The crypto exchange, FTX, has collapsed. It is being said that the reason was a retraction of a bid by Binance after only a half day of due diligence. We are not clear on the details, but it emphasizes the precarious nature of crypto currencies. By the time you read this, it probably is no longer news to you, but none of the stories we have seen have included a chart of FTX. Here it is. We'll review the Bitcoin chart at its usual location.
Here is an ad taken from the FTX site. The logic is impeccable.
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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MAJOR MARKET INDEXES
Each S&P 500 Index component stock is assigned to 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.
CLICK HERE for Carl's annotated Sector charts.
THE MARKET (S&P 500)
IT Trend Model: SELL as of 9/8/2022
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: Today's market action was not at all good. Price formed a top lower than the previous top and before reaching the top of the rising wedge. The close was right on the bottom of the wedge, and the daily PMO topped. The rising wedge most often resolves downward, and that is a reasonable assumption at this point.
The RSI dipped into negative territory below net neutral (50). Stochastics also topped alongside the PMO, but they remain in positive territory for now.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential has topped in near-term overbought territory.
Climax* Analysis: There were strong and unanimous climax readings today, giving us a downside initiation climax. SPX Total Volume was solid but did not imply any kind of blowoff.
*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 UP and the condition is NEUTRAL.
We still have more than half of the SPX showing rising momentum. STOs are still rising. The market could still be propped up.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is SOMEWHAT OVERBOUGHT.
STOs may still be rising, but the ITBM/ITVM are not and we should consider that a veiled warning that this could turn into more than just a day or two of downside.
PARTICIPATION and BIAS Assessment: 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 short-term bias is BULLISH, but deteriorating. Participation pared back today but %Stocks > 20/50-day EMAs is higher than the SCI.
The intermediate-term bias is SOMEWHAT BULLISH. The SCI decelerated today and with shrinking participation, we are pulling back on our bullish outlook somewhat.
The long-term bias is NEUTRAL. The GCI had a positive crossover last week and it is still rising. We have far more stocks above their 50/200-day EMAs than those with golden crosses. The GCI should continue to rise.
CONCLUSION: Based on our indicators, today's decline was a bit of a surprise. However, a great deal of damage was done with this one day decline. The PMO has topped beneath the zero line again and the ITBM/ITVM topped. STOs are still rising, but the downside initiation climax that was triggered on the decline has us looking for, at best consolidation. Consider tightening stops and/or reevaluating your more aggressive positions.
Erin is 50% exposed.
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The decimation of crypto continued today. This would've been an excellent area for Bitcoin to consolidate and pause its decline, but instead we saw another watershed moment with the FTX headline not helping matters. Note the extremely high volume on the selling. It begs the question, are there any sellers left? We expect there are. The RSI is now oversold, but the PMO is back below the zero line.
Below is the weekly chart. It may seem that support isn't that far away, but if it moves down to that level it will be a more than 23% decline. The last time Bitcoin was trading at this level, it was November of 2020.
Yields stalled again today.
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:
"We've annotated a symmetrical triangle formation today. A symmetrical triangle is considered a continuation pattern, meaning we should expect the breakout/breakdown to continue the prior trend. That would imply an upside breakout ahead. Indicators are fairly positive, but the PMO is still falling. We expect another trip down to test the bottom of the triangle."
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Yesterday's comments still apply with this addition:
UUP rebounded today and avoided the breakdown, but indicators aren't seeing any real improvement.
"The bearish descending triangle continued to form after last week's failed breakout. The psychology of a descending triangle is bears pulling price lower (declining tops) while bulls keep it together with horizontal support. The expectation is a breakdown below horizontal support as the bears eventually take control. The indicators look terrible so we do expect to see the Dollar to breakdown."
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: GLD digested the move from yesterday. The indicators are still strong and with the market hiccuping, we expect Gold will move higher.
GOLD Daily Chart: $GOLD showed strength today. The Dollar was up +0.75% and rather than Gold being down -0.75%, it was only down by -0.13%. We see internal strength. Additionally, we have the 2nd highest discount reading since it started being tracked in 2010. This is extraordinarily bearish sentiment. Gold is primed to move much higher.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners pulled back but held support easily. Indicators are still very positive. Participation wasn't hurt on the decline. We would look for Miners to do very well should Gold fulfill its promises.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/4/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO broke its short-term rising trend. The indicators have now turned south again. Support is still holding along the 200-day EMA but given the deterioration of our primary indicators, we would look for a test of the October low.
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds continued higher on falling yields. The RSI is still very negative, but we are seeing some positive movement by the PMO which turned up along with Stochastics. We don't see this leading to a huge rally given yields are still in strong rising trends.
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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