Another brutal day in the market as not only the coronavirus continues to panic, but Oil added to the fun and took a deep dive along with the Dollar today. We haven't reached the magic 20% down number to officially call this a bear market, but both Carl and I are calling it. Carl wrote an excellent article regarding "Bear Market Rules" in Friday's Weekly Wrap. I highly recommend you read it!
On today's DecisionPoint Show, Carl and I looked at all of the sectors and pointed out that 7 out of the 11 sectors had passed the 20% bear market threshold (XLE, XLF, XLI, XLB, XLK) OR were close enough to call them bear markets (XLC and XLY). Below are 11 price charts of the sectors with those percentages annotated:
For an even better review of the sectors, check out the DecisionPoint.com Sector ChartList. You'll find the links to this ChartList as well as our others on the left hand side of the "Blogs and Links" page on DecisionPoint.com.
CURRENT BROAD MARKET DP Signals:
I've annotated the new IT Trend Model Neutral signal on the NDX. It was triggered when the 20-EMA crossed below the 50-EMA. It was not a "SELL" signal as the 50-EMA is above the 200-EMA. Price has already dipped below both the July and September tops and is nearing the May top for a support test.
TODAY's Broad Market Action:
Past WEEK Results:
Top 10 from ETF Tracker:
Bottom 10 from ETF Tracker:
On Friday, the DecisionPoint Alert Weekly Wrap presents an assessment of the trend and condition of the stock market (S&P 500), the U.S. Dollar, Gold, Crude Oil, and Bonds. Monday through Thursday the DecisionPoint Alert daily report is abbreviated and covers changes for the day.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
Each S&P 500 Index component stock is assigned to one, and only one, of 11 major sectors. This is a snapshot of the Intermediate-Term (Silver Cross) and Long-Term (Golden Cross) Trend Model signal status for those sectors.
One WEEK Results:
IT Trend Model: NEUTRAL as of 2/28/2020
LT Trend Model: BUY as of 2/26/2019
SPY Daily Chart: Price cut through another level of support EASILY today. Next up are the June lows. This could be an opportunity to get a bear market bounce, but overall I don't think it will curb this massive decline. With today's decline, the SPY nearly hit the 20% bear market threshold. Carl and I aren't waiting at this point. This is a bear market. The 'black swan' event known at the coronavirus took highly overbought market conditions and cleared them out within a few days. Even with vaccines, tests, etc, this will still have a massive global effect as certain industries are damaged or nearly destroyed. Look at airline and cruise line stocks...they likely will continue to get hit along with other industries like Oil and shale. That brings up a good point, the market had massive downside pressure between the coronavirus and the drop in oil prices.
Climactic Market Indicators: I annotate using a blue dashed line to highlight today's readings and can then see how they compare to previous readings. As you can see, the negative readings are all hitting new territory. The VIX closed above 54! Many times we get these climactic negative readings and will see a reversal. Now we are seeing exactly what a bear market can do. Oversold readings can continue in a bear market, just like overbought readings can persist in a bull market. Normally I'd see these readings and would look for an immediate upside move. We're ready for a relief rally, but the panic needs cool. Given the average American's response to this crisis that will take more time. Notice that today's volume was very high. A big downside move on volume, suggests more downside.
Short-Term Market Indicators: The ST trend is DOWN and the market condition is OVERSOLD based upon the Swenlin Trading Oscillator (STO) readings. Tops below the zero are very bearish. I see the STO-V did that back in August, but I don't see it with the STO-B all year. I don't like it.
Intermediate-Term Market Indicators: The Silver Cross Index (% of SPX stocks 20EMA > 50EMA) and the Golden Cross Index (percent of SPX stocks 50EMA > 200EMA) are declining more quickly. The SCI is now very oversold but has not hit its lows. The GCI is now hitting oversold territory, but it has more room to fall. With a very strong bull market rally, many stocks, like the market, have 50-EMAs well-above their 200-EMAs so it will take a bit longer to see the GCI hit the oversold levels we want.
The IT trend is DOWN and the market condition is VERY OVERSOLD based upon all of the readings on the indicators below. Extremely oversold indicators are here and we are finally seeing the readings we did back at the end of 2018. Unfortunately, none of these indicators looks interested in halting their decline.
CONCLUSION: The ST and IT trends are DOWN. Market condition based on ST and IT indicators is VERY OVERSOLD. Yes, Virgina, we are in a bear market. Officially we still have another percentage point to lose. Let's face it, folks, that will likely happen by the end of the week, if not by the end of the day tomorrow. I don't see any indicators that suggest otherwise right now unless you're banking on oversold conditions. Remember that bear market rules tell us those conditions aren't something to depend on right now.
(Not a Diamonds subscriber? Add it to your DP Alert subscription and get a discount! Contact firstname.lastname@example.org for your limited time coupon code!)
IT Trend Model: NEUTRAL as of 3/9/2020
LT Trend Model: BUY as of 5/25/2018
UUP Daily Chart: The OHLC bars on some of these charts are crazy. UUP ultimately closed down 1% but had been down as much as 5% during the day. Support was broken and the next area of support is the June low. Today's trading took that out, but I still believe we could see a rebound there.
IT Trend Model: BUY as of 12/26/2019
LT Trend Model: BUY as of 1/8/2019
GOLD Daily Chart: Gold was up slightly and it did set a new multi-year intraday high. The PMO is on a BUY signal and rising. A panicked market generally flees to metals. We haven't seen a huge flight to safety to Gold, it's been more about bonds. I still like Gold and suspect we will see increased demand as we move forward.
GOLD MINERS Golden and Silver Cross Indexes: Gold miners are subject to market winds and we are seeing the results of that. Both the SCI and GCI could move much lower.
CRUDE OIL (USO)
IT Trend Model: Neutral as of 1/27/2020
LT Trend Model: SELL as of 2/3/2020
USO Daily Chart: Well Russia and OPEC obviously did not work out their differences as Russia is flooding the market with cheap oil. Interestingly, I heard that China (and maybe even the US) might consider buying it even if they don't need it to take advantage of lower prices and then sell high later. We'll see. In the meantime, we are seeing lows on USO that we haven't seen since 2009. The lower support levels are nearing.
IT Trend Model: BUY as of 1/22/2020
LT Trend Model: BUY as of 1/2/2019
TLT Daily Chart: Vertical price moves continue. Yields are ridiculously low and nearly negative in some cases, but the flight to safety continues. The PMO is very overbought, but you can see the volume tells us investors aren't done here. A parabolic breakdown is due.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact email@example.com for more information!
Technical Analysis is a windsock, not a crystal ball.
Happy Charting! - Erin
Erin Swenlin will be presenting at the The MoneyShow Las Vegas May 11-13, 2020! You'll have an opportunity to meet Erin and discuss the latest DecisionPoint news and Diamond Scans. Claim your FREE pass here! You can watch online with this pass too!!
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.
Helpful DecisionPoint Links (Can Be Found on DecisionPoint.com Links Page):
DecisionPoint Shared ChartList and DecisionPoint Chart Gallery
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)