The Health Care Sector ETF (XLV) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL Signal. Support has now been reached, but we do note the rising bottoms trendline is being compromised. The indicators suggest further downside. Participation has thinned and Stochastics have dropped below 20. While this would be an excellent pivot point, bearish indications should win out.
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 9/22/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: We noticed that we have a more accelerated declining tops trendline in the short term. Price was never able to rally to the declining tops trendline drawn from the July top. This rally is coming at an opportune time as support was just broken. The PMO is flattening somewhat.
The VIX is rising on our inverted scale, but remains below its moving average which implies weakness. Stochastics also imply weakness as they have moved below 20.
Here is the latest recording 10/23:
S&P 500 New 52-Week Highs/Lows: New Lows contracted but were still sizable given today's rally. We saw no New Highs on the rally. The 10-DMA of the High-Low Differential is in decline after topping beneath the zero line.
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) continue to move lower. They have now reached oversold territory, but we have seen lower readings. The rally did manage to improve %PMOs Rising, but had little effect on %Stocks > 20EMA.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
All of our intermediate-term indicators are moving lower which confirms already falling short-term indicators.
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.
Participation of stocks above their 20/50-day EMAs saw very little improvement on today's rally. The Silver Cross Index is falling below its signal line. The best we can say is that other than the Golden Cross Index, these indicators are very oversold. In a bull market oversold can mean that support is close at hand. In a bear market oversold can warn of a bottomless pit for prices. Support is here, if we drop below 415, it could be a pit of despair.
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 items with highlighted borders indicate that the BIAS changed today.
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CONCLUSION: The market rallied off support today, but it did very little to improve our indicators. No New Highs were logged so we know that weakness is still a problem. All of our primary indicators are in decline and the rally did not change that. We do admit that this would be a great pivot point for the market given it sits on support and indicators are oversold or getting oversold. Earnings are kicking off and should we see some mega-cap outperformance it will likely carry the market higher. We don't see an extended rally given IT indicators are so bearish. We wouldn't let go of your hedges just yet, the market is still very vulnerable to more decline. Refrain from getting too extended on the long side as we think this rally will be short-lived.
Erin is 20% long, 6% short.
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BITCOIN
Bitcoin is hot right now. The RSI is extraordinarily overbought and the PMO while rising is also overbought. This is a parabolic rally and those always beg for a correction. Technically we should see a digestion phase, but Bitcoin is often recalcitrant. This rally does seem extended.
The resistance that was broken was a multi-year level of resistance. We now have to determine where the next level of resistance will be. At this point we would look to 40,000 to 41,000 levels.
INTEREST RATES
Treasury yields were mixed on the day. They are likely ready to pause as many of the rising trends have gone parabolic.
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
Yesterday's comments still apply:
"The second parabolic formation was broken with yesterday's sharp decline in the 10-year yield. This has caused the PMO to top as well as Stochastics. The picture is not bleak by any means. The RSI remains positive and $TNX is very resilient right now." We think it is time for a digestion phase.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT is looking more bullish than it has in some time. The PMO is nearing a Crossover BUY Signal. However, we note that just when the PMO had a positive crossover its signal line, that ended the rally. This rally will likely be short-lived as with the prior one. We would plan that this rally will fail around the same level it did last time.
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 rallied, but remains in a short-term declining trend. The RSI remains positive, but the PMO is still declining. The Dollar will likely continue to consolidate sideways. This is forming a bull flag so we will assume that when it is finished digesting, it will break back up.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: The Dollar rallied by Gold was only slightly lower which tells us Gold does have internal strength. Stochastics are sitting comfortably above 80 and that also suggests internal strength. The PMO is rising and the RSI is positive and not yet overbought. The last two days of decline are forming a flag on a flagpole. That implies an upside breakout ahead.
GOLD Daily Chart: We're not surprised to see Gold hiccup given strong overhead resistance was reached at 2000. Discounts remain elevated on PHYS and that is generally a favorable condition for Gold.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are staying above the declining tops trendline on this small pullback at resistance. The PMO is still on the rise and we actually saw %Stocks > 20EMA tick upward on today's small rally. We believe Gold will resume its rally and that should put the wind at the back of Gold Miners. If we see participation bleed off further, you'll want to avoid the group.
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 had its third day of decline and it has damaged the indicators suggesting a possible test of support at the October low. The PMO is falling again and the RSI moved into negative territory. Stochastics which tend to be a leading indicator are declining as well. We are now seeing a double top forming.
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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