Today the Consumer Discretionary Sector (XLY) 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. Not surprisingly, XLY participation as measured by % Stocks > 20/50/200EMAs has deteriorated significantly. The PMO is now falling below the zero line and Stochastics are below 20.
The weekly chart shows XLY in a rising trend from the 2022 low. The weekly PMO has formed a negative divergence, is falling below the signal line (Crossover SELL Signal). Support is arriving, but we would look for the rising trend line to be tested.
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: BUY as of 11/14/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: Support was compromised today on the formation of a bearish engulfing candlestick which implies another day of decline tomorrow. The PMO is falling fast toward the zero line indicating diminished strength and building weakness.
The VIX penetrated the bottom Bollinger Band on the inverted scale again today. These punctures have yet to materialize with an advance. Stochastics are below 20 indicating serious internal weakness.
Here is the latest recording from April 15th:
S&P 500 New 52-Week Highs/Lows: We saw one New High on the day and New Low expanded as we would expect. The High-Low Differential is nearing the zero line and is reading lower than it has since the rally began.
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 OVERSOLD.
Swenlin Trading Oscillators (STOs) were lower pushing them further into extremely oversold territory. These types of oversold readings do tend to arrive before short-term rallies. Only 5% of stocks hold rising PMOs. We need rising momentum to fuel an upside reversal.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM and ITVM are dropping in negative territory, but they are not oversold yet. They can accommodate far more downside. Only 5% of stocks have a PMO Crossover BUY Signal which is oversold, but also is indicative of the extreme weakness within the index.
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 remains dismal. We see only 10.4% with price above their 20-day EMA which is clearly a bearish reading for the ST Bias. The Silver Cross Index and Golden Cross Index are moving vertically lower and both are below their signal lines giving us a BEARISH Bias in the long-term timeframe.
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: The Bias Table above is getting extremely bearish and we see extremely oversold readings on STOs and the VIX. While this could be an indication an upside reversal is nearing, other indicators like the ITBM and ITVM still aren't oversold and are falling. We also have very little support from momentum within the index. Today's bearish engulfing candlestick suggests more downside tomorrow. Very short-term hedges can be employed, but position size wisely and remember that inverse ETFs shouldn't be considered primary investments.
Erin is 40% long, 5% short.
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BITCOIN
Bitcoin is starting to lose support. It did manage to close above the support line, but looking at this toppy formation, look for more downside. The RSI and PMO are in agreement that more decline should follow.
BITCOIN ETFs
INTEREST RATES
Rates backed off today, but remain in strong rising trends. We think this decline will be temporary if it continues at all.
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 pulled back today but remains in a strong rising trend. The breakout from the bearish rising wedge was especially bullish as is the current rising trend established on the breakout. The PMO is still on the rise and isn't overbought so we expect the rally to continue.
BONDS (TLT)
IT Trend Model: SELL as of 3/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT took advantage of the 20-year yield's decline, but the steep declining trend remains intact for now. Indicators are now attempting to reverse, but we wouldn't get that bullish unless the declining trend was broken.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar was lower on the day. It could be forming a bearish reverse island pattern which would imply a coming gap down. The RSI is still overbought and the PMO is decelerating. Stochastics have also topped. We aren't sure we'll see the gap down, but it does appear that the Dollar could churn.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: With the Dollar being down we expected to see Gold up. We note that it is beginning to lose strength versus the Dollar, but we like that Stochastics are rising again. We still expect good things from Gold, but it is vulnerable to a decline to the bottom of the current rising trend channel.
The PMO is still rising nicely. Notice that the correlation between the Dollar and Gold is very positive. This is an unusual circumstance. With the Dollar showing signs of weakness, it doesn't mean that Gold will take advantage as it is likely to travel in the same direction as the Dollar right now. Overall we still very much like Gold.
GOLD MINERS (GDX) Golden and Silver Cross Indexes: Gold Miners rallied despite a decline in both Gold and the market. The rising trend channel held up despite its steepness. The PMO is about to surge above the signal line (bottom above the signal line) which would signal pure strength. Participation is exceptional and suggests more upside ahead for Gold Miners.
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 Oil broke down from the bullish flag which is especially bearish, but it is managing to hold support. Unfortunately we see a new PMO Crossover SELL Signal and diving Stochastics. We will likely see more downside. The 50-day EMA should provide support.
The double top formation seems to have won the day. On the bright side, the minimum downside target isn't far away. Again the 50-day EMA looks like a strong support level.
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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