Today the Technology Sector (XLK) 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating an LT Trend Model BUY Signal. As we stated yesterday with the LT SELL Signal on XLU, we need to treat these signals as information flags, not calls to action. With the long-term signals, price has persisted in a particular direction for an a long time, and the actual crossover event is frequently followed by a price reversal. In the case of XLK a pullback would be appropriate as the result of reaching the top of a rising trend channel. Also, the PMO is overbought and has topped. In any case, the Golden Cross should be viewed as a positive event for the long term, but it won't necessarily deliver a good entry point.
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
For Today:
For the Week:
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.
For Today:
For the Week:
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: BUY as of 2/9/2023
SPY Daily Chart: Monthly options expiration delivered as promised with a low volatility trading day with normal daily volume. Price has now confirmed the short-term bearish rising wedge with today's drop below the pattern. We do note that while this implies more downside, today's candlestick suggests otherwise, at least for Monday. Price formed a bullish hammer on a bullish hollow red candlestick. These usually are followed by a new short-term bottom.
However, we don't feel that bullish given the new PMO crossover SELL signal on the SPY today. The RSI is still positive, but Stochastics are falling and the VIX is below its moving average on the inverted scale. That suggests internal weakness.
Here is the recording for our last trading room (2/13):
SPY Weekly Chart: The market was mostly unchanged on the week, but a declining trend is now visible as the past two weeks have seen lower highs. The 17-week EMA is about to cross above the 43-week EMA which would be very bullish. Note the last time that happened it was at the end of the 2020 bear market. The weekly RSI is positive and the weekly PMO is rising above the zero line on an oversold crossover BUY signal.
New 52-Week Highs/Lows: New Highs and New Lows were mostly negligible this week. Most important is that the 10-DMA of the High-Low Differential has topped and is headed lower.
Climax Analysis: There were no climax readings today. We saw two climax days this week. Monday's upside initiation climax didn't amount to much upside. It was followed by a downside initiation climax yesterday that did resolve to the downside.
*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 NEUTRAL.
STOs finally began dropping today. They had been bucking the trend as price was moving lower and they were inching higher. They are in neutral territory for now, but a top so far below the last tops does suggest short-term weakness. Only 32% of stocks show rising momentum. Interestingly, despite today's decline, we saw a few more rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
We've listed the condition in the intermediate term as "neutral". The ITBM/ITVM are getting toward neutral, but really are still on the overbought side. %PMO BUY signals continued their decline today. This should continue a bit longer given only 32% of stocks have rising PMOs. On the bright side, %PMO BUY signals is catching up to the %PMOs rising. This could mean that indicator will bottom. Of course, if stocks continue to lose rising momentum, the buy signals will continue to disappear.
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PARTICIPATION and BIAS Assessment: The following table 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 following table summarizes participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation. There are three groups: Major Market Indexes, Miscellaneous Sectors, and the eleven S&P 500 Sectors.
NEW SECTORS ADDED! We have begun collecting SCI and GCI data for four new industry groups: Biotechnology (IBB), Regional Banking (KRE), Retail (XRT), and Semiconductor (SMH).
Based on IT Bias, XLRE is in the top spot. However, there is a problem for XLRE, it is losing ground on its Silver Cross Index. If that continues, we will see the Golden Cross Index suffer too. Currently it is holding up.
The weakest IT Bias below to XLE. While it is holding a strong Golden Cross Index value, the Silver Cross Index is deteriorating. That tells us that Energy is losing steam in the shorter term and that is going to affect the longer term.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
Semiconductors hold the top spot with 100% of stocks with a 20-day EMA > 50-day EMA and an improving Golden Cross Index. Internal strength is still available to SMH.
While Gold Miners aren't in the bottom spot, they lost a significant number of silver crosses on their way down. That group is flailing right now and given the deterioration of the Golden Cross Index as well, we see more downside for Miners. Utilities (XLU) hold the bottom spot with the lowest SCI and no change to either the SCI or GCI. On the bright side, no deterioration.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
XLE may hold the top GCI spot, but as noted earlier the SCI is losing ground and that will eventually rub off on the GCI. Interestingly, the leadership sector for much of the last month's rally was XLC. While it has been pulling back, this table suggests it is temporary given the increase in both the SCI and GCI.
The following chart objectively shows the depth and trend of participation in three time frames.
The market bias is BEARISH.
The short-term bias is BEARISH.
The intermediate-term bias is BEARISH.
The long-term bias is NEUTRAL.
We do see more than half of stocks with price above their 20-day EMA and 50-day EMA. That is barely on the positive side of 50%. Given those percentages are below the SCI, we look at the short-term as bearish. A topping SCI that is picking up momentum to downside after a negative crossover tells us the intermediate-term bias is bearish. Long-term, we have slightly more stocks above their 50/200-day EMAs than those with golden crosses. The margin is thin so we see the long term as neutral.
CONCLUSION: There are so many reasons to be bearish right now: negative and falling indicators, a new PMO SELL signal and a backdrop of two bearish chart patterns. Participation continues to thin and internal weakness is visible in Stochastics and the VIX. While today's candlestick is bullish, we don't see a big rally on the horizon given the bearish bias in the short- and intermediate-term timeframes. Rotation is also favoring defensive sectors, Utilities (XLU) and Consumer Staples (XLP). There are some pockets of strength visible within those sectors, but overall, expanding exposure is risky given the indicators.
Calendar: The U.S. markets will be closed on Monday for Presidents Day. There will be NO DecisionPoint Trading Room.
Erin is 20% exposed.
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BITCOIN
Bitcoin had a terrific week, jumping higher more quickly than we've seen in some time. Resistance has now been overcome and indicators are gelling. The RSI is positive and not overbought. The PMO is rising toward a new crossover BUY signal and Stochastics are almost above 80. We had thought that maybe resistance would hold here. Instead it broke out and looks like it is ready to move even higher.
This chart is to show where some of the support/resistance lines come from. This is a strong area of overhead resistance in the longer term.
INTEREST RATES
Yields continued to march higher this week. Many have executed double-bottom chart patterns. The expectation is a move that is the height of the pattern. That would put all yields easily at new 52-week highs.
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 is at a decision point. It has hit overhead resistance after a strong breakout from the declining trend. We will now find out if it is going to confirm the bullish double-bottom. Indicators look very strong with the positive RSI, rising PMO and steady Stochastics. We expect rates to continue their march higher.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount. As buying power has been shrinking, home prices have come under pressure.
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This week the 30-Year Fixed Rate rose from 6.09 to 6.12.
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 is inching higher and is now nearing overhead resistance at the January high. The rally has formed a bearish rising wedge. The indicators remain bullish so we will look for a breakout here. We don't want to forget to mention the bearish engulfing candlestick, but really the candlesticks have been bearish most of the rally.
Price has broken out of an intermediate-term declining trend channel. Price has also made it above all of the key moving averages. As a result, we are very close to a golden cross of the 50/200-day EMAs.
UUP Weekly Chart: This week price held support. The weekly indicators are looking more bullish as the weekly RSI nears positive territory above net neutral (50). The weekly PMO is decelerating and could begin rising as early as next week. We see more upside for the Dollar, particularly in the intermediate term.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GOLD Daily Chart: GLD formed a bullish engulfing candlestick today. price is holding above December tops. Indicators are still very negative though. The RSI is below net neutral (50) and the PMO is falling, nearing the zero line. Stochastics are in the basement and showing no signs of improvement.
Overall, Gold's strength against the Dollar has been fading on this decline. Not a surprise given the near perfect reverse correlation and a Dollar on the rise. We also see that sentiment is getting more bearish. The higher the discounts, the more bearish investors are. We aren't at extremes as in November, but they are getting close. Extreme discounts generally result in higher prices. We just need to see them get even more bearish.
GOLD Weekly Chart: Fortunately support is near on the weekly chart. Price is still above both the 17-week and 43-week EMAs. However, indicators are breaking down. The RSI is positive but could drop into negative territory soon. The weekly PMO is topping. We'd like to say an upside reversal here is imminent, but support looks tenuous at best.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners continued their declining trend and lost another line of support at the 200-day EMA. We don't see any relief in sight. The RSI is very negative and not yet oversold. The PMO has just entered negative territory and the Silver Cross Index is falling out of the sky. Participation has thinned greatly and isn't trending higher yet. We expect to see Miners test 26.00.
CRUDE OIL (USO)
IT Trend Model: SELL as of 2/2/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil was already worrying us and apparently we were right to be worried. The indicators are just getting more bearish including a new PMO SELL signal today. It is a bullish hollow red candlestick so it isn't out of the realm of possibility that this could turn out to be an island reversal pattern. That would imply a gap up on Monday or a price cluster followed by a gap up. However, those indicators tell us this is likely going to see a continuation to the downside.
USO/$WTIC Weekly Chart: We don't really have a breakdown of the long-term rising trend on USO, but it is coming even if price just consolidates sideways. The weekly indicators aren't that enlightening. We see this short-term trading range between $60 and $80 persisting. This will make investing in Energy positions tricky.
BONDS (TLT)
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT spent the week trending lower. There is now a large bearish double-top looming. It will be confirmed if it loses support at the confirmation line (December low). That would also mean a breakdown of the short-term rising trend. There is a bullish engulfing candlestick, but the PMO and Stochastics tell me that this isn't going to be an inflection point.
TLT Weekly Chart: The double-top is clearly visible on the weekly chart as well. It is forming after a breakout from the declining trend. If the double-top pattern is confirmed, the minimum downside target would be right on support at 90.00.
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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