Technology (XLK) rallied just in time to hold its intermediate-term rising bottoms trendline. It didn't do that much to improve the internals, but we do admit that this would be a great spot to see a rally. We've talked about the inverse Technology ETF (TECS) which is leveraged 3x (Erin currently owns it). It's certainly more risky today than it was Friday.
The chart remains weak in our opinion. The RSI is still deeply negative, albeit rising as of today. The PMO decelerated, but is still declining. The Silver Cross Index topped beneath its signal line which is especially bearish. The Silver Cross Index measures how many stocks have a 20-day EMA > 50-day EMA. It will likely continue lower given there are fewer stocks with price above their 20/50-day EMAs to push it upward. Stochastics are weak below 20.
One day of rally doesn't mean the end of the short-term decline. We wouldn't get bullish on this sector until we see the Silver Cross Index turn up at a minimum. Holding a leveraged hedge on Technology at this juncture is definitely risky. You'll have to determine if it suits your portfolio and risk appetite.
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 is holding support at the June tops, but the declining trend is still intact. The PMO is declining. Notice the bump in relative performance against the equal-weight RSP. The mega-caps helped this rally along.
Stochastics are below 20 and the VIX is below its moving average on the inverted scale. This implies internal weakness.
Here is the latest recording (8/14):
S&P 500 New 52-Week Highs/Lows: New Highs were negligible on today's rally and we saw an expansion on New Lows. We continue to see the 10-DMA of the High-Low Differential declining which is bearish.
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 DOWN and the condition is NEUTRAL.
STOs surprisingly turned up last week, but price never responded to their bullish configuration. Today on a rally, they turned back down. This doesn't bode well. The rally did nothing to improve participation. Fewer stocks are above their 20-day EMA and we lost a few rising PMOs as well.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM remain in positive territory but have been in decline since the market topped. We continued to lose PMO BUY Signals within the SPX.
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 market bias is BEARISH in all three timeframes.
We continue to see deterioration in participation of stocks above their 20/50/200-day EMAs. The Silver Cross Index is declining quickly leaving the IT with a bearish bias. The Golden Cross Index is now in decline and given fewer stocks have price above their 200-day EMAs, we should continue to see it fall. That gives us a bearish long-term bias.
CONCLUSION: It was a nice rally primarily for Technology and the Nasdaq. The broader market internals are bearish with participation seeing no real improvement. New Lows expanded and STOs reversed lower on a rally day. This suggests the decline in the short term isn't likely over. The bias remains bearish in all three timeframes. The market needed some relief and it got it today, but technicals suggest it is a pause not a time to look for strong follow-through.
Erin is 20% long, 4% short.
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BITCOIN
Bitcoin is range bound and we don't see any hint from the indicators to tell us it will break free in either direction. Every indicator is neutral so we would expect this support will hold for the time being.
INTEREST RATES
Yields are on the rise again and based on the strong push upward, we don't expect them to pull back yet.
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 testing the prior August top and based on the positive indicators, we would expect to see it breakout and test the 2022 highs. The saucer shaped bottom is a nice base to support the yield moving even higher.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT formed a bearish reverse flag and is declining out of it. The 20-year yield is nearing overhead resistance so a reversal is possible here. Should price reverse higher, it would form a bullish double-bottom. It's a bit too early to count on that particularly given the very bearish indicators. Stochastics look particularly bleak.
There really isn't any longer-term support at this price level so we do see lower prices ahead.
DOLLAR (UUP)
IT Trend Model: BUY as of 8/3/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar managed to breakout and close above those prior highs. The indicators are very bullish and suggest we will see follow-through.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: The strong Dollar has done no favors for Gold, but Gold isn't doing itself any favors either. Notice that relative strength against the Dollar has been declining since the July top. The correlation of Gold to the Dollar is also not helping given it is nearly a perfect reverse correlation. Support is arriving at the June low, but we don't think it will hold.
GOLD Daily Chart: We have a PMO Crossover SELL Signal on $GOLD now. The RSI is negative and Stochastics are very weak. Discounts are paring back so we don't have extreme bearishness as we saw back at the end of 2022. $GOLD is testing its rising bottoms trendline, but given the indicators, we don't expect this rising trend to hold much longer.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are clinging to support. The PMO is accelerating lower and the RSI is negative. When we look under the hood, internals are trying to improve somewhat. The Silver Cross Index has turned back up and we see a slight rising trend in Stocks > 20/50EMAs. Stochastics are also turning up. Given the weak picture for Gold, we don't think support will hold here, but it is looking interesting.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: USO showed some weakness today with a break down from the bearish rising wedge. It was tiny and certainly not decisive, but it does tell us that USO might be ready to cool down and consolidate. The PMO is looking toppy and Stochastics just dropped below 80.
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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