Today the Regional Banking ETF (KRE) 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. Yesterday KRE generated an IT Trend Model BUY Signal, but we wrote, "Participation has fallen like a rock when you look at %Stocks > 20/50EMAs. The Silver Cross Index has had a Bearish Shift across the signal line and the Golden Cross Index has been falling for some time. While the Financial sector looks very bullish, this industry group should be avoided." The words "instant gratification" come to mind.
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.
Watch the latest episode of DecisionPoint on our YouTube channel here!
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: BUY as of 11/14/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: The market was down today but it did manage to form a hammer candlestick which typically leads to upside. However, we would note that these single day patterns are usually stronger when they come off a more concerted decline. We noticed a slight negative divergence between the OBV tops and price tops.
The VIX dove on the inverted scale suggesting today's decline shook up investors. The rising wedge suggests an eventual breakdown, but Stochastics are still above 80 so there is some internal price strength.
Here is the latest recording from 3/11:
S&P 500 New 52-Week Highs/Lows: New Highs contracted on the decline as we would expect. No New Lows were recorded. The 10-DMA of the High-Low Differential continues lower.
Climax* Analysis: There were three climax readings and one "almost," so we have a downside initiation climax. It has been about a month since the last climax day, although we're not sure of the significance of that. We will expect some follow through to the downside, but downside expectations haven't worked well since October.
*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) sank today by mile which adds to our concerns about the short term. Notice that the PMO, while holding flat above the zero line, has had its second top beneath the signal line. Participation also dropped precipitously. Only 1/3rd of the index hold rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT.
More bad news, the ITBM and ITVM both topped for the first time since February. This confirms the dropping STOs and could spell trouble. We also saw a loss of PMO BUY Signals within the index. That will continue much lower if we continue to see so few 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 BULLISH in all three timeframes.
We have a bullish bias in the short term, but it is already deteriorating. Since readings on %Stocks > 20/50EMAs are above our 50% bullish threshold, we are leaving the ST Bias as BULLISH. Percentages are now lower than the Silver Cross Index (SCI) which implies it will soon top. It is above its signal line so the IT Bias is BULLISH. The LT Bias remains BULLISH given the Golden Cross Index (GCI) is above its signal line; however, we do note that it has topped.
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.
**************************************************************************************
CONCLUSION: Considering today the market was down only slightly, we had some big bearish signals come through. We have a second top beneath the signal line for the PMO. The STOs and ITBM/ITVM are all falling now. We also had a downside initiation climax today. The stage is certainly set for the market to decline out of the bearish rising wedge. We do know the market has ignored prior bearish signals, but we think this time is different given the ITBM and ITVM topped. NVDA's decline hasn't helped matters. It is likely a good time to tighten up those stops.
Erin is 75% long, 0% short.
Calendar: Tomorrow is options expiration. Typically, it should have low volatility, but today should not have been as volatile as it was, so no guarantees. It is also an end-of-quarter expiration, so SPX Total Volume will be very high -- do not attribute it to a blowoff or blowout.
**************************************************************************************
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact support@decisionpoint.com for more information!
BITCOIN
Bitcoin pulled back today. It nearly took the RSI out of overbought territory. The rising trend is intact, but the PMO has topped in very overbought territory. It may be time for a cooling off period.
BITCOIN ETFs
INTEREST RATES
Yields are making a comeback and that is certainly not helping the market. They look bullish enough to keep on rising so Bond funds will suffer.
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 popped higher today. This has the PMO rising again toward a Crossover BUY Signal. The RSI is positive and not overbought and Stochastics look particularly bullish. With such bullish indicators, we should look for $TNX to move even higher. We do note that overhead resistance is nearing and that could pose a problem.
BONDS (TLT)
IT Trend Model: BUY as of 3/6/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With the 20-year yield on the rise, TLT has been headed lower. Support has been reached, but the chart is not conducive to a reversal here. The RSI is in negative territory, the PMO has topped and is nearing a Crossover SELL Signal, and Stochastics are diving lower.
The double bottom hasn't been busted yet, that would take a move below 92. It's getting close.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: So much for the reverse flag, or maybe the flag itself is lengthening. The chart looked far more bearish yesterday. The Dollar is attempting a reversal and indicators are set up to support this. This could weigh heavy on Gold.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: We see a possible flag formation on Gold. The flag itself may need some lengthening after such a strong rally. Stochastics are worrisome, but so far they are holding above 80. A rally in the Dollar will put downside pressure on Gold and given we are already seeing Gold losing relative strength against the Dollar, more decline may be necessary.
Discounts elevated somewhat which tells us we still have bears on Gold. Readings are not nearly as elevated as we would like to see. High discounts generally means upside reversal for Gold. Gold looks like it may need to decline or consolidate a bit more before the rally resumes.
GOLD MINERS Golden and Silver Cross Indexes: A bad day for Gold and the market led to a big decline for GDX. Participation was unperturbed by the decline and remains very high. The Silver Cross Index is rising strongly as well. However, we see some problems with Gold so this group is likely to roll over a bit more. If participation remains strong, a decline would give us an interesting entry.
CRUDE OIL (USO)
IT Trend Model: BUY as of 2/12/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: Crude is finally igniting a real rally with a breakaway gap and follow up continuation gap. Price broke above the prior March high. The PMO is holding above the zero line on a PMO BUY Signal and Stochastics are rising strongly. We expect more follow through.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
(c) Copyright 2024 DecisionPoint.com
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.
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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)