The 20-day EMAs crossed down through the 50-day EMAs (Dark Cross) above the 200-EMAs on the S&P 100 Index (OEF), Nasdaq 100 Index (QQQ), and the Consumer Discretionary Sector (XLY), generating IT Trend Model NEUTRAL Signals.
Significant short-term support has been broken alongside this new signal. The PMO has dropped beneath the zero line. Participation has been bleeding off since the prior market top. These readings are oversold, but we know they can get worse and based on loss of support, we do see lower prices ahead.
The same analysis holds true for QQQ which also lost significant short-term support.
Support has arrived for XLY at the 200-day EMA, but it has also lost significant support in the short term. Participation numbers are very oversold, but this condition could persist, particularly given the Silver Cross Index is still reading at 20%.
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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MARKET/INDUSTRY GROUP/SECTOR INDEXES
CLICK HERE for Carl's annotated Market Index, Sector, and Industry Group charts.
THE MARKET (S&P 500)
IT Trend Model: NEUTRAL as of 9/25/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: We're now hitting another support level, but it isn't as strong as the level at 420 and the 200-day EMA so we expect to see price move lower to meet that level at minimum. The RSI is extremely negative and the PMO is building margin to the downside between it and its signal line--all of this is happening beneath the zero line.
The VIX continues to puncture the lower Bollinger Band on the inverted scale, but it has yet to result in a real rally. Stochastics have turned up but they are in very negative territory below 20. The market is clearly internally weak.
Here is the latest recording 9/25:
S&P 500 New 52-Week Highs/Lows: New Lows remain in oversold territory in the near term, but we know they can expand much further to the downside. The 10-DMA of the High-Low Differential is now reading the lowest it has since late March, but as with New Lows, it can get much more oversold.
Climax* Analysis: Today was a robust climax day. There were strong, unanimous climax readings on the four relative indicators, giving us a downside exhaustion climax. This is the fourth downside climax and the third "exhaustion" climax since the September 14th price top. This implies that we should see at least a pause in the decline. Nevertheless, the decline could continue with a vengeance, and we should take our lead from tomorrow's open.
*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 OVERSOLD.
Swenlin Trading Oscillators (STOs) quickly reversed lower on today's decline suggesting we could see even lower prices. They are oversold like most of our other indicators, including %Stocks > 20EMA and %PMOs Rising.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is SOMEWHAT OVERSOLD.
IT indicators are also oversold, but as with our other indicators, they can get even more oversold. We should see readings on %PMO Crossover BUY Signals more oversold before this is over and done with.
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 market bias is BEARISH in all three timeframes.
All readings are oversold with the exception of the GCI, but in all cases, readings could move even lower. %Stocks readings are extremely anemic. The SCI is picking up speed to the downside, as is the GCI which keeps our bias negative in both the intermediate and long terms.
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 Utilities Sector (XLU) and the Gold Miners Industry Group (GDX) Silver Cross Indexes crossed down through their 10-day EMA, changing their intermediate-term BIAS to bearish. The Utilities Sector (XLU) Golden Cross Index crossed down through its 20-day EMA, changing the long-term BIAS to bearish. Every index, sector and industry group that we cover hold Bearish Biases.
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CONCLUSION: Today's downside exhaustion climax and extended VIX readings do suggest we will see some relief over the next day or two, but we also wouldn't be surprised if the decline continues in earnest given the weak readings on participation and declining primary indicators. The about face of the Swenlin Trading Oscillators has us especially concerned that the decline could easily plague tomorrow. As noted earlier, we will need to take our cue from the open as to whether a relief rally is even possible. Regardless, we don't think any type of rally will be meaningful in the intermediate term or even the short term. Adding hedges and honoring stops is our best defense. Keep exposure low. There are very few places to hide.
Erin is 25% long, 2% short.
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BITCOIN
Yesterday's comments still apply:
"Bitcoin lost support over the weekend, moving it back into the prior trading range. The RSI is negative and the PMO is now starting lower. Stochastics are falling so we would prepare for a test of the bottom of the range at 25,000."
INTEREST RATES
Yields rose but not a voraciously as yesterday. In fact, the 2-year yield saw a sizable decline.
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 pushing even higher and based on the indicators, we don't see relief in sight for Bonds. The best we can say is that the RSI is now overbought and that condition hasn't typically persisted for very long. Until the PMO and Stochastics suggest otherwise, we see the yield rising even further.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday's comments still apply:
"Bonds continue to free fall as yields pick up speed. We don't see any relief in sight for Bonds given the strong rising trend of the 20-year yield. Indicators are very negative as we would expect."
TLT lost very important longer-term support today. We'll have to take a look at the monthly chart to find where the next level of support lies.
It appears 80.00 is the next likely stopping point. However, given the very ugly monthly PMO, we shouldn't expect that level to hold.
DOLLAR (UUP)
IT Trend Model: BUY as of 8/3/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: Yesterday's comments still apply:
"The Dollar is continuing to rally. The rally has yet to get parabolic. It shows no signs of letting up. The PMO has surged above the signal line (bottomed above the signal line) and Stochastics have made a home above 80. The RSI is back in overbought territory so we could see a pause similar to others we've seen along the way on this rising bottoms trendline."
We don't see any real overhead resistance yet on the 1-year daily chart.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: The Dollar's rally continues to smack Gold down. Usually we see a flight to Gold when the market tanks. Not so this time around which speaks to internal weakness. However, we do notice that $GVZ saw a huge spike to the downside on our inverted scale. Investors suddenly got extremely bearish on Gold. Sentiment is contrarian and while we haven't seen the deepest discounts, $GVZ does seem to suggest we could see a rally off this support level.
GOLD Daily Chart: It is unfortunate that today's decline took Gold beneath the symmetrical triangle. We have been expecting a breakout from this formation. The PMO is now on a Crossover SELL Signal. This is a good support area to see a rally in Gold but indicators simply aren't supporting a breakout scenario.
GOLD MINERS Golden and Silver Cross Indexes: The market's crash and Gold's drop meant a terrible day for Gold Miners. Participation isn't at zero (yet), but the PMO has topped beneath the signal line is about to trigger a Crossover SELL Signal. Support at the August low is likely to be tested.
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 was one of the few bright spots today. It formed a bullish engulfing candlestick which portends higher prices the following day. The PMO narrowly avoided a Crossover SELL Signal. A breakout could help avoid it altogether. This looks like a textbook flag formation suggesting to us that a breakout from the current short-term declining trend is likely. The flag itself is a bullish falling wedge. Production problems continue for Crude Oil and that should keep prices inflated.
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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