Today we saw broadening of participation by comparing the percentage change of the cap-weighted version of the S&P 500, SPY (+1.45%), versus the equal-weighted, RSP (+2.18%), which shows that today RSP advanced 50% more than SPY. This is only one day's action, but we think it shows a turning point.
Also notable is that tech stocks, which started this advance, took something of a breather today -- Technology (XLK) and Communications (XLC) Sectors had the smallest advance of the eleven SPX Sectors.
______
The Dow Jones Industrial Average (DIA) 20-day EMA crossed back up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. Yes, we're still dealing with whipsaw. This time out, participation is improving greatly based on %Stocks > 20/50/200-day EMAs.
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
For Today:
For the Week:
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.
For Today:
For the Week:
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: Price is now well above support at the February and May highs. The PMO is finally putting some distance between it and its signal line.
Today saw an upside breakout from a bearish rising wedge. Bullish conclusions to bearish chart patterns are especially bullish. One problem today, the VIX punctured its upper Bollinger Band and that generally leads to a pause or decline over the next day or two.
Here is the latest recording from 5/22:
SPY Weekly Chart: We also had an upside breakout from a longer-term rising wedge which is especially bullish. We have now drawn a rising trend channel.
New 52-Week Highs/Lows: We saw a decent expansion in New Highs, but the 10-DMA of the High-Low Differential continues to fall.
Climax Analysis: The four relative indicators had strong, unanimous climax readings, giving us an upside exhaustion climax. SPX Total Volume was also very strong, but it could be indicating a blowoff. The VIX puncture of the upper Bollinger Band on our inverted scale also suggests an exhaustion on Monday.
*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.
Participation expanded greatly on the rally, past our bullish 50% threshold. This is something we have been looking for on previous rallies. The STOs both rose strongly today suggesting short-term follow-through.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM/ITVM are rising and consequently confirming the rising STOs. While we didn't see a push of %PMO BUY Signals above our 50% bullish threshold, given there are 78% of stocks with rising momentum, that percentage should grow fairly quickly.
_______
PARTICIPATION and BIAS Assessment: The following table 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 following table summarizes participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation. There are three groups: Major Market Indexes, Miscellaneous Sectors, and the eleven S&P 500 Sectors.
NEW SECTORS ADDED! We have begun collecting SCI and GCI data for four new sectors: Biotechnology (IBB), Regional Banking (KRE), Retail (XRT), and Semiconductor (SMH).
The strongest IT Bias is Real Estate. This sector is really picking up speed based on the improvement of both its Silver Cross Index and Golden Cross Index percentage gains. The lowest is Gold Miners which continue to break down internally.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
Semiconductors (SMH) hold the top spot on the the Silver Cross Index table. That group is improving quickly under the surface with the SCI gaining 20 percentage points this week.
Energy which is breaking down internally holds the bottom spot. This sector is performing even worse than the Regional Banks (KRE).
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
In the long term, SMH also holds the top spot. This is an improving group particularly given the large gain on the SCI. Regional Banks (KRE) is the long-term loser with only 4% holding a 50-day EMA above the 200-day EMA. No improvements have been made in the long term, but we are seeing some movement on the SCI.
The following chart objectively shows the depth and trend of participation in three time frames.
The market bias is BULLISH.
The short-term bias is BULLISH.
The intermediate-term bias is NEUTRAL.
The long-term bias is NEUTRAL.
We have participation readings that are now over 50% in the short term. These percentages are higher than the SCI, but the SCI is still well below the 50% threshold so we read the IT bias as Neutral. The GCI is flat and under the 50% threshold, but we have more stocks above their 50/200-day EMAs than Golden Crosses which is favorable so the long-term bias is also Neutral.
CONCLUSION: The rally of the last two trading days was certainly fueled by short covering, but it was so broad that it is hard to write it off. We are due for a pause based on our upside exhaustion climax and VIX puncturing the upper Bollinger Band on our inverted scale. The market bias is bullish in the short term so we expect a pause rather than sharp decline. With so many beat down stocks that haven't participated in the mega-cap rally, there are far more choices. We wouldn't pile on positions given the irregularity of the market, but shorts can probably be let go.
Erin is 10% long, 7% short. She will be clearing out her shorts and adding to longs.
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
Bitcoin hasn't shaken its large bearish rounded top. Indicators are very wishy washy and flat. This tells us to expect more sideways movement.
This chart is to show where some of the support/resistance lines come from.
INTEREST RATES
Interest rates are back on the rise and with money likely to flow from Bonds on a rally continuation, we believe that will continue.
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
The reversal of $TNX along the 50-day EMA has us reconsidering the bearish commentary we've had most of this week. The rebound came off support and it bottomed before testing the bottom of this bullish falling wedge. That suggests that the next time it challenges the top of the wedge, it will likely breakout. The PMO has 'surged' above the signal line (PMO bottom above the signal line), but Stochastics are still suspect. We aren't counting on a breakout here, but other than Stochastics, the chart suggests we will see one.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount. As buying power has been shrinking, home prices have come under pressure.
--
This week the 30-Year Fixed Rate changed from 6.57 to 6.79.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds followed through on the bearish filled black candlestick formed yesterday. There is a high likelihood that money will flow out of Bonds right now given the market rally. However, this does look like a bullish cup with handle and Stochastics are rising still. The RSI and PMO are no help. We are leaning bearish on Bonds.
TLT Weekly Chart: The weekly chart is attempting to improve. The weekly PMO is about to surge above its signal line. The weekly RSI is rising. However, overall we read the IT for Bonds as bearish. A surge on the PMO will change us to a bullish stance.
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 after one weird trading day yesterday. It did form a higher high and higher low. The RSI rebounded in positive territory and the PMO, while overbought, is surging above the signal line suggesting this is all the downside we are going to get.
UUP Weekly Chart: The longer term picture is also bullish given the positive weekly RSI and new weekly PMO Crossover BUY Signal. We don't like the breach of the rising bottoms trendline, but that comes from yesterday's odd candlestick so we aren't making a big deal about it.
GOLD
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GOLD Daily Chart: The rally in the Dollar hit Gold hard today. It has moved indicators from mostly neutral to decidedly bearish. The PMO top beneath both the signal line and zero line which is especially bearish in our minds. Stochastics and the RSI have tipped over in negative territory.
Gold has moved back into a near perfect inverse correlation with the Dollar so it is highly tied to what the Dollar is doing now. $GVZ popped above the upper Bollinger Band on the inverted scale which suggests more downside--probably a test of the rising bottoms trendline at a minimum.
GOLD Weekly Chart: Gold will need to be very careful about any decline as it will compromise the bullish rising trend channel. The weekly PMO is looking ready for a Crossover SELL Signal. Sentiment isn't really bearish enough to look for an upside reversal. We are bearish on Gold currently.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners found a heartbeat this week, but they are already failing to hold up the rally. Participation was weak at best, but it is now headed the wrong direction, leaving us with very little selection in the group. Stochastics do look encouraging, but we need the PMO and RSI to get on board.
CRUDE OIL (USO)
IT Trend Model: SELL as of 5/3/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil ultimately finished lower on this wild week. Indicators are beginning to look up suggesting more rally, but Oil has been all over the place. We expect the rollercoaster to continue with price trickling higher.
USO/$WTIC Weekly Chart: The rising bottoms trendline and price support around 60 is strong, but price is about to break that rising trend. Ultimately the weekly RSI and PMO are neutral so we expect this 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.