There are only two trading days left in the month, so we will cover the monthly charts today.
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The Communications Services Sector (XLC) 20-day EMA crossed down through the 50-day EMA (Dark Cross), generating an IT Trend Model NEUTRAL Signal. The best we can say is that support is holding at the 200-day EMA. The strongest level of support at the August/September lows has already been broken. With participation very thin and a dropping PMO and Stochastics, we have to believe that the 200-day EMA won't hold price up. Participation readings are weak, but not as oversold as they can get.
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.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
MARKET/SPX SECTOR/INDUSTRY GROUP INDEXES
Change Today: 
Change for the Week:
CLICK HERE for Carl's annotated Market Index, Sector, and Industry Group charts.
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: The market was up earlier in the day but rolled over to form another bearish filled red candlestick. The RSI is now oversold so a rally is needed and of course, wanted. The PMO continues to decline so more downside is likely before we see a bounce.
We have to look at the 1-year chart in order to see the next level of support. 400 is the next level to watch for and a great place to see a reversal. The VIX remains beneath its moving average on the inverted scale and Stochastics are nearly at zero. Internal weakness is clear.
Here is the last recording from 10/23:
SPY Weekly Chart: This week the rising bottoms trendline was compromised. Carl wrote an excellent article that discusses the possibility that we could be entering another bear market. Price didn't make it up to the 2021 top before turning down. Now we wait to see if we get a lower low that would extend the prior bear market. That would require a drop below 340. Given the declining weekly PMO, we do expect more downside. How far down? We don't think 360 is out of the question.
SPY Monthly Chart: The monthly PMO has topped beneath its signal line which is especially bearish. We are also forming a possible double top formation.
New 52-Week Highs/Lows: Yesterday's positive divergence between New Lows and price lows disappeared as we saw even more New Lows than previously. The 10-DMA of the High-Low Differential is now declining vertically.
Climax Analysis: Today there were three climax readings on three of the four relevant indicators, giving us another downside exhaustion climax. The character of the market seems to have changed to bearish, so an exhaustion day may not be as reliable a bottom finder as in a bull market.
*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 clear positive divergences on Swenlin Trading Oscillators (STOs) which turned back up yesterday. Unlike yesterday we did see a decrease in %Stocks > 20EMA. Yesterday we saw an increase in rising momentum. Today it is back to declining. While the STOs tend to pick good price bottoms, they can be fooled in a bear market type move.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The ITBM and ITVM are continuing their decline. All of these indicators have reached oversold territory, but we can easily see that they could accommodate more downside price action before hitting oversold extremes. A reversal on these indicators would speak volumes as it would set up positive divergences. For now they simply suggest any rally will be short-lived.
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PARTICIPATION: The following tables summarize participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation. There are three groups: Major Market Indexes, Miscellaneous Industry Groups, and the 11 S&P 500 Sectors.
The most positive IT Bias goes to Gold Miners (GDX) which were the only area to see an increase in the Silver Cross Index. They did lose some Golden Crosses, so they aren't completely healthy.
The worst IT Bias belongs to Technology (XLK)! This is a leadership sector and if it is this unhealthy, we should expect the market to follow.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
Energy (XLE) may hold the highest SCI reading, but it took a huge hit this week losing 17 percentage points. It is also struggling in the long term given the loss of 5 percentage points on the GCI.
Real Estate holds the lowest reading. It is about as oversold as it can get so we should keep an eye out for a possible reversal if the market gets going again.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
XLE holds the highest percentage but as noted above it is losing ground. Technology is right after it, but is also losing percentage points on the GCI. While they hold the highest readings, they are weakening.
Regional Banks (KRE) have the lowest percentage on the GCI and that got even worse this week. This is an area of the market that we would continue to avoid.
None of the indexes/sectors/groups saw an increase in the GCI. Weakness abounds.
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 do see positive divergences on %Stocks > 20/50EMAs and readings are oversold. However, both indicators are decline and those positive divergences could disappear. In any case, oversold readings nearly always result in some kind of upside. The IT Bias is bearish given the SCI is in decline beneath its signal line. The LT Bias is also bearish for the same reason.
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 had a good chance at rallying today based on yesterday's positive divergences, rising STOs and contracting New Lows. It didn't. Instead we've now lost near-term support and the longer-term rising bottoms trendline. When bullish indications don't result in positive price movement, you might be entering a bear market. We did see the rising trend broken on weekly and monthly charts. Still, the indicators are getting very oversold and we have rising STOs. Additionally, we had a downside exhaustion climax. This is the market's chance to rally. We don't think a rally is out of the question, but we may have to absorb more loss until we hit strong support at 400 for the SPY. Regardless, the weekly and monthly PMOs are in decline so we aren't expecting a "sticky" rally should we get one off oversold conditions. We'd avoid adding exposure with the exception of shorts and hedges.
Erin is 15% long, 15% short.
Calendar: The Fed meets next week with the interest rate announcement on Wednesday. It is widely expected that rates will stay the same so we don't expect unusual volatility attributed to the announcement.
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BITCOIN
Bitcoin and Gold were bolstered by the market's weakness this week. It rallied strongly and is now digesting the vertical move upward. We believe that it could rally further after this digestion phase given the strongly rising PMO. This consolidation is helping the RSI move out of overbought territory. Stochastics couldn't be much stronger as they oscillate above 80.
This chart is to show where some of the support/resistance lines come from. The recent rally pushed price above strong overhead resistance. We would look for 39,000 as the next level of overhead resistance.
INTEREST RATES
Yields continued lower today, but it did nothing to help the market. Rising trends are holding up on most yields suggesting we aren't out of the woods. The rising rate environment should continue after this pause.
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
The second parabolic formation was broken this week, but it didn't result in the usual deep and swift decline. This speaks to internal strength. The PMO did give us a Crossover SELL signal so the decline may not be over yet, but given internal strength we do expect the rising trend to remain.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount, which shuts many buyers out of the market, and potential sellers will experience pressure to lower prices (to no effect so far).
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This week the 30-Year Fixed Rate changed from 7.63 to 7.79.
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 this week. The PMO Crossover BUY Signal suggests it could eke out more rally, but we see upside potential as minimal given the strength of the 20-year yield and the fact that Stochastics topped in negative territory.
TLT Weekly Chart: Support is not visible on the weekly chart. We've marked the recent low for now. The weekly PMO continues to decline suggesting more downside. The weekly RSI is oversold at present, but given the very bearish daily chart and weekly PMO, we would prepare for more downside.
TLT Monthly Chart: We've just about reached support at 80, but given the very positive move on the 20-year yield and the declining monthly PMO, we don't expect it to hold. The next level of strong support doesn't arrive until price hits 60. We could see that.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 7/13/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The PMO has been in decline nearly all of October but it hasn't resulted in price damage. We don't think the Dollar is done rallying. The RSI is positive and Stochastics are back above 80. Once this consolidation phase is over, we expect the Dollar to rally higher.
UUP Weekly Chart: Overhead resistance is getting closer at 30.50. We should see it reach that level given the rising weekly PMO.
UUP Monthly Chart: The monthly chart confirms the bullish daily and weekly charts. The monthly PMO is rising after a bullish surge above the signal line (bottom above the signal line). It is overbought, but the monthly RSI is not. Look for a resumption of the rally for the Dollar.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GOLD Daily Chart: The Dollar was up but GLD was up higher than the Dollar. This was an excellent breakout for GLD, but we're not seeing quite the same result on $GOLD...
$GOLD is stuck beneath strong resistance at the psychological 2000 level. The indicators are very favorable so we should look for that breakout. GLD certainly suggests we'll see it. The Dollar could resume its rally but we don't see it as being the usual headwind given relative strength of Gold to the Dollar is rising. Additionally the correlation between the two is non-existent right now. They are entirely decoupled.
GOLD Weekly Chart: The weekly PMO is now rising suggesting we will see new all-time highs for the metal. The weekly RSI is also positive. Sentiment remains bearish based on elevated discounts for PHYS and that should continue to work in Gold's favor.
GOLD Monthly Chart: The monthly PMO has given us a Crossover BUY Signal. The monthly RSI is also positive. We think that the handle of the bullish cup has been completed and we'll get new all-time highs.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners pulled back after reaching overhead resistance. We like the look of this chart. It has moved back in the bullish category. Participation is widening again and look at the bullish rise in the Silver Cross Index. It's now bouncing off the prior declining tops trendline and the 20/50EMAs. The PMO is surging above the signal line. Stochastics aren't on board yet, but the RSI turned back up and is in positive territory. Look for higher prices on GDX.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: Crude Oil is acting fishy so be careful with your Energy positions. Every fundamental indication is that Crude will continue to rise, but it has yet to get it going again. Today's rally was helpful, but price is below the 20-day EMA. The PMO is flat and the RSI is neutral. It should've already rallied above the September high, instead it is forming a bearish double top. Stochastics are rising so maybe this rally will catch hold and we will get the breakout we keep expecting.
USO/$WTIC Weekly Chart: The weekly PMO is rising and isn't overbought. The weekly RSI is positive albeit declining right now. $OVX is in oversold territory and that generally results in higher prices. The technicals favor a continuation rally.
WTIC Monthly Chart: The monthly chart for $WTIC shows a monthly PMO in decline. However, it has decelerated and the price pattern looks bullish with the steep rising trend. The monthly RSI is positive. This confirms the bullish daily and weekly charts.
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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