Today the Energy Sector (XLE) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL Signal. The last 50/200EMA crossover was a Golden Cross in January of 2021. This bearish crossover reflects the negative long-term pressures on the Energy Sector, but it has been moving into a narrower range in the last nine months. Indecisive with a negative bias.
Also today, the Health Care Sector (XLV) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. This is the seventh 20/50-day EMA crossover in a year, emphasizing, along with the triangle formation, that this sector is still mired in indecision. It won't take much of a decline to put price below key moving averages and cause more signal changes, but we must admit participation looks pretty good right now, although the Silver Cross/Golden Cross Indexes have paused.
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 Market Index, Sector, and Industry Group 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: Today we saw a bullish engulfing candlestick which does imply tomorrow will carry another rally. We don't think the digestion period is over at this point. The PMO paused so essentially it is still in decline. The decline did move the RSI out of overbought territory, but another rally could push it back above 70. More digestion is needed.
The VIX has yet to show any strain even on the past three days of decline. Stochastics did dip below 80 so internal strength, while visible, is weakening.
Here is the latest recording (6/12 - no recording on 6/19):
S&P 500 New 52-Week Highs/Lows: New Highs contracted slightly on the rally which isn't good. In particular, we saw some New Lows on the rally...also not good.
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.
The Swenlin Trading Oscillators (STOs) continued to decline. The STO-V hit negative territory. The good news is that they are now in neutral territory and ready for the next rally. Participation has now left overbought territory as well with now only 61% above their 20-day EMAs. Rising momentum has taken a big hit with a reading that is now flirting with a bearish reading below 50%.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Both the ITBM/ITVM continued lower, but both remain overbought. Considering the loss of rising momentum, we haven't seen that much damage done to %PMO BUY Signals but a drop below the signal line seems imminent.
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 market bias in the short term is NEUTRAL.
The market bias in the intermediate and long terms are BULLISH.
We are moving the short-term bias to neutral given the big declines in %Stocks above their 20/50-day EMAs. For now, the intermediate-term bias remains bullish given there are more stocks above their 20/50-day EMAs than there are Silver Crosses. However, the Silver Cross Index has paused. Should it turn over, the IT bias will move to neutral or possibly bearish depending on whether participation percentages hold above the 50% bullish threshold. The long-term bias remains bullish as we have more stocks above their 50/200-day EMAs than those with Golden Crosses.
CONCLUSION: We don't believe three days of decline are enough to consider the market through with the digestion phase. Participation and the loss of a bullish short-term bias tell us the pullback isn't likely over. We still have overbought indicators like the PMO and ITBM/ITVM that need relief. Given market participants are complacent based on the low VIX reading, we would warn sentiment is contrarian. Nearly all of our indicators are in decline so we do expect more digestion. Portfolio expansion should be done with care and with stops.
Erin is 45% long, 0% short.
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BITCOIN
Instead of a pullback, we got a pause on Bitcoin as overhead resistance was reached yesterday. The RSI is overbought so more pause or a small pullback would help. The PMO and Stochastics are very bullish right now so an upside breakout should be expected.
INTEREST RATES
Yields ticked higher, putting pressure on Bonds.
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 was higher on the day. It continues to avoid a double-top formation. The overreaching chart pattern is a bullish falling wedge so we should expect a breakout. The RSI is positive, but the PMO isn't quite behind a breakout. Stochastics are positive and rising. More than likely we have more sideways movement to deal with.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT fell as the 20-year yield rose on the day. A breakout seemed imminent, but now the PMO is topping beneath the zero line and price has closed beneath the 20-day EMA. The RSI moved into negative territory and Stochastics have topped. We favored an upside breakout, but that PMO top looks very bearish.
DOLLAR (UUP)
IT Trend Model: BUY as of 5/18/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: In spite of an ugly bearish engulfing candlestick, the Dollar rallied today. The declining trend is still firmly in place and indicators are negative so we still are bearish on UUP.
GOLD
IT Trend Model: NEUTRAL as of 6/8/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: The Gold chart is very bearish, but we do see strong support arriving at the 200-day EMA. Indicators are bearish though so we should expect Gold to drop below that level. The RSI is negative, the PMO in decline and Stochastics are below 20.
GOLD Daily Chart: Discounts continue to expand suggesting traders are very bearish on Gold. Not a surprise given the slide from the May high. Discounts are reading higher than we seen since March (when we did see an upside reversal in Gold). Remember sentiment is contrarian so the more bearish market participants are, the more bullish it is for Gold. We do note that discounts have certainly been higher so we aren't counting on sentiment to help just yet.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"Gold Miners broke near-term support. The RSI has been negative for well over a month. Today the PMO topped beneath the signal line which adds insult to injury. The injury being little to no participation. The SCI is falling almost vertically. We would look for price to drop down to 26.00 unless participation finally begins to improve."
CRUDE OIL (USO)
IT Trend Model: SELL as of 5/3/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: The pressure was on the Energy sector today due to the big decline in Crude Oil. While we do have a line of support drawn here, we think the trading range will win out and we'll see a test of the bottom of the range at around 60.00.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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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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