Admittedly it is early, very early to make a pronouncement that a double-top is "in", but we do have a second top that could be the last top. We've annotated the prior long-term top from 2021. Technology's bear market began in earnest at that time. The Silver Cross Index was not as high as it is now. It is very overbought.
Granted the Golden Cross Index is rising and could rise higher. Many of the stocks within the sector are configured as XLK. XLK's price is well above both the 50/200-day EMAs. The loss of a Golden Cross requires price to move below the 200-day EMA, that is a long way down for many of the very overbought stocks within Technology.
We have a bearish Adam & Eve top in the shorter-term on XLK that suggests at the very least a pullback. The PMO is in decline after bearishly topping beneath the signal line. Participation is holding strong, but is overbought in all timeframes. Nowhere left for those indicators to go except down.
Conclusion: Technology is very overbought and we could be looking at a long-term double-top starting. At a minimum we have a short-term double-top that suggests a pullback. We will want to watch the Silver Cross Index closely, if we see a drop beneath the signal line it will be character change or "bearish shift".
The Nasdaq-100 Index Special Rebalance to be Effective July 24, 2023
NEW YORK, July 07, 2023 (GLOBE NEWSWIRE) -- Nasdaq today announced that the Nasdaq-100 Index® (NDX®) will undergo a Special Rebalance effective prior to the market open on Monday, July 24, 2023. As described in the published index methodology, a Special Rebalance may be conducted to address overconcentration in the index by redistributing the weights. The Special Rebalance will not result in the removal or addition of any securities.
The Nasdaq-100 Index® includes 100 of the largest Nasdaq-listed domestic and international non-financial companies, and serves as the benchmark for numerous financial products around the world, including ETFs, mutual funds, futures, and options. The index is typically reconstituted annually in December, with additional rebalancing opportunities each quarter. The Special Rebalance of the index will be enacted based on the index securities and shares outstanding as of July 3, 2023, and the index share announcements and pro-forma file release will take place July 14, 2023.
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Editor's Note: Specifically, this rebalancing will cause stocks like AAPL to have less weight in the Index because their price increased so much in the prior quarter. This will affect the performance of the Index going forward. With AAPL's weight being decreased, it will not have as much influence on the Index price.
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: The double-top is in on the SPY and while price rebounded a bit today, we still expect to see the confirmation line at 430 tested. A drop below 430 will confirm the pattern and the minimum downside target would be around 415, lining up with April/May tops. The PMO is moving lower.
The VIX once again penetrated the lower Bollinger Band on the inverted scale. Typically this can lead to an upside move like it did on Friday's puncture, but we expect the VIX readings will move lower and stretch out the Bands. Stochastics are in decline in spite of today's rally. We still see internal weakness.
Here is the latest recording from 7/10:
S&P 500 New 52-Week Highs/Lows: New Highs expanded on the rally which is encouraging. The 10-DMA of the High-Low Differential is overbought.
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.
Swenlin Trading Oscillators (STOs) continue to make their way down toward negative territory. Participation did expand today. We have a healthy number of stocks with rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM and ITVM were mixed with the ITBM rising and the ITVM falling. We're losing PMO BUY Signals and two negative divergences are visible with the ITVM and %PMO Crossover BUY Signals.
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 timeframes.
We still see problems surfacing in our indicators, but based strictly on percentages, the bias is bullish in all three timeframes. We have healthy readings on participation of stocks above their 20/50-day EMAs. Those percentages are high enough to keep the Silver Cross Index rising. The Golden Cross Index is rising and we do have a higher percentage of stocks above their 200-day EMAs in comparison to the GCI, so we should expect it to move higher.
CONCLUSION: The market rallied but it wasn't enough to change the course of the declining PMO. Swenlin Trading Oscillators are in decline and we have negative divergences visible on our intermediate-term indicators. We expect to see the decline resume but aren't calling for a correction yet as the Silver Cross Index is still on the rise. It might not be a bad idea to reevaluate your current positions. Decide if they are configured to weather a storm. If your stock is already showing weakness, you may want to let it go. A market decline won't help an already shaky position.
Erin is 50% long, 0% short.
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BITCOIN
Bitcoin rallied strongly today but it didn't change prevent today's PMO Crossover SELL Signal. We do see the possibility of more consolidation primarily because momentum has stalled, but Stochastics are rising. Mixed indicators suggest more sideways movement. This is a very strong area of resistance long-term for Bitcoin. Positive momentum will be a necessary ingredient for a breakout.
INTEREST RATES
Yields pulled back slightly today. All remain in strong rising trends.
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 has been stopped by overhead resistance. We don't think the rally is over yet. This pause has given the RSI to move out of overbought territory and the PMO is still rising. Stochastics did top, but remain above 80. We're looking for a breakout.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: After breaking support at the May lows, TLT rallied. It wasn't enough to put price back above that prior support level and we expect it will struggle. The RSI is negative and the PMO is falling in negative territory.
Major support lies at 98. That is where we expect to see TLT soon.
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 is pulling back and has now formed a new double-top formation. Price is nearing the confirmation line at the June lows. Should the pattern be confirmed, the minimum downside target would be at the April lows. Indicators suggest we will see a drop below the confirmation line.
GOLD
IT Trend Model: NEUTRAL as of 6/8/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold is forming a nice short-term base that could set up a long awaited rally. The PMO has yet to confirm this line of thinking, but Stochastics certainly look interesting as they rise.
GOLD Daily Chart: We don't like that $GOLD fell on a big decline in the Dollar, but it is proof that the two are decoupled as demonstrated by the near zero correlation between the two. We do see an intermediate-term bullish falling wedge that implies a breakout ahead.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners look ready to rally again. We don't have a PMO BUY Signal yet, but interesting things are happening under the hood. Participation began to expand and most importantly, we saw a heartbeat on the Silver Cross Index. We see a short-term double-bottom developing. This is a pretty good setup, particularly if Gold reverses as we expect.
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. It has hit the top so a decline back down seems likely. The PMO has hit positive territory. We would watch Stochastics closely. They look positive and could imply a breakout this time around, but if they tip over we would prepare for a ride back down.
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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Price Momentum Oscillator (PMO)
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