We continue to discuss the deterioration of our primary indicators and today we saw another bad omen. The Silver Cross Index (SCI) which measures how many stocks have a 20-day EMA above their 50-day EMA, topped today. Currently the percentages of stocks above their 20/50-day EMAs are higher than the SCI, but it topped anyway. This means that while many stocks may have a "Silver Cross" of the 20/50-day EMAs, they aren't all sitting above both indicators and very likely are in decline. The internals are souring.
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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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 3/30/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: Although price was higher the last two trading days, it drifted out of the bearish rising wedge. The RSI is still comfortably within positive territory above net neutral (50), but the PMO fell again today.
The VIX expanded somewhat but managed to stay above its moving average on the inverted scale. A dip below typically suggests internal weakness. Stochastics look terrible as they decline, moving below 80. Internal strength is shifting toward internal weakness.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Highs continue to be posted, but are trending lower. The 10-DMA of the High-Low Differential continues to rise but is overbought.
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 UP and the condition is NEUTRAL.
We were recently emailed asking us how we can be bearish when we say the "trend is UP". The trend is marked by rising bottoms, it is not an opinion. We will say that the rising trend is beginning to be compromised. What is most important is that Swenlin Trading Oscillators (STOs) continue to make their way lower with the STO-V entering negative territory. These indicators are not oversold in the least. Even with two up days, participation is still in a declining trend.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The IT Breadth Momentum and IT Volume Momentum Oscillators continue to confirm short-term bearish behavior by our short-term indicators. Both indicators continue lower. Today, we also see a negative crossover on %PMO BUY Signals.
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 NEUTRAL.
The intermediate-term bias is NEUTRAL.
The long-term bias is BULLISH.
We noted in the opening that the Silver Cross Index has topped while participation of stocks above their 20/50-day EMAs has shrunk. This has us moving to a "Neutral" bias in the short and intermediate terms. We still have over 50% of stocks above their 50/200-day EMAs and those percentages are higher than the Golden Cross Index (GCI) so we can still read the long-term bias as bullish.
CONCLUSION: We believe a major market top is on the way. The negative configuration of our market indicators which includes a top on the Silver Cross Index have us very concerned. We have a few positives. The 10-DMA of the High-Low Differential is rising, the RSI is positive and the VIX remains above its moving average on the inverted scale. We wouldn't hang our hat on those few bullish indications. The VIX is about to move bearish, High-Low Differential can top at any time and a decent decline will take the RSI out of positive territory. We are playing defense with tighter stops (so far Erin's positions are holding above stop levels). She is uninterested in expanding her portfolio at this time. Aggressive investors could consider adding shorts.
Erin is 30% long, 4% short.
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BITCOIN
Bitcoin lost support last week and is attempting to firm up new support along the 50-day EMA and late March lows. Indicators are still quite negative with the PMO falling and the RSI below net neutral (50). Stochastics have turned up, but remain in very negative territory below 20. We don't believe this level of support will hold.
INTEREST RATES
Yields for the most part declined today, but we would look for them to reverse higher. This seems a strong level of support for most.
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 backing off after testing overhead resistance. We aren't thrilled with the falling RSI, but the PMO remains healthy. Stochastics have topped though so we should be prepared for a test of the 200-day EMA if this decline continues. We still favor a resumption of the prior rally.
BONDS (TLT)
IT Trend Model: BUY as of 3/17/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT caught a break as the 20-year yield pulled back today. It is rising off short-term support and today, it managed a close above the 20-day EMA. The RSI moved above net neutral (50) and Stochastics are rising again. The PMO is stubbornly declining. We see a possible move back to test overhead resistance, but ultimately we don't see a breakout in TLT's future there.
There is a very large bullish ascending triangle visible which does favor a breakout, but again, we see the 20-year yield foiling any breakout.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 3/28/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: The Dollar continues to trickle lower. This pushed the PMO below its signal line for a Crossover SELL signal. The RSI topped in negative territory and Stochastics have topped well below 80. The bias is clearly bearish for the Dollar, but support is not too far away at 27.25. We expect more of the same with the Dollar continuing to move lower.
GOLD
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: While the Dollar may be weak, it hasn't done much for Gold which is meandering sideways above support at the January high. Indicators are mostly bearish with the PMO and Stochastics both in decline. However, it isn't all bad as the RSI is managing to stay in positive territory despite the downward pressure of the Dollar.
GOLD Daily Chart: While the Dollar is in a rising trend channel, it is vulnerable to a test of the bottom of the channel. We would look for Gold to decline in the short term.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners have pulled back to support at the January high. With downward pressure on the Dollar and a likely market decline on tap, it will be difficult for this level of support to be held, particularly given the thinning participation. The Silver Cross Index had a negative crossover today and the PMO has had its own giving us a PMO Crossover SELL Signal. This has been a nearly teflon area of the market, but we'd play the reversal only if the PMO and/or participation begin moving up again.
CRUDE OIL (USO)
IT Trend Model: BUY as of 4/10/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil has decided to reverse on the 50-day EMA. The PMO has turned back up giving us a "surge" or bottom above the signal line. While we are looking at Crude Oil more favorably, Stochastics still haven't confirmed this rally. It appears another test at 72.00 will materialize. We see Energy as a 'hold' not a 'buy' as resistance has proved powerful; that will limit upside potential.
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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