The 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-EMA on the Financial Sector (XLF), generating an IT Trend Model NEUTRAL Signal. Price dipped below support but managed to close above the April top. The PMO has now sunk below the zero line and participation continues to bleed off based on %Stocks > 20/50/200EMAs losing ground. Stochastics did bottom, but these are oscillators and they must oscillate. We wouldn't read too much into its rise.
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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: The market managed to muster a small rally today. It performed worse than most of the indexes. Good news is the clear "hammer" candlestick that does imply higher prices tomorrow. The PMO is near-term oversold as is the RSI.
Even with the Bollinger Bands expanding on the VIX, it is still managing to puncture the lower Band on the inverted scale. The VIX near-term oversold, but we know readings have been higher. Stochastics are rising again so we are seeing a touch of internal strength. As with XLF, we don't want to read too much into rising Stochastics.
Here is the latest recording 9/25:
S&P 500 New 52-Week Highs/Lows: New Lows expanded further into oversold territory, but as with other indicators, we know they can expand even further. The 10-DMA of the High-Low Differential is in decline. It has hit the same level we saw back in March so it is near-term oversold as well.
Climax* Analysis: There were no climax readings today. Yesterday's downside exhaustion climax suggested that we could be approaching a bottom, and today the bulls won the contest, creating the "hammer" candlestick, which is technically a short-term bottom.
*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.
We have a bottom on the STO-V, but the STO-B ticked lower again. It required a manual check as visually the bars are so close together. We won't get overly bullish.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
IT indicators are getting very oversold, but they continue to decline. We note that %PMO Crossover BUY Signals continue to fall as they should based on only 14% holding rising PMOs.
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.
Yesterday's comments still apply:
"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.
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CONCLUSION: Yesterday's downside exhaustion climax played out with a little upside today. The STO-V is rising now. Indicators in all timeframes are oversold. We can't get too bullish regarding oversold conditions as there is room for all of those indicators to accommodate more downside. But, we can get a little bullish with the hammer candlestick. Until we see the PMO turn up or at least decelerate, we should operate under the assumption that the decline isn't over yet. A small bounce could afford us the opportunity to sell into strength.
Erin is 10% long, 2% short.
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BITCOIN
Bitcoin managed to break out above the 20-day EMA at 26,500, but it couldn't hold there. The RSI is negative and the PMO is flat. We will take our lead from Stochastics which are falling and suggest more downside.
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 continues to beat down the market as it rises almost exponentially. The RSI is very overbought, but given current conditions it will likely remain so. The PMO is rising and isn't overbought yet. Stochastics are very strong. All of this suggests the yield will rise even higher.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT formed a bearish engulfing candlestick, but that wouldn't be the only reason we should expect prices to move even lower. The PMO is falling and Stochastics have taken up residence below 20. The oversold RSI gives us some hope, but based on the rising trends in yields, we don't expect a rebound yet.
TLT has lost very important longer-term support. 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 and breakdown this month, 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: The rally on the Dollar is beginning to go parabolic as it extends well above the rising bottoms trend line. It is very overbought based on all of the indicators so a pause would be welcome. Price just doesn't seem interested in a decline or a pause.
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 parabolic rise has really beat up Gold and all the metals. Short-term support was lost on GLD as this decline picks up speed. There is a new PMO Crossover SELL Signal to contend with and Stochastics have dropped below 20.
GOLD Daily Chart: The intermediate-term rising trend has bee broken along with support. $GVZ offers us some hope that we will see a bounce given it has moved well below the lower Bollinger Band on the inverted scale. Gold is also showing weakness against the Dollar which is proving to be fatal. Look for a possible test of 1800 at this point. So much for Gold being considered a "safe haven" when the market is weak.
GOLD MINERS Golden and Silver Cross Indexes: GDX took a beating today dropping below the August low. It now sits on support at the February/March lows. It isn't likely to hold that support level based on the PMO Crossover SELL Signal beneath the zero line. Participation is barely there so we don't have any internal strength.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: USO confirmed two bullish chart patterns today. The bullish falling wedge formed the flag and the bigger picture pattern was a bullish flag formation. The minimum upside target of the flag is about 94.00. We don't think it is out of the question that Crude could make its way up there. This puts a bullish spin on the Energy sector as a whole.
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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