Today the Russell 2000 ETF (IWM) 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. We see a possible reverse flag formation which would imply another leg down given price did break the very short-term rising trend of the flag.
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: After a nice rally in the afternoon, price did finish higher. However, the declining tops trendline remains intact given today's lower low and lower high. The PMO is in negative territory and the RSI, while rising, is also in negative territory. Mega-caps seem to be doing their job as the SPY is outperforming RSP (the equal-weight version of the SPY).
We pointed out a reverse flag on IWM, but we have a similar configuration on the SPY. Yesterday's decline took out the rising trend of the flag and today's intraday low continued the breakdown, basically confirming the pattern. Stochastics are rising again and the VIX closed above its moving average on the inverted scale, so we are seeing less internal weakness.
SPY Weekly Chart: The SPY did finish positively this week and held support at the 17-week EMA. However, the weekly PMO is still declining toward a Crossover SELL Signal.
New 52-Week Highs/Lows: New Highs contracted on the rally which isn't good news. New Lows contracted as we would expect. The 10-DMA of the High-Low Differential its decelerating, but still is in decline. This is oversold territory so if that indicator turns up we could look for a potential reversal that will stick.
Climax Analysis: There were no climax readings today. We had only one climax this week. A downside initiation climax. It didn't portend today's rally. We note that Total Volume was rather light on today's rally.
*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.
Today's rally was backed up by rising Swenlin Trading Oscillators (STOs) and a mild expansion in participation. We do have 1/3rd of the index showing rising momentum which is good news for bulls.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
All of our IT indicators can be considered oversold. We did see slightly more PMO Crossover BUY Signals and given we have 32% with rising PMOs, we should see %PMO BUY Signals rise further.
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PARTICIPATION: The following tables summarize 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 Industry Groups, and the 11 S&P 500 Sectors.
Regional Banks (KRE) may hold the most positive IT Bias, but that industry group is failing. It lost a huge 22 percentage points on its Silver Cross Index and lost ground on the Golden Cross Index too.
The lowest IT Bias is in Semiconductors (SMH). Long-term it is holding up on the Golden Cross Index, but it continues to lose ground on the Silver Cross Index. This group still looks weak to us.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
Energy (XLE) holds a superb 96% on its Silver Cross Index, but with Crude Oil bouncing around, it did see a loss of 4 percentage points. Long-term it is still improving given the gain in the Golden Cross Index. We are leary of this sector in the shorter terms.
Gold Miners (GDX) were obliterated on the severe decline, but they have now bounced off support. They managed to hold onto the current low readings likely due to the recent rally.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
Energy (XLE) and Semiconductors (SMH) hold the top spots on the Golden Cross Index but we do note there is weakness coming in for the intermediate term based on the loss of percentage points on their Silver Cross Indexes.
Regional Banks (KRE) hold the lowest Golden Cross Index value and that is continuing to deteriorate. Not only is the long term a problem, we saw a huge loss of percentage points on the Silver Cross Index so this group is weakening in a big way.
PARTICIPATION: 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 BEARISH in all three timeframes.
While we saw a small expansion in participation based on %Stocks > 20/50EMAs, they remain well below our bullish 50% threshold. The expansion wasn't particularly impressive considering the SPY closed higher this week. The Silver Cross Index continues lower after a Bearish Shift at the beginning of the month. The Golden Cross Index is also declining and this week saw its own Bearish Shift beneath the signal line.
BIAS Assessment: The following table expresses the current BIAS of various price indexes based upon the relationship of the Silver Cross Index to its 10-day EMA (intermediate-term), and of the Golden Cross Index to its 20-day EMA (long-term). When the Index is above the EMA it is bullish, and it is bearish when the Index is below the EMA. The BIAS does not imply that any particular action should be taken. It is information to be used in the decision process.
The Long-Term BIAS for the S&P 600 (IJR) and Communications Services Sector (XLC) changed to Bearish today.
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CONCLUSION: The market surprised us with a strong finish today taking out yesterday's downside initiation climax in one fell swoop. However, we see bearish reverse flags appearing on the indexes. Short-term indicators are rising out of somewhat oversold territory, but the intermediate-term indicators aren't confirming them yet. We still see a bearish bias in all timeframes. With indicators mixed in the short and intermediate terms, we are thinking this will begin a consolidation period which pauses the decline. We do not believe the decline is over, but at this point sideways movement above short-term support seems a good compromise all things considered. Short positions should be managed carefully. Adding longs will be risky business given the current bearish bias that pervades nearly every sector and industry group we follow.
Erin is 5% long, 0% short.
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BITCOIN
Bitcoin has formed a new trading range. Indicators are mixed. The RSI is oversold which can be positive, but the PMO is still in decline and not really oversold. We expect this trading range to hold up for now, but the chart does have a bearish bias.
This chart is to show where some of the support/resistance lines come from.
INTEREST RATES
Interest rates dipped this week, but none of them really compromised rising trends. Until those rising trends begin to fail, we expect rates will continue to press higher, particularly given the pause they saw this week.
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 cooled this week, but didn't compromise any of the rising trends. We could still see 4.1% tested given the PMO is nearing a Crossover SELL Signal and Stochastics are falling, but that level should hold up based on the strong rising trend.
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 7.09 to 7.23.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT took advantage of the decline in the 20-year yield and today formed a bullish engulfing candlestick. The PMO and Stochastics suggest it will rally higher, but we aren't so sure given the multiple levels of overhead resistance facing it at the 20/50-day EMAs and 99.00. Yields have been showing too much strength to expect a lengthy rally out of Bonds.
This seems a somewhat unusual place for this reversal given we don't see a significant support level associated with it. We can't count out Bonds just yet as a reversal that far above strong support at 90 could indicate followthrough ahead.
TLT Weekly Chart: The weekly chart is bearish. Price fell below an already bearish declining trend channel. The weekly RSI is below net neutral (50) and the weekly PMO is declining on a Crossover SELL Signal. If we do get more rally, this chart suggests it would only be short-term in nature.
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 is showing no signs of weakness. The one issue could be an overbought RSI, but when a stock/ETF is running this hot, those overbought conditions can easily persist. There is nothing on this chart to indicate the rally will fail in the shorter term.
UUP Weekly Chart: This week's breakout is impressive. The weekly RSI is positive and not overbought and the weekly PMO is rising on a Crossover BUY Signal. There is a high likelihood that UUP will test the 2022 high given we don't see any significant resistance ahead.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: BUY as of 1/5/2023
GOLD Daily Chart: Gold is set up to rally. We were disappointed to see this rally stall already. However, the PMO encourages us to look for this rally to resume. Stochastics are now in positive territory and price is currently holding above the 200-day EMA.
Discounts pared back this week suggesting that investors are more bullish on the metal. Sentiment is contrarian, but until we see a significant pullback in discounts or premiums we don't expect sentiment to work against Gold.
GOLD Weekly Chart: This is a strong area of support on the weekly chart as it lines up with the 2021 high and the 43-week EMA. The weekly PMO isn't looking particularly positive yet, but the weekly RSI is about to reach positive territory. We like Gold, but would really like it if the weekly PMO were to turn back up.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners made a valiant effort to rally, but when Gold cooled and resistance was reached, they failed. We still see a rally continuation as possible given the nearing PMO Crossover BUY Signal and somewhat improved numbers on %Stocks > 20/50EMAs, but not likely unless...Gold begins to rally again.
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 has been acting fishy, but we do see a new bullish falling wedge. Today's rally did get the RSI to stay in positive territory, but it hasn't affected the declining PMO. Stochastics are negative, but rising. We shouldn't count Crude Oil out right now.
Price did manage to get above strong overhead resistance this week when we look at the one-year chart, but we need to see a rising PMO before we get too bullish here.
USO/$WTIC Weekly Chart: The weekly chart shows a tiny bull flag alongside a rising weekly PMO and positive weekly RSI. The bullish bias does suggest we will see the rally resume in the intermediate term.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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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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