A number of issues are being cited for today's decline -- economic slowdown, debt ceiling concerns, etc. -- but the Regional Banking chart gives visible evidence of its negative influence on the market. The problem with a lot of the information we get on situations like this is that it comes from banking industry insiders, whose incentive is to minimize the negative and accentuate the positive. We think this is not over.
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Also today, the Industrial Sector (XLI) 20-day EMA crossed down through the 50-day EMA (Dark Cross), generating an IT Trend Model NEUTRAL Signal. That would be the third signal change for XLI in as many trading days. Again, this signal does not deserve any action being taken. With price braiding the 20/50-day EMAs, this is probably not the last crossover we'll see.
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 3/30/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: A real decline finally hit the market. It hasn't erased the gains of the prior rally, but we don't think this over. It seems highly likely that the rally was a massive short squeeze. The PMO has now whipsawed back into a Crossover SELL Signal.
The VIX punctured the lower Bollinger Band on our inverted scale as fear spiked on today's decline. Many times these punctures of the lower Band will lead to higher prices. We don't see that mainly because the VIX nearly punctured the upper Band today as well. We expect the decline will push the Bollinger Bands apart. Stochastics tipped over.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Highs contracted as expected and New Lows expanded as expected. What was somewhat unexpected was the top on the 10-DMA of the High-Low Differential in overbought territory. We seen it twitch, so we won't read too much into it yet.
Climax* Analysis: There were unanimous and mostly strong climax readings on the four applicable indicators today, giving us a downside initiation climax. SPX Total Volume was strong, confirming the climax assessment.
*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 RISING and the condition is NEUTRAL.
Swenlin Trading Oscillators (STOs) are still rising but we see this as coming to an end soon. Participation was hit hard on today's decline, nearly erasing all the gains from the rally. Percentages are now bearishly below our 50% threshold.
Intermediate-Term Market Indicators: The intermediate-term market trend is RISING and the condition is OVERBOUGHT.
Our ITBM and ITVM topped today after rising for only two days. This was not unexpected to us. %PMO BUY Signals will continue lower given there are only 38% of stocks with rising PMOs.
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 BEARISH.
We are moving the bias to BEARISH in all three timeframes. The SCI is currently rising but so far has not had an upside crossover. Given there is a lower percentage of stocks above their 20/50-day EMAs than the SCI, the SCI has a high likelihood of topping again. %Stocks above their 20/50/200-day EMAs are all below our bullish 50% threshold. The GCI topped today.
CONCLUSION: We advised that you continue to play defense yesterday as we wait for the FOMC's decision. The market has showed its weak hand today, coming in before the announcement lower. Internals were devastated by today's decline. The worst was the PMO whipsawing back into its prior SELL signal combined with a downside initiation climax. Banks may've been the first catalyst to a market correction. The Fed could definitely add insult to injury tomorrow. Stay defensive. Expanding your portfolio opens you up to a great deal of risk right now.
Erin is 28% long, 4% short.
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BITCOIN
Bitcoin is indecisive and is forming a symmetrical triangle. These are continuation patterns. The prior trend was up overall before this pattern began forming so we would eventually expect a breakout from the pattern. The PMO is flattening and the RSI whipsawed back into positive territory. Stochastics are a big problem though. The banking issue could bring more to the crypto table as before. More than likely that contributed to today's rally in Bitcoin. We expect more hemming and hawing for Bitcoin.
INTEREST RATES
Today's decline had the effect we expected, a flight to Bonds which depressed interest rates.
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 has seen indicators do an about face. The RSI has moved back into negative territory and the PMO topped today. Stochastics completely tipped over. We had expected rates to continue rising...barring a deep market decline. The market decline is beginning in our opinion, so Bonds will likely overpower yields.
BONDS (TLT)
IT Trend Model: BUY as of 3/17/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The market reversed and so did Bonds. Today's big rally is likely attributed to many moving money toward Bonds and safety. We think the decline will continue and that should benefit TLT.
Today's rally also prevented a break in the intermediate-term rising trend. That means that the bullish ascending triangle (flat tops, rising bottoms) is still intact. A market decline could easily push Bonds above overhead resistance.
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 pulled back slightly, but still set a higher low and higher high. We don't think the rally in the Dollar is over yet given the PMO is rising and Stochastics are about to move above 80. We expect a rally to be slow-going.
The longer-term daily chart reveals a large symmetrical triangle. These are continuation patterns. The break from the triangle is determined by the prior trend. In the case of the Dollar, it is up. An upside breakout should be expected.
GOLD
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold was up far more than the Dollar was down. As with Bonds, we think this is a consequence of the market decline. Indicators turned around quickly. The RSI is above net neutral (50) and the PMO is turning back up. Stochastics are moving up.
GOLD Daily Chart: Given the excellent relative strength of Gold to the Dollar, we see both rising. The Dollar very slowly and Gold slightly faster. As long as the market continues lower, we would expect Gold to rise. Certainly this support level should at least hold.
GOLD MINERS Golden and Silver Cross Indexes: As a consequence of a heavy decline today, Gold had a great day. That translated into a good day for Gold Miners. This bounce looks convincing, but we will be more convinced if the Silver Cross Index were to turn back up. Today it held the same reading as yesterday. We saw a nice expansion in participation and the PMO has turned up. The RSI has remained positive since early March. We still think entry here is risky as it is early. A deep market decline could easily stomp on this rally.
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 sped the decline, but it has reached support at 62.00 so we should be on the lookout for a reversal. However, the RSI is negative and falling and isn't oversold yet. Stochastics topped below 20. The PMO is accelerating lower on a SELL signal. A reversal here is wishful thinking. We would look for a test of 58.00.
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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