So much for yesterday's downside exhaustion climax. The decline was "exhausted", but didn't result any upside. When our bullish signals and indicators don't result in positive price action, we know there are internal problems.
The market dropped on the open, but as noted in the headline, it managed to shore up those losses to finish only slightly down on the day. The 5-minute PMO is in decline out of overbought conditions and does suggest we will see lower prices tomorrow morning. Right now investors are keeping an eye on tomorrow's jobs report to take their cue.
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 did see a higher low and a hammer-like candlestick which would suggest we could see some upside here, but we suspect it will be churning on top of this support level rather than bouncing significantly.
The VIX is below its moving average on the inverted scale and Stochastics are flat so we don't see any internal strength at the moment.
Here is the latest recording from 10/2:
S&P 500 New 52-Week Highs/Lows: New Lows were still substantial but we are seeing fewer. This sets up a positive divergence with price in the very short term, but given we still have so many New Lows, we aren't optimistic this will return much in upside price movement.
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 SOMEWHAT OVERSOLD.
Swenlin Trading Oscillators (STOs) reversed course today and moved lower. However, we still have positive divergences with price. We also saw an increase in %Rising PMOs. Only about a quarter of the index have rising momentum, but it is a start.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The ITBM/ITVM are in decline but are getting very oversold. We do see a small positive divergence between price lows and rising lows on %PMO Xover BUY Signals.
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.
%Stocks > 20/50EMAs are oversold but are showing zero expansion. We note very little participation with the Silver Cross Index moving lower alongside the Golden Cross Index. Both the SCI and GCI could continue lower given their percentages are higher than %Stocks indicators. Additionally, while the SCI is getting oversold, it isn't as oversold as it could be. The GCI has plenty of room on the downside. We need to see a turn on the SCI, but that can't happen until we get %Stocks > 20/50EMAs with higher percentages than the SCI's percentage. Turns on the SCI have been very prescient.
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.
No changes:
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CONCLUSION: We're seeing some positive divergences in the short term that does set up the market for a bounce, but we aren't seeing confirmation and Tuesday's downside exhaustion climax hasn't resulted in higher prices yet. One look at thin participation and we know it will be very difficult for the market to reverse course. IT indicators have yet to turn back up. We think the best we'll see is churn. More like a pause before the decline gets going again. Keep your stops in play. We would continue to limit exposure or hedge what exposure you do have.
Erin is 10% long, 6% short.
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BITCOIN
Stochastics have kept us from getting too bullish on Bitcoin, but they are beginning to flatten. There is a new LT Trend Model "Golden Cross" BUY Signal as the 50-day EMA crossed above the 200-day EMA. Additionally we have an IT Trend Model "Silver Cross" BUY Signal on tap as the 20-day EMA is about to cross above the 50-day EMA. Based on the rising PMO and positive RSI, we do expect overhead resistance to be tested at 29,000.
INTEREST RATES
Yields in general pulled back today, but the rising rate environment continues. We note that the yield curve is beginning to flatten, but this is not because the shorter durations are falling, but because longer durations are rising.
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
It appears the parabolic price pattern is breaking down. It could become a much greater decline. This would certainly improve the outlook for the market in general, but it's early and indicators aren't showing much stress yet. We do see a likely decline ahead, but we wouldn't count on it enough to enter into Bonds at this point.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT saw a decline as the 20-year yield did not pullback with other rates today. The chart is still very bearish with no visible level of support.
Even the one year chart isn't showing support. We have to go to the monthly chart.
The monthly chart tells us the next level of support is around 80. The monthly PMO looks terrible.
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 finally declining enough to take the RSI out of overbought territory. It also turned the PMO lower. It is time for the Dollar to cool, but we wouldn't count on a big decline yet. We've seen the PMO top at least three times during this rally and it didn't result in a break of the rising trend.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: SELL as of 10/5/2023
GLD Daily Chart: The falling Dollar has yet to make an impression on Gold. GLD fell, but volume on the declines is diminishing. It is time for an upside reversal, but we'll want to see the PMO turn back up.
GOLD Daily Chart: We're arriving at a very important and strong support level at 1800. Given the very oversold RSI, we know it is time for a rally. Discounts have expanded to bearish enough levels to look for one at 1800. We are cautiously optimistic that the 1800 level will be the reversal point.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners saw some positive action today in spite of the poor participation. They had gotten oversold based on the RSI. The PMO is now oversold too. Participation is about as low as it will go so there is nowhere left to go but up. When/if Gold does turn around, this will be a very interesting group to follow. For now we don't see much upside potential. This doesn't look like a strong enough to support level to look for a complete recovery.
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 continued to slide lower, but is getting close to support at the April top. Indicators are especially bearish as you would imagine so this may not be a stopping point. We think price has further to fall, at least to the 200-day EMA. Low demand is the cover story for this decline. Crude got extraordinarily overbought, it was time for a correction or pullback, it just came sooner than we had anticipated given production is still slim.
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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