Today the Utilities Sector (XLU) 20-day EMA crossed down through the 50-day EMA (Dark Cross) below the 200-day EMA, generating an IT Trend Model SELL Signal. This is the seventh 20/50-day EMA crossover in the last year, so we can't assume that the 10-month trading ranges will be vacated to the downside. Participation is very slim and oversold. The PMO is now in negative territory so near-term support may not hold. We should look to the 2022 low as viable support. However, this is a defensive sector and a broad market decline could sway investors back. We will watch the Silver Cross Index closely as an upside reversal that would invite opportunity back to the sector.
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 market managed a positive close, setting up a nice reversal on short-term support. The RSI is turning up in positive territory. The PMO is still declining on a SELL signal so we don't expect this to see much follow-through.
The VIX continues to puncture the lower Bollinger Band on the inverted scale, but given the Bands are expanding, we expect this condition to continue a bit longer. Stochastics are very negative. We see internal weakness as a continuing problem.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Lows contracted somewhat, but so did New Highs. The glaring problem is the continued decline of the 10-DMA of the High-Low Differential.
Climax* Analysis: Of the four relevant indicators, three had climax readings today, so we have an upside initiation climax; however, SPX Total Volume was only 82% of the one-year daily average volume, which shows a lack of conviction. We will look for upside follow through, but won't be surprised if none materializes.
*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.
Swenlin Trading Oscillators (STOs) are near-term oversold, but neutral in the bigger picture given we've seen readings much lower than we currently have. We saw a small pick up in rising momentum and readings are in oversold territory. However, less than one-third have rising PMOs, we need to get it closer to our bullish 50% threshold.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM and ITVM both are declining and both are still what we would consider "overbought". PMO BUY Signals continue to be lost and will continue to be lost unless we see a higher percentage of stocks with rising momentum on our previous chart.
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 the short and intermediate terms.
The market bias is NEUTRAL in the long term.
Today saw a pick up in %Stocks > 20/50/200-day EMAs, but readings continue to trend lower overall. Readings are not oversold yet. The Silver Cross Index continues lower after a "BEAR SHIFT" on the cross below its signal line. We are leaving the long-term bias NEUTRAL given the Golden Cross Index is rising. We have slightly more stocks above their 200-day EMA than Golden Crosses, so the Golden Cross Index could continue higher.
CONCLUSION: Today's upside initiation climax suggests we will see some follow-through on today's rally, but volume was light and indicators are still soft. STOs did not turn up and IT indicators are moving lower. Apple (AAPL) is putting downside pressure on the cap-weighted indexes and Technology (XLK). Participation indicators suggest the broader market isn't stepping up to fill the void. We would stay defensive. With Technology so weak, it could offer a hedge without going all-in on a correction in the market as whole. As noted in today's DP Trading Room, there are pockets of strength visible in Insurance groups. Just be careful with portfolio expansion at this time.
Erin is 20% long, 4% short.
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BITCOIN
Bitcoin continues to cling to support and mixed indicators suggest we will see more of the same this week. The RSI is negative, albeit rising. The PMO is now below the zero line, but is decelerating. Stochastics are very negative, but are now rising.
INTEREST RATES
Long-term rates saw a slight increase, but shorter-term rates continued to move lower.
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 continues to build a base with the saucer shaped bottom. It is basically holding support, but it isn't out of the question that we will see some churn that could form a 'handle' on this 'cup'. Ultimately we believe rates will continue higher, particularly if the Fed continues to raise its rates.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: It appears that TLT is now consolidating the waterfall decline, but we don't think the decline is over yet. Indicators are very negative.
The next level of strong support lies at 90.00.
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 pulled back to finish last week, but it appears ready to resume the rally given the rising trend hasn't really been compromised. Stochastics are hinting that we may see consolidation as they have topped. We expect overhead resistance to at least be tested at 28.70.
Price is nearing the top of a longer-term trading range. As noted above Stochastics topping could indicate this trading range will continue.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: The rally in the Dollar today did no favors for Gold. The handle on this cup is getting extended, but we still look at it as having bullish implications. The indicators aren't particularly favorable so we expect more downside in the near term. Probably a test of the 200-day EMA.
GOLD Daily Chart: The PMO is still on a BUY signal and the RSI is in positive territory on $GOLD. Stochastics are certainly bearish so what little bullish indications are left on $GOLD will likely disappear. Of note, $GOLD is no longer correlated with the Dollar in the short term. While the direction of the Dollar will still affect Gold, its dominance over Gold is going to be muted. What we want is rising Gold despite a rising Dollar. What we could get is a falling Dollar and falling Gold. Given relative strength is declining against the Dollar, more than likely we will see the latter.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are holding support in spite of negative indicators. We aren't seeing any expansion in participation under the surface so more than likely a breakdown is ahead for GDX. Support looks strong at 26.00, but we wouldn't look to reenter this group until participation gets back to where it was before.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: Crude Oil is holding support at the April top. The RSI is technically not overbought, but it is close. There is a bearish rising wedge dominating the chart. We don't see any weakness to go along with this wedge so for now we expect higher prices. How high?
Based on the one-year chart we see 78.00 as the next stop for USO.
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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