Today the S&P 500 (SPY) 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating an LT Trend Model BUY Signal. Being a long-term signal, price must advance for a long time to make it happen. Unfortunately, it appears that price has hit an intermediate- or short-term top, and the rising wedge formation tells us price is most likely to break down from that formation. Note that the PMO is overbought and has topped, and there is a negative divergence on the OBV.
To make matters worse for the SPY, today the Silver Cross Index (SCI) had a negative crossover its signal line. We'll discuss this in more detail under the "Bias" section.
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 StockCharts TV's YouTube channel here!
MAJOR MARKET INDEXES
SECTORS
Each S&P 500 Index component stock is assigned to one of 11 major sectors. This is a snapshot of the Intermediate-Term (Silver Cross) and Long-Term (Golden Cross) Trend Model signal status for those sectors.
CLICK HERE for Carl's annotated Sector charts.
THE MARKET (S&P 500)
IT Trend Model: BUY as of 1/12/2023
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: The short-term bearish rising wedge was confirmed with today's decline. Additionally we have a bearish engulfing candlestick that suggests more downside tomorrow.
The PMO topped today on the SPY. The RSI may be positive, but it is on its way to negative territory below net neutral (50). Stochastics are moving lower below 80. There is a large giant bearish rising wedge that was formed out of the Bear Market low. That suggests not only a drop past the 200-day EMA, but likely a drop below 390.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: Another market decline saw another expansion in New Highs. This tells us that there are still pockets of strength that could be taken advantage of. If you're not a DP Diamonds subscriber, you may want to reconsider as Erin is picking those stocks/ETFs right now.
Climax* Analysis: Yesterday was a marginal climax day with only two of four possible climax readings. We went with a downside initiation climax for the day, but at today's open the market was up -- not an option we would have expected. Eventually, that enthusiasm faded and prices moved downward. Today there was only one climax reading out of four indicators, so it is not a climax day for the market.
*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 SOMEWHAT OVERSOLD.
STOs dropped quickly lower today. On the bright side, it has put the STO-B in oversold territory. Additionally, %PMOs Rising is now in somewhat oversold territory. The more these stretch down, the sooner we will be able to look for an upside reversal.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Half of the SPX are still holding crossover BUY signals. That's not a great number. The other issue is that indicator is not at all oversold. The ITBM/ITVM continue lower, but remain in overbought territory.
PARTICIPATION and BIAS Assessment: 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 short-term bias is BEARISH.
The intermediate-term bias is BEARISH.
The long-term bias is BULLISH.
The big news is that the Silver Cross Index saw a negative crossover today. This is very bearish in the intermediate term. Given the deterioration of the %Stocks > 20/50-day EMAs the short term remains bearish. The long term is holding up, barely. We have more stocks above their 50/200-day EMAs than those with Golden Crosses. This implies that the Golden Cross Index could continue to rise.
CONCLUSION: The indicators are really breaking down right now and the confirmation of the short-term rising wedge has us looking for price to decline even further. The topping PMO and falling short-term indicators is very bearish. The negative crossover on the Silver Cross Index is also ominous. In the short term, some of our indicators are getting oversold, but they have plenty of room to move even lower. It's time to exercise great caution and make sure that your portfolio is holding stocks/ETFs within visible pockets of strength in the market. That means industry groups on the rise with rising relative strength lines. Topping PMOs are your first warning that you may be holding a future loser.
Erin is 20% invested.
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BITCOIN
As we've been writing, Bitcoin was primed for a breakdown. We think it can move even lower given the RSI just dropped below net neutral (50) and the PMO is headed down in very overbought territory. Stochastics look sickly. Expect more downside.
INTEREST RATES
Yields ticked up. We expect rates to move higher given they are all forming bullish double-bottoms.
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
Yesterday's comments still apply:
"$TNX is testing the declining tops trending now. A breakout could suggest another trip to test October highs. Why do we think that? We have what looks like an Adam & Eve bullish double-bottom developing. Additionally, price is in a symmetrical triangle. Those are continuation patterns. The prior trend was up so we expect an upside breakout."
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: SELL as of 1/31/2023
UUP Daily Chart: The Dollar fell but held support and formed a bullish hollow red candlestick. It is bullish because bulls were able to pull price up well past the open. The indicators are still positive. The RSI is above 50 and Stochastics are above 80. The PMO is rising in spite of the short-term declining trend.
The declining trend channel is holding, but any decent rally will get a breakout.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold had an opportunity to rally today given the Dollar was lower. Instead it moved much lower than the Dollar and formed a bearish engulfing candlestick that suggests a decline again tomorrow. Stochastics are oscillating below 20 which implies internal weakness.
GOLD Daily Chart: The RSI topped in negative territory. The PMO continues lower in overbought territory. We haven't talked much about discounts/premiums. Mainly because they have stayed in the same bearish range. Gold officially broke out of its rising trend channel. Gold is should see a continuation to the downside.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners broke strong support today at not only the 50-day EMA but at December tops. The Silver Cross Index finally turned down and had a negative crossover. Participation was already thinning, but it is falling off the map right now. We believe Gold Miners are ready for a correction.
CRUDE OIL (USO)
IT Trend Model: SELL as of 2/2/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: USO pulled back today after three days of solid rally. The RSI has dropped back into negative territory and the PMO is about to top beneath the zero line. Yet, Stochastics are rising. We believe that USO is range bound right now between September and now. There is likely more rally ahead, but it looks shaky which is why we would expect a downturn at overhead resistance. If this decline continues, we would expect a breakdown simply because price wasn't able to test overhead resistance at the top of the trading range. It's early, but we would be careful with any Energy positions related to Crude.
BONDS (TLT)
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT formed a giant bearish engulfing candlestick that suggests another decline tomorrow. The chart has already been breaking down. The RSI is negative and the PMO is putting distance between it and its signal line. Stochastics are below 20. We expect a breakdown at the rising bottoms trendline.
There is a large symmetrical triangle on the longer-term chart. This can resolve in either direction, but typically it will be in the direction of the prior trend (this is why we call them "continuation" patterns). That also tells us to expect a breakdown.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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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.
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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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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