The broad markets are seeing a nice rally after the recent pullback, but one sector that has not shared in the wealth is Utilities (XLU). After hitting the 200-day EMA price began to retreat and it hasn't let up. You'll notice that participation of stocks above their 20/50-day EMAs topped even before the PMO so we knew there were problems under the hood. Currently, the Silver Cross Index is declining after a negative crossover its signal line and the Golden Cross Index topped beneath its signal line. Until participation picks up we should look for XLU to test support at around 63.00.
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 PMO is in the process of crossing below its signal line so despite the rally of the past three days, momentum has yet to shift positive. We see a declining trend on relative strength between RSP and the SPY. This tells us that mega-caps are softening and/or the rally is broad. We believe both are true currently.
The Bollinger Bands on the VIX have contracted considerably so we won't read too much into any punctures that may occur. Overall market participants are bullish as the VIX remains above the moving average on the inverted scale. The RSI is positive and Stochastics turned up above net neutral (50) so internal strength is visible.
Here is the latest recording (6/26):
S&P 500 New 52-Week Highs/Lows: New Highs were about the same today with negligible New Lows. More evidence of internal strength. We do note that the 10-DMA of the High-Low Differential is topping again in overbought territory.
Climax* Analysis: There was only one climax reading today, and two other indicators had high, but not climactic, readings. This puts us close to an upside exhaustion climax, but it is still short. SPX Total Volume was only 83% of the one-year daily average, a sign of exhaustion. So, while it is not a climax day, we'd still be alert for some downside.
*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 STO-B moved into positive territory today and while the STO-V is in negative territory, it also rose on the day. Participation is broadening once again, but it is already getting a bit overbought.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM turned up today, but the ITBM isn't on board just yet. %PMO BUY Signals turned back up today. This indicator is limited to 71% given only 71% have rising PMOs. It does suggest we could see that indicator continue to rise 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.
Yesterday's comments still apply:
"The market bias is BULLISH in all three timeframes.
The bias in the short and intermediate terms moved back to bullish. We see expanding participation of stocks above their 20/50-day EMAs and percentages are above our 50% bullish threshold. The Silver Cross Index turned back up today and we have a higher percentage of stocks above their 20/50-day EMAs in comparison to the Silver Cross Index so we should see it continue higher. It is also reading above 50%. The long-term components are above the 50% bullish threshold as is the Golden Cross Index."
CONCLUSION: We had the whiff of an upside exhaustion climax which does tell us we could see some decline tomorrow, but overall the bias is bullish. STOs are on the rise, as is participation. We would like to see the ITVM reverse higher and see the SPY's PMO BUY Signal stick, but any kind of decline will prevent both from happening. We have been looking for churn in the market but instead it is slowly marching higher so expanding portfolio positions (in areas other than Utilities) appears safe. Mental stops are fine, but hard stops should be placed on positions with fading momentum or falling PMOs.
Erin is 60% long, 0% short.
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BITCOIN
Yesterday's comments still apply:
"Bitcoin is struggling against overhead resistance at 31,000. If you look at the one-year chart below the five-month chart, you'll see that this is a very strong resistance line. It isn't surprising to see price staying below resistance. The RSI and Stochastics are still bullish, but we note the PMO is beginning to decelerate. We expect more sideways movement. This could be a bull flag, but we need to make sure the PMO doesn't begin dropping."
INTEREST RATES
Yields popped higher today somewhat unexpectedly given the 10-year yield chart has been bearish. Yields of 5-years or less continue in rising trends. Long-term yields are more depressed.
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
So much for the bearish Adam & Eve bearish double-top. Today the pattern was officially busted on the breakout above both tops. The overarching chart pattern is a bullish falling wedge, but based on what was a bearish chart, we were looking for the yield to pull back further. Today, indicators switched gears with the PMO turning back up and Stochastics moving up vertically. We would look for follow through on this move.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: $TNX flipped a bullish switch and TLT flipped a bearish switch. Indicators had been firming up with the PMO actually reaching above the zero line. However, all this was turned on its head with today's giant decline. The RSI is now negative and the PMO has topped and returned below zero. Stochastics are falling almost vertically. Admittedly, we didn't see this coming.
DOLLAR (UUP)
IT Trend Model: BUY as of 5/18/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: The Dollar rallied today, improving the chart further as the RSI rises in positive territory and the PMO continues to move toward a Crossover BUY Signal. Stochastics are rising and the OBV is confirming the rally. We are looking for a test of overhead resistance and if indicators are correct, it will breakout. (Here's hoping as Erin prepares to leave for Europe).
GOLD
IT Trend Model: NEUTRAL as of 6/8/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: GLD briefly dipped below the 200-day EMA but managed to rebound. It formed a bullish hollow red candlestick so this could begin a reversal. Unfortunately the indicators look terrible so we are preparing for further decline. The large rounded top seems to suggest a breakdown ahead.
GOLD Daily Chart: Discounts are paring back, meaning investors are getting less bearish on Gold. This would play right into a reversal off the 200-day EMA. Even though the inverse correlation with the Dollar is gone, we would still beware given the Dollar is looking more bullish. Intrinsically, Gold is denominated in Dollars so that could at least cause downside pressure. The indicators are very bearish currently so we wouldn't bet on an upside reversal yet.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners rallied off support today, but given the paltry participation within this group, we aren't expecting this rally to take hold. Certainly indicators are oversold, but we aren't seeing anything positive out of them yet. Participation readings will help us determine when the group will be viable for investing. Right now indicators and participation are too negative.
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 remains in a trading range. We don't see anything in our primary indicators to suggest a decline, but given the range, upside potential is limited as price is situated in the middle of the range. $OVX did begin to rise on the inverted scale which bolsters our premise that price is ready to test 66.00.
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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