The Fed did what everyone was expecting and made no change to interest rates. The market was up pre-announcement, fell to neutral and held steady after the announcement, but ultimately began to slip into a negative close during Chairman Powell's comments. The next Fed Watch date is November 1.
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Today the Semiconductor Industry Group ETF (SMH) 20-day EMA crossed down through the 50-day EMA (Dark Cross), generating an IT Trend Model NEUTRAL Signal. Support is available, but participation is thin and seeing no improvement. Stochastics are below 20 suggesting internal weakness. We expect this support level to be broken.
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: BUY as of 3/30/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: Today saw a huge bearish engulfing candlestick that engulfed not only yesterday, but the day before as well. This suggests another decline tomorrow. The PMO is picking up speed to the downside.
The VIX dropped below its moving average on the inverted scale and Stochastics dropped below 20. Internal weakness is clear.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Highs expanded quite a bit on today's decline, but remember, this indicator shows us the highest amount of New Highs on the day. These could have come in before the Fed revealed its intentions. Good news is that the 10-DMA of the High-Low Differential turned back up and is back in positive territory. Not a bad chart.
Climax* Analysis: There were two climax readings on the four relative indicators today, so we'll call today a downside exhaustion climax, since there was a downside initiation climax last Friday. SPX Total Volume was short and not confirming.
*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.
STOs are in decline and we lost participation of stocks above their 20-day EMA as well as stocks losing rising momentum. %Rising PMOs are well below our bullish 50% threshold.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM are confirming the decline of short-term indicators. %PMO Crossover BUY Signals topped beneath the zero line.
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.
Our bullish threshold of 50% is not being met by %Stocks > 20/50EMAs making the short-term bias Bearish. We also are seeing no improvement to those indicators. The Silver Cross Index has topped beneath its signal line and dropped on the day. The Golden Cross Index did turn up yesterday, but ultimately it isn't likely to move much higher given we have far fewer stocks above their 50/200-day EMAs versus the Golden Cross Index percentage.
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 S&P 100 (OEF) Silver Cross Index moved below its 10-day EMA to give OEF a Bearish BIAS in the intermediate term, and the OEF Golden Cross Index crossed up through its 20-day EMA to change its long-term BIAS to Bullish.
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CONCLUSION: Overall weakness in the market won out as price declined into the close. We have two pieces of bullish news and that is the New Highs chart and a possible downside exhaustion climax. However, we see the bearish evidence as weighing heavy. We have a bearish engulfing candlestick and declining short/intermediate-term indicators. Given today's climax wasn't confirmed by volume, we expect it won't override bearish ST and IT indicators. Tighten stops and consider hedging.
Erin is 35% long, 2% short.
** IMPORTANT ** Erin will be traveling to finish out the week so reports on Wednesday and Thursday may arrive later than usual. As always, they will definitely be in your inbox before the market opens the following day.
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BITCOIN
Yesterday's comments still apply:
"Bitcoin is now trading above the 200-day EMA. As long as this continues, a Death Cross of the 50/200-day EMAs can be avoided. So far it is holding above new support. The indicators are favorable so we expect this support level to hold up with potential to move higher."
INTEREST RATES
Rates were mixed with most long-term rates falling and shorter-term rates rising. The yield curve remains inverted.
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 saw a new PMO Crossover BUY Signal today so we should expect the yield to breakout here. Stochastics and the RSI are confirming this possible outcome.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT managed a small rally, but indicators remain very bearish. The RSI is below net neutral (50) and Stochastics are below 20. Most importantly, the PMO is nearing a Crossover SELL Signal. We aren't expecting much out of today's rally.
Looking at the longer-term daily chart, the August low doesn't seem like the strongest support level. More than likely it will see the 89 to 90 range on a decline.
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 pausing and that brought the RSI out of overbought territory. The PMO is overbought, but still rising alongside Stochastics oscillating above 80. At this point we should look for the Dollar to continue higher.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold was up on the day but it formed a bearish shooting star candlestick. That aside, we are cautiously optimistic on a short-term rally in Gold. Price is above key moving averages now. The RSI is positive, the PMO is rising on a Crossover BUY Signal and Stochastics are rising in positive territory. It's a good setup.
GOLD Daily Chart: Price is traveling in a symmetrical triangle. Given the prior trend was up, we should see an upside breakout soon. Discounts are paring back slightly suggesting investors are getting slightly less bearish on Gold.
GOLD MINERS Golden and Silver Cross Indexes: GDX hasn't broken above the 200-day EMA yet, but it has overcome resistance at the prior price top. We like GDX's chances right now given participation has expanded, the PMO is rising, the RSI is positive and the PMO is rising on a BUY Signal.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: It appears we are finally getting the pause that was needed. The RSI is finally out of overbought territory which is a big plus to today's decline. The PMO is now declining. FYI inverse Energy and Crude Oil ETFs appeared in Erin's Diamond scans today so this could turn into a pullback versus a pause.
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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