The only two sectors to close higher on the day were in the defensive category, Consumer Staples (XLP) and Utilities (XLU).
We have already been watching XLP as it has established a short-term rising trend. What we aren't seeing is healthy participation. We are seeing some expansion in stocks above their 20/50-day EMAs, but the Silver Cross Index is stagnant and below its signal line. Still, we do see this as one bright spot to consider in the current market environment if you want to be long.
XLU is experiencing a fresh bounce after losing ground out of the October top. In contrast, we have healthier participation as far as %Stocks > 20EMA. Yet, the Silver Cross Index hasn't budged. This new rally did put price back above the 20-day EMA and we see a PMO Surge above the signal line (bottom above the signal line).
Conclusion: When defensive sectors lead the market it is bearish overall or could get worse. Seeing these two sectors as bullish should give us pause.
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: Today we had a big fat bearish filled red candlestick. For the first time, price traded completely below the 200-day EMA. After topping well beneath the zero line, the PMO is in decline on a Crossover SELL Signal. Total volume was above its annual average suggesting some veracity behind this deep decline.
The VIX is below its moving average on the inverted scale and that implies internal weakness. Additionally, Stochastics flash weakness as they are below 20.
Here is the latest recording 10/23:
S&P 500 New 52-Week Highs/Lows: New Lows saw a large increase as we would expect. These are oversold readings. The 10-DMA of the High-Low Differential topped beneath the zero line and continues lower. It is close to oversold territory as well.
Climax* Analysis: We only saw one of the relevant climax indicators move outside our threshold (SPX Net A-D Vol). It doesn't fulfill our climax requirement, but if it were a climax, we would call it a downside initiation climax which does make sense at this juncture.
*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) are definitely oversold right now, but we have seen readings that were lower so more downside could be accommodated. Interestingly we didn't see any loss to %Stocks > 20EMA. We did see fewer rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
Unlike short-term indicators, our IT indicators are not oversold. This doesn't bode well. All of them continue to decline suggesting this decline could continue on longer.
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.
Yesterday's comments still apply:
"The market bias is BEARISH in all three timeframes.
Participation of stocks above their 20/50-day EMAs saw very little improvement on today's rally. The Silver Cross Index is falling 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, but, 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.
The items with highlighted borders indicate that the BIAS changed today.
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CONCLUSION: One look at our Bias Assessment table above and you know that the market is weak. It also tells us that it is getting oversold. Short-term indicators, the Silver Cross Index, participation and New Lows are oversold so we should be on the lookout for a market pivot. Unfortunately all of those indicators can accommodate more short-term decline and with today's mild downside initiation climax, we would look for lower prices this week. IT indicators are not oversold and tell us that any rally will be short in nature. We are seeing pockets of strength in the defensive areas of the market, but knowing we have so few stocks with PMOs rising or PMO BUY Signals, it will continue to be difficult to find good longs. Your chances of ferreting out shorts are going to be better.
Erin is 20% long, 6% short.
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BITCOIN
Yesterday's comments still apply:
"Bitcoin is hot right now. The RSI is extraordinarily overbought and the PMO while rising is also overbought. This is a parabolic rally and those always beg for a correction. Technically we should see a digestion phase, but Bitcoin is often recalcitrant. This rally does seem extended."
"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 resumed their ascent with gusto. The yield curve is definitely flattening out. We would look for longer-term rates to eventually outpace shorter-term rates which seem to have stabilized somewhat.
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
As with the last parabolic formation, this one ended with a decline. However, it wasn't much of one. The RSI is positive and not overbought. The PMO has surged above its signal line and Stochastics have tipped upward. We would look for another parabola to form as the yield continues to make its way higher.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We figured the rally on TLT would be short-lived and we were right. The PMO is now topping beneath its signal line. Stochastics haven't turned over so we could see a little more follow-through on this week's rally, but yields look awfully bullish and the 20-year yield is no exception.
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 managed to rally above the short-term declining tops trendline. The PMO has yet to turn up so we don't want to read too much into today's small breakout. Stochastics tend to be a leading indicator and they are rising in positive territory. The RSI is also positive and not overbought. It is set up well to continue its rally.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: The Dollar rallied and Gold did too, this speaks to its internal strength and relative strength to the Dollar. We have a flag formation and this small rally does imply that the formation has executed. That would mean an extended rally ahead.
GOLD Daily Chart: The indicators are very favorable for $GOLD to continue its rally. It was stopped at 2000 which doesn't surprise us. Given the strong PMO and Stochastics above 80, we should see all-time highs tested.
GOLD MINERS Golden and Silver Cross Indexes: We don't like that Gold Miners declined so heavily today. It siphoned off participation a great deal. Clearly the market's direction held more sway than the rally in Gold. This makes us less bullish on the group. We would tighten stops on your Gold Mining positions.
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 rallied today but it didn't do anything for the Energy sector. Beware of internal weakness in that sector. Crude Oil is pivoting on the 50-day EMA. It looks credible as an inflection point, but the PMO and Stochastics tell us further decline is probable.
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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