition is NEUTRAL.
Swenlin Trading Oscillators (STOs) are both in negative territory and are not at all oversold. Participation was hit very hard by today's decline. It siphoned rising momentum and brought quite a few stocks back below their 20-day EMAs.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM and ITVM topped today, so the decline is likely to continue. We also saw a top on %PMO Crossover BUY Signals. That indicator will continue to fall as we have only 35% with rising PMOs.
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.
%Stocks > 20/50 EMAs are below our 50% bullish threshold. The SCI is beneath its 10-day EMA moving giving us a Bearish IT Bias. The GCI continues to decline. %Stocks indicators are all below the SCI and GCI readings so both could continue lower.
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 Silver Cross Index for the Communications Sector (XLC) crossed back up through the 10-day EMA, shifting the BIAS to bullish. The Silver Cross Indexes for the Industrial (XLI) and Technology (XLK) Sectors crossed down through their 10-day EMAs, shifting their IT BIAS to bearish. The Gold Miners ETF (GDX) Golden Cross Index crossed up through the 20-day EMA, shifting the LT BIAS to bullish.
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CONCLUSION: We said yesterday that we would pivot should the ITBM and ITVM turn lower. They did that today below the zero line which does suggest this decline will hang on likely until near-term support is hit at 430. The VIX and the downside exhaustion climax suggest we could see some relief tomorrow, but given the bearish bias in all three timeframes and declining IT indicators, it isn't a lock. You may want to take some profits off the table and reconsider adding shorts or hedges in the very short term.
Erin is 55% long, 2% short.
Calendar: Because of options expiration we expect tomorrow to have low volatility. It is not an end-of-quarter expiration, so higher than normal volume is not expected.
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BITCOIN
Bitcoin is still digesting its Monday rally. It is flirting with overhead resistance at 29,000. The indicators certainly suggest it will breakout here.
INTEREST RATES
Most interest rates pushed higher. We don't see this situation improving until the Fed decides to ease its rate. That isn't likely to happen for months.
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 rocketed higher again today setting up a new parabolic formation. The angle of ascent is even steeper which begs for a breakdown. Unfortunately as we noted above, we don't see this situation improving until we get some easing from the Fed. The PMO is rising again and Stochastics are above 80 so a continuation is likely. When it does finally breakdown, it could be a big drop. We can hope.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT dropped below near-term support. We've included the monthly chart so you can see where the next level of support lies. That would be at 80. We doubt it will hold that level. Indicators are highly negative and interest rates are rising too strongly.
If it loses 80 as support, we don't see strong support until we hit 60. That is not out of the question.
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 rally out of the July low. Considering how negative the PMO looks, we haven't seen much price damage. Stochastics are positive and flat...not declining. That suggests there is still internal strength. Price has yet to drop below the 20-day EMA and the RSI remains positive as it sits above net neutral (50). If we see a drop below the 20-day EMA, we will start considering the formation of a double top. It's a bit too early for that as the Dollar always seems to recover.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: SELL as of 10/5/2023
GLD Daily Chart: Gold took advantage of the Dollar's decline and then some as it rallied +1.23% on GLD and +0.62% on $GOLD. The PMO hit the zero line today as it rises off an oversold PMO Crossover BUY Signal. Stochastics are oscillating above 80. The RSI has gotten a tad overbought, but we see more upside ahead. It will likely hold overbought conditions.
GOLD Daily Chart: Discounts are still rather high which bodes well for Gold. We note that the correlation between Gold and the Dollar has relaxed giving Gold the opportunity to rally even should the Dollar rally as well.
GOLD MINERS Golden and Silver Cross Indexes: Participation remains strong for Gold Miners. Today, the Golden Cross Index moved above its signal line giving GDX a Bullish LT Bias. The Silver Cross Index continues to move higher. The RSI is positive and not overbought. The PMO is about to cross above the zero line. Stochastics are strongly oscillating above 80. It wasn't surprising to see price back off a little as overhead resistance is being hit. Ultimately we expect it to breakout with rising Gold prices.
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 formed a bullish engulfing candlestick today suggesting we will see more upside followthrough. The RSI tells us that despite a strong rally, price is not overbought. Stochastics are flashing internal strength and the PMO is nearing a Crossover BUY Signal. Oil should continue to rise not only from a technical standpoint, but also fundamentally given the war.
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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