Trading today started off well enough, but interestingly the Fed pause seemed to stir the market up and add volatility. Our sense is that the pause was mostly priced in, the volatility likely arose around speculation of what the next rate increase will be as it was made clear this wasn't the end of rising rates. Ultimately, the SPY was able to push to a positive close in the last five minutes of trading today.
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Today the NYSE Composite Index ($NYA) 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating an LT Trend Model BUY Signal. Price is now up against resistance so a pullback would make sense here. On the bright side, participation is reading above our 50% bullish threshold with the exception of the slow moving Golden Cross Index so we would expect any pullback to be brief.
Also today, the Financial Sector (XLF) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. Price traded above the 200-day EMA, but closed beneath resistance. The indicators are still very favorable and participation is expanding; however, this sector is definitely underperforming the SPY.
Finally, the Materials Sector (XLB) 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating an LT Trend Model BUY Signal. The Golden/Silver Cross Indexes are reading well below our 50% bullish threshold, but participation is expanding and given the higher readings in %Stocks > 20/50/200-day EMAs, we should see both the Silver Cross Index and the Golden Cross Index to continue higher.
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: The SPY formed a doji candlestick today which is a sign of indecision. However, these candlesticks often come before a trend change. This would be a good time for a pause or pullback.
The RSI is now overbought which could also signal a trend reversal. On the bull side, the VIX remains above its moving average on the inverted scale and Stochastics are firmly above 80 so internal strength is present.
Here is the latest recording (6/12):
S&P 500 New 52-Week Highs/Lows: Today we saw an even higher reading on New Highs. We see this as a sign of caution. Spikes in 52-Week New Highs tend to signal an exhaustion point of a price advance.
Looking at NYSE New Highs, we saw an expansion which is welcome; however the negative divergence persists.
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 OVERBOUGHT.
The Swenlin Trading Oscillators (STOs) turned down today which doesn't bode well when combined with the doji candlestick today. You'll also note that they continue to hold negative divergences with price. Participation is healthy, but getting overbought.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The STOs may be indecisive, but the ITBM/ITVM are in agreement as they continue to rise in overbought territory (at least for the ITVM). %PMO BUY Signals expanded but is now equal to the percentage of rising PMOs. This tells us this indicator is likely to head down tomorrow.
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 is BULLISH in all three timeframes.
The long-term bias is now fully BULLISH. We have more than 50% of stocks above their 50/200-day EMAs and today the Golden Cross Index saw a Bullish "Shift" as it crossed above its signal line. All other indicators are above their 50% bullish threshold and the Silver Cross Index continues to rise strongly.
CONCLUSION: The Fed paused and caused volatility to reenter the market to finish the day. It was only the last five minutes of trading that put the SPY in the black. With STOs topping and an overbought RSI, it seems time for overbought conditions to be relieved with a digestion phase. The bias is still firmly bullish so we aren't expecting a deep decline at this time, just a period for a pause or pullback, not a correction.
Erin is 40% long, 0% short.
Editor's Note: Erin is slotted to be on Making Money with Charles Payne next week. We'll publish the date and time when we have it.
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BITCOIN
With today's breakdown, yesterday's comments still apply:
"We've elongated the bearish rounded top as price was getting ready to drift right out of the previous one. We believe it is still a bearish formation. Stochastics ticked up, but given the PMO Crossover SELL Signal as well as the negative RSI and we would look for more sideways movement with a high likelihood of a breakdown ahead."
INTEREST RATES
Yields were mixed today. None of the rising trends on longer-term rates were compromised.
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 failed to confirm the bullish falling wedge today, but given the positive indicators, we believe a breakout is imminent. The RSI is firmly positive and not overbought. The PMO is rising on a Crossover BUY Signal. Finally, Stochastics are about to move above 80. We see internal strength.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT made up for most of yesterday's over 1% decline. This didn't clear up the picture. Indicators are flat and neutral giving us no hints on future direction. We would look for more sideways movement. Hopefully the indicators will reveal something soon.
DOLLAR (UUP)
IT Trend Model: BUY as of 5/18/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: There is a large bearish double-top formation that was nearly confirmed. We moved the confirmation line up to match the end of May decline. Given the new PMO Crossover SELL signal, a now negative RSI and Stochastics dropping below 80, our outlook on the Dollar is bearish.
GOLD
IT Trend Model: NEUTRAL as of 6/8/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: GLD formed a bearish filled black candlestick. Support did hold and with the bearish outlook on the Dollar, Gold should see a resurgence.
GOLD Daily Chart: The indicators aren't looking healthy, but a very bearish looking Dollar has us looking at Gold favorably. Sentiment is near-term very bearish based on expanding discounts. Sentiment is contrarian so this suggests Gold will rally soon.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners could use some help from Gold since we believe the market is ready to pause. It was a small decline today, but it pushed %Stocks > 20/50/200-day EMAs lower. Without help from Gold, we see this current support level as very vulnerable to a breakdown.
CRUDE OIL (USO)
IT Trend Model: SELL as of 5/3/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil was lower on the day and formed a bearish engulfing candlestick suggesting today wasn't the end of the decline. Overall price is in a trading range and based on the indicators, we don't see that changing. At this point we would look for the bottom of the range to be tested.
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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