This 5-minute bar chart of SPY shows what a nutty day it was. The market opened up about +0.65%, fell back to no change, then rallied up about +0.90%. After the top, it fell for the last three hours, closing down -0.45%. We have found no news that adequately explains what happened here. Technically speaking, we tend to believe that negative seasonality has truly kicked in, and that the overbought condition of the market is now getting its due.
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
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: The SPY formed a bearish engulfing candlestick when it was all said and done which tells us to expect more downside on Monday. The PMO continues to put margin between it and its signal line as it declines.
Stochastics have moved almost as low as they can go suggesting serious internal weakness. The VIX once again punctured the lower Bollinger Band on our inverted scale. Normally this returns an upside reversal, but we see more volatility ahead for the SPY.
Our latest recording from 7/31:
SPY Weekly Chart: The SPY compromised its steep rising trend this week, closing near the lows. The weekly PMO decelerated, but is still rising.
New 52-Week Highs/Lows: New Highs expanded, but this reading is taken intraday. We have a feeling many of today's New Highs failed by the end of the day. New Lows expanded as expected. The 10-DMA of the High-Low Differential spent all week in decline. More evidence of internal weakness.
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 to OVERSOLD.
The rising trend has now been broken so we are listing the short-term trend as "DOWN". The STOs continued lower but remain in Neutral territory. There is plenty more downside left for these indicators. %PMOs Rising shows how internally weak the market is right now. Only 1/5th have rising momentum. That indicator is oversold, but can remain so if the market continues lower as we believe it will.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The longer-term rising trend is still intact so we are listing the intermediate term market trend as 'UP". All of these indicators are confirming the decline of short-term indicators. %PMO BUY Signals is not overbought, in fact they are near-term oversold. However, there is more room to move lower and based on only 20% showing rising PMOs, we expect this indicator to continue lower.
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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 highest IT Bias belongs to Regional Banks (KRE) which have seen major improvement in the short term. It is taking longer for the GCI to catch up which is why we have such a strong IT Bias.
Gold Miners (GDX) hold the lowest IT Bias as short-term deterioration to the Silver Cross Index has increased greatly.
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) performed so strongly over the long term that they continue to hold the top spot on the SCI and GCI. There is nowhere to go but down from here and a market correction will likely put a dent in participation. We haven't seen weakness yet.
Gold Miners lost 18 percentage points on the SCI which placed them at the bottom of the table.
We do note that serious weakness is pervading the Utilities sector as it lost a whopping 26 percentage points on its SCI.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
SMH holds the top spot and saw no deterioration in the long or intermediate terms this week. KRE is clicking in the short term, but it also saw a nice 5 percentage point gain on the GCI.
The following chart objectively shows the depth and trend of participation in three time frames.
The market bias is BEARISH.
The short-term bias is BEARISH.
The intermediate-term bias is BEARISH.
The long-term bias is NEUTRAL.
Participation was decimated this week on Stocks Above Their 20/50-day EMAs which means a bearish short-term bias. This week the SCI saw a "Bearish Shift" as it crossed below its signal line. That is very bearish for the intermediate term. The GCI actually turned up this week despite the loss of participation above the 200-day EMA. Percentages above their 50/200-day EMAs is now lower than the GCI so the current Neutral Bias is deteriorating into a Bearish Bias.
CONCLUSION: This week saw a pullback in price, but given the internal weakness in the market, we are looking for a corrective move. Indicators are falling in all timeframes with the exception of the Golden Cross Index, but we know that won't last given deteriorating participation of stocks above their 50/200-day EMAs. Today's midday reversal suggests investors are nervous. They have good reason to be. The technicals are bearish and getting more bearish. Given some of the FAANG+ stocks are shifting to bearish biases, they won't be able to hold things together as they've done previously. Play defense, set stops and consider limiting exposure. Erin added hedges today.
Erin is 15% long, 4% short.
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BITCOIN
Bitcoin holds a negative bias now that the PMO has begun to accelerate lower and Stochastics have topped in negative territory. It doesn't help that the RSI is negative. This level of support is more vulnerable. The declining price trend also suggests a breakdown ahead.
This chart is to show where some of the support/resistance lines come from. Note that the level it is trying to hold onto coincides with the 2021 lows. It's strong, but as noted above, it is vulnerable.
INTEREST RATES
After a week of shooting higher, yields pulled back today. We don't see this as the beginning of a longer-term decline, it is simply an opportunity to relieve overbought conditions.
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 10-year yield pulled back significantly. It is back below prior support. However, the indicators are still very bullish so we see this as temporary.
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.
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This week the 30-Year Fixed Rate changed from 6.78 to 6.81.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds rebounded today but we see it as short-lived given the 20-year yield is still above the July high. The PMO decelerated but continues lower. The RSI is negative. Stochastics did tick upward, but remain in very negative territory.
This week saw a breakdown of strong support at the 2023 prior lows. We expect to see 90.00 tested.
TLT Weekly Chart: The weekly PMO generated a Crossover SELL Signal this week, adding insult to injury. 90.00 does look like a realistic level of support. A rebound would be surprising to us.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 7/13/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar broke its short-term rising trend, but did so with a bullish hollow red candlestick. The PMO is still rising in spite of the recent drop. UUP saw a bullish "Silver Cross" of the 20/50-day EMAs this week suggesting a bullish bias. The rising trend was steep and therefore hard to maintain. We see the rising trend softening, but aren't looking for a collapse.
UUP Weekly Chart: In the longer term we have rising bottoms and a flat top. That is a bullish ascending triangle that suggests an upside breakout ahead. The weekly PMO is rising and should get a Crossover BUY Signal next week barring a collapse.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: BUY as of 1/5/2023
GOLD Daily Chart: GLD holds a more bearish chart in comparison to $GOLD. We have a short-term declining trend that is forming a handle on a Cup with Handle pattern. The PMO had a negative crossover giving us a Crossover SELL Signal. The PMO is also in negative territory. If $GOLD is correct, GLD should start looking more bullish soon.
$GOLD shows a large symmetrical triangle. These are continuation patterns and therefore we should expect an upside breakout (prior trend was rising). The PMO did tip over, but it remains in positive territory. There is a short-term rising trend on $GOLD. The correlation to the Dollar is near zero now which tells us the two have decoupled. This means that Gold isn't as tied to the Dollar as it normally is. It could rise even if the Dollar rises. We do need to see relative strength build on Gold to the Dollar, but so far it remains in a declining trend.
GOLD Weekly Chart: Carl noted last week that the rally to all-time highs was more orderly and not parabolic. It gives us a bullish outlook that a breakout could occur next time around. The weekly PMO does need to reverse.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners reversed off support, but we still believe that support level is tenuous at best. The decline in the Silver Cross Index isn't good and participation is still very weak. The PMO triggered a SELL Signal this week.
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 one of the bright spots in the market. This week's breakout was impressive. There is a bearish rising wedge in the short term, but given the breakout and strong indicators we think this rally will continue.
The breakout is even more impressive on the 1-year daily chart. The PMO has surged above the signal line (bottom above the signal line), Stochastics are oscillating strongly above 80 and notice that $OVX is holding above its moving average on the inverted scale. All of this implies internal strength.
USO/$WTIC Weekly Chart: The weekly PMO is rising on a Crossover BUY Signal and is nowhere near overbought. $WTIC looks ready to move to $100/barrel and that will push USO even higher. The weekly RSI is not overbought so there is plenty of upside potential.
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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