Today the Gold ETF (GLD) 20-day EMA crossed down through the 50-day EMA above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. We'll cover Gold in more detail in its section later in the report.
Also, the Real Estate Sector (XLRE) 20-day EMA crossed down through the 50-day EMA below the 200-day EMA, generating a Dark Cross SELL Signal. The sector attempted a rally, but today took back all of the gains. This sector hasn't been in good shape for some time and it is reflected in the negative indicators and particularly, in very low participation numbers. The Silver Cross Index is flying lower and given the small amount of stocks above their 20/50-day EMAs, that percentage will continue to slide. Stochastics were rising until today where they topped below net neutral (50). We didn't even mention the PMO, it was attempting to turn up, but instead is accelerating lower. We would look elsewhere for additions to your portfolio.
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: BUY as of 2/9/2023
SPY Daily Chart: Fed Chair Powell's remarks today were especially hawkish, and the air went right out of the market. Last week's rally was, we suspect, fueled by unfounded dovish fantasies. So much for that. The rising trend line drawn from the October low, which defines the current cyclical bull market, was again violated to the downside. We think that the market will not be recapturing that trend line any time soon. Some may assert that we should redraw the line under last week's low, but we think the current line emphasizes the turmoil the market is experiencing.
Primary indicators have quickly reversed. The RSI is back below net neutral (50). The PMO has topped beneath the signal line. Stochastics have topped in negative territory. The VIX didn't collapse and does remain above its moving average on our inverted scale.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: Yesterday we said: While price today was higher than Friday's, new 52-Week Highs contracted. This is short-term bearish. We rest our case.
Climax* Analysis: Today there were strong unanimous climax readings on all four eligible indicators, giving us a downside initiation climax. SPX Total Volume was strong, but nowhere close to blowout levels.
*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.
We were deflated when we saw that STOs have started back down. Participation took a giant hit based on the %Stocks > 20-day EMA. Rising momentum was slashed as well.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERSOLD.
Just as the ITBM/ITVM had begun to confirm bullish short-term indicators, they hit a wall and moved lower. %PMO BUY signals is definitely oversold, but it requires more PMOs Rising (see above chart). Currently with only 17% showing rising PMOs, we know that %PMO BUY signals is vulnerable to decline.
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 bias of the market is BEARISH in all three timeframes.
Not only did we see a contraction in %Stocks > 20/50/200-day EMAs, all of those indicators are reading lower than both the Silver Cross Index and Golden Cross Index.
CONCLUSION: Indicators which had been looking up are now beginning to fail leaving our bullish expectations from last week's rally by the wayside. A few indicators deteriorating is one thing, but every indicator reversing is quite another. To add insult to injury, we had a strong downside initiation climax. This looks like a classic bull trap in which our indicators got caught. We're back to playing defense. If you did expand your portfolio or are holding longs, set stops and honor them. The downside initiation climax may have been our warning shot.
Erin is 25% long, 2% short.
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BITCOIN
After brief consolidation, Bitcoin broke down and is about to test support at the 200-day EMA and 21,500. This looks like a bearish double-top. A drop below the February low will confirm it. Given the very negative indicators, falling/negative RSI, falling PMO on a SELL signal and Stochastics topping below 20, look for the pattern to execute.
INTEREST RATES
Yields were mixed today. The yield curve inverted further given long-term rates turned down, but very short-term rates moved higher. Inverted curves often lead to recession so check that box on your "Are we going into a recession?" checklist.
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 broke out and then had a mechanical pullback to the breakout point. It finished lower on the day, but support at the confirmation line of the bullish double-bottom pattern held. The RSI is still firmly positive and the PMO is still rising. We do not like that Stochastics are falling out of the sky, but they are still above net neutral (50). We still believe this support level will hold and the double-bottom pattern will fulfill its upside target at the October high.
DOLLAR (UUP)
IT Trend Model: BUY as of 2/27/2023
LT Trend Model: BUY as of 2/24/2023
UUP Daily Chart: The consolidation appears over as the Dollar kicked it into high gear with a huge rally today. There is a bearish rising wedge visible on the chart so price is still vulnerable to a decline. The PMO is rising gently and Stochastics are rising slightly. This was a big move that will likely need to be digested with consolidation.
GOLD
IT Trend Model: NEUTRAL as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold was just starting to firm up bullishly, but with the Dollar's strong rally, Gold was punished. The drop below the 50-day EMA spurred on today's "Dark Cross" of the 20/50-day EMAs. The RSI is negative and not oversold. The PMO is topping below its signal line which is especially bearish. Stochastics topped well below 80.
GOLD Daily Chart: Gold's relative strength to the Dollar is fading again. Support is available for Gold, but given the indicator reversals, we expect a breakdown.
GOLD MINERS Golden and Silver Cross Indexes: Gold's decline was Gold Miners' disaster. Insult to injury was a market that plunged today. Just as Gold and Gold Miners were beginning to see strength, the carpet was pulled out from under them. Indicators are bad across the board. Not only is the RSI in negative territory and falling, the PMO has topped beneath its signal line which is especially bearish. Stochastics also topped in negative territory. Participation is barely there. We certainly expect support at 26.00 to be tested, if not lost.
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 dove lower today, but managed to cling to its short-term rising trend. The RSI dropped below 50. The PMO is now topping suggesting the rally is already waning.
Price had just moved out of its declining trend and now it is back in. Stochastics remain above 80, but they too have topped. This trading range has been in effect since December and will likely continue.
BONDS (TLT)
IT Trend Model: SELLas of 2/21/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The rising trend continues and based on Stochastics, it should continue. The PMO isn't quite convincing yet. The RSI is in negative territory. Today we saw an "inside" trading day where the candle body of today was covered by yesterday's candle body. These denote indecision. So while we may be seeing some positive action out of TLT, we shouldn't get too bullish.
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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