Today the NYSE Composite Index ($NYA) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. The EMAs are "braiding" but price is now well-above all of the key moving averages so this signal should stick around. Considering the gain today we would've expected see an expansion of stocks above their 20/50/200-day EMAs, but no such luck. Important overhead resistance has arrived so it could be readying for a pause on this rally.
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 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: We are happy with this rally, but it is beginning to look parabolic. Remember parabolic formations generally end quickly and painfully. We may be in for a sizable decline when the fuel runs out.
Indicators are very favorable with the exception of an overbought RSI. The last time we saw overbought territory on the RSI we were nearing the August top. The VIX remains above its moving average on the inverted scale and Stochastics are firmly above 80 so internal strength is visible.
Here is the latest recording (6/12):
S&P 500 New 52-Week Highs/Lows: Today we got an expansion of SPX New Highs, the highest since April of 2022. Spikes in 52-Week New Highs tend to signal an exhaustion point of a price advance.
Another problem in this area is NYSE New Highs. While the price index logged a nice advance today, NYSE New Highs contracted. This kind of negative divergence, while short-term, can still precede a pullback.
Climax* Analysis: Tying in with today's spike in SPX New Highs, there were unanimous climax readings on the relevant indicators, so we have an upside exhaustion climax day.
*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.
Both of the Swenlin Trading Oscillators moved higher again today, but we do see negative divergences currently. Participation expanded as did %PMOs Rising. While this is positive, all of these readings are getting overbought.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
IT indicators continued to rise. %PMO BUY Signals is getting overbought. The ITVM is also overbought.
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.
Yesterday's comments still apply:
"The bias is BULLISH in all three timeframes.
We may be jumping the gun slightly on moving the long-term bias to BULLISH, but we have more than 50% of stocks above their 50/200-day EMAs so while the GCI is not above 50% it is very close to a "Shift" above the signal line. We are concerned about the negative divergences with price tops and participation readings are getting close to overbought, but current conditions have us bullish in all three timeframes."
CONCLUSION: The market is acting a bit too optimistic as we move into the Fed announcement. This is not to say they won't pause, but we aren't out of the rising rate environment yet. The market is getting overextended and overbought, but indicators are still behaving appropriately. Our concern is today's upside exhaustion climax and negative divergences, particularly on STOs and the exhaustive reading on New Highs. We are due for at least a pause. Consolidation could be all that is needed, but the parabolic rise on the SPY suggests we are vulnerable to a deeper decline. The bias is bullish, but we should prepare for a digestion phase.
Erin is 40% long, 0% short.
Editor's Note: Erin is slotted to be on Making Money with Charles Payne tomorrow during the 2p ET hour.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact support@decisionpoint.com for more information!
BITCOIN
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 rose on the day putting downside 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 is about to confirm the bullish falling wedge pattern as it is beginning to breakout of the formation. Indicators are positive and suggest follow-through. The RSI is positive and PMO is on the rise. Stochastics turned up in positive territory.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We are looking for a test of overhead resistance at the 50-day EMA, but today's nearly 1% decline turned indicators south, including the PMO. A breakout doesn't seem likely. More likely is a test of the May low.
DOLLAR (UUP)
IT Trend Model: BUY as of 5/18/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: Yesterday's comments still apply:
"The Dollar has formed a bearish double-top. The very long tail on the red candlestick is technically where the confirmation line would be, but we would look at the close as the actual confirmation line. There is a PMO Crossover SELL Signal on tap and Stochastics just dipped below 80. Price may be rallying right now, but the indicators and chart pattern suggest problems."
GOLD
IT Trend Model: NEUTRAL as of 6/8/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: GLD is holding support, but the indicators are slowly moving south again. The RSI is negative and falling. The PMO has topped beneath its signal line while Stochastics have topped in negative territory. The Dollar looks weak, but Gold isn't showing signs of strength on its own.
GOLD Daily Chart: Stochastics are in positive territory for $GOLD, but they have tipped over and could find negative territory quite easily tomorrow. The PMO has topped beneath its signal line which is especially bearish. Upside on Gold may be limited to what the downside is for the Dollar. However, with the inverse correlation relaxing, Gold could still fall on a rise in the Dollar. Look for more indecisive movement from Gold with a high likelihood of a near-term breakdown.
GOLD MINERS Golden and Silver Cross Indexes: The PMO has topped beneath its signal line which is especially bearish for Gold Miners. Participation is still extremely thin, not enough to push this group higher. A test of the 30.00 support level appears imminent.
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 rebounded significantly today but still closed beneath overhead resistance. Indicators are flashing negative so while we could see some follow-through, ultimately we expect the current trading range to persist.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
(c) Copyright 2023 DecisionPoint.com
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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.