The 20-day EMAs crossed down through the 50-day EMAs (Dark Cross) above the 200-EMAs for the Dow Industrials (DIA), S&P 500 (SPY), and Nasdaq Composite (ONEQ) Indexes, generating IT Trend Model NEUTRAL Signals.
Support is barely holding for DIA at the August low and 200-day EMA. The PMO is now below the zero line on a Crossover SELL Signal. Participation is in a declining trend across the board. As with other indexes, this decline is extended and some upside could be seen before support is lost.
We'll discuss the SPY later.
ONEQ is also clinging to support. As with DIA, the PMO is below the zero line on a SELL Signal. Participation indicators are all in declining trends. While this would be a good area for a recovery rally, we think we'll only see a little more upside before we see more downside on a breakdown.
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
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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: Support has been lost at the August low, but we did see a rally off this level today. The Dark Cross does suggest more downside ahead.
The rising trend has been compromised and we now have a low that is lower than the August low. That has set up a declining trend. The VIX punctured the lower Bollinger Band on the inverted scale once again and Stochastics did tip upward. This suggests we could see another small relief rally.
SPY Weekly Chart: We missed the weekly chart in our last DP Weekly Wrap so here is a look. The weekly PMO is on a Crossover SELL Signal and continuing lower. This does have the look of a cup with handle pattern. The handle is still developing. The weekly RSI is about ready to drop below net neutral (50). We see a double top as part of the handle so we expect it isn't done forming.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Lows have moved into oversold territory and are at the level we saw back in March. That marked the end of the decline. However, we suspect this will be a deeper decline and certainly we've seen far more New Lows than we have now.
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 OVERSOLD.
Swenlin Trading Oscillators (STOs) reversed higher suggesting we could see higher prices again. There was slight improvement to %Stocks > 20EMA and %Rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is SOMEWHAT OVERSOLD.
We aren't getting confirmation of our rising short-term indicators from our intermediate-term indicators. Both the ITBM and ITVM continue lower. While they are oversold, we know they can get more oversold than they currently are. Only one quarter of the SPX hold PMO BUY Signals, we need to see more to sustain a rally.
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.
We saw only slight improvement to %Stocks > 20/50EMAs so we are leaving the short-term bias as bearish. The SCI is picking up speed to the downside, as is the GCI which keep 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 Financial Sector (XLF) Silver Cross Index crossed down through its 10-day EMA changing the BIAS to bearish.
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CONCLUSION: The market got very extended to the downside so we aren't that surprised that we saw a bit of a relief rally today. The question is whether it will continue. STOs and the VIX suggest more upside, but the backdrop is still a bearish bias with declining intermediate-term indicators. We believe we will see a modest rally in the very short term, but we don't believe it will be the start of a sturdy uptrend. Stops should remain in play as the market is likely to resume its decline sooner rather than later.
Erin is 30% long, 2% short.
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BITCOIN
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 are continuing to rise strongly giving Bonds increasing headwinds. We believe they will continue to expand.
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 finally broke out above the late 2022 top and August high on a gap up. It rose strongly again today. Considering the lengthy rally out of the May lows, we don't have an overbought PMO. The PMO is rising on a Crossover BUY Signal and Stochastics are oscillating above 80. A pullback is needed so the RSI may be signaling a pause ahead.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: 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.
We've now hit important support for TLT so maybe a relief rally could be had. Looking at the 20-year yield above, the rise is getting parabolic and could call for a quick retreat. However, we wouldn't count on that.
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 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.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: A strong Dollar means weak Gold. We keep waiting on a good Gold rally, but it has yet to materialize given the strength of the Dollar's rally. Considering that Dollar rally Gold isn't looking as bad as it could. We still see a PMO Crossover BUY Signal. Unfortunately the RSI and Stochastics are declining below net neutral (50).
GOLD Daily Chart: $GOLD is clinging to its PMO Crossover BUY Signal, but if it is going to hold it a reversal is needed quickly. Gold is continuing to lose relative strength against the Dollar and its correlation to the Dollar is quite negative suggesting it will continue to deteriorate if the Dollar doesn't relinquish its power soon.
GOLD MINERS Golden and Silver Cross Indexes: We see a double top formation on GDX and its minimum downside target would take price down to the August low. Nearly all of the participation has been sucked out of the group and primary indicators are negative. The bias is Bearish in all three timeframes right now. Look for more downside ahead.
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 paused, but this looks like a rounded top and that would mean more downside ahead. The RSI is not as overbought as it has been, but it could use a decline. The PMO suggests we will see more decline or sideways consolidation at best. Stochastics are dropping but remain in positive territory. We suspect we will see sideways movement or a small short decline. Production is still lower than the norm and we are seeing reduced supplies here at home so ultimately the rally should continue. Energy positions do look vulnerable on this pullback so manage them carefully.
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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