Today the U.S. Dollar Index (UUP) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL Signal. Based on the Price Momentum Oscillator (PMO) rising on a BUY signal and Stochastics rising, the signal probably arrived too late. We will discuss more in the section on the Dollar.
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!
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: BUY as of 1/12/2023
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: As we stated yesterday, "We've annotated where we should look for an "official" or textbook level where a bull market would start. A 20% gain is identified as a bull market and a 20% loss is considered a bear market." Price continues to fill up the bearish rising wedge, but it is also still holding above 400. It is overdue for a decline, but indicators are firming up already.
The RSI is positive and the PMO is making its way higher again. Stochastics, however are still moving lower. Since Stochastics are above 80, we will forgive that, but we'll want to watch this "early detection" indicator.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: Again, the New Highs negative divergence persists.
Climax* Analysis: A change of direction today gave us strong, unanimous climax readings and an upside initiation climax. Expanding SPX Total Volume ahead of the Fed announcement seems premature.
*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.
STOs reversed upward on today's strong rally. Rising momentum expanded quickly. Clearly not much damage occurred yesterday as it only took a quick reversal to bring it up to the comfortable level of 72%.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM and ITVM confirmed the STO decline yesterday with a decline and today it confirmed the upside reversal with a rise. Not much movement on %PMO BUY signals, but at least its above the signal line.
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.
The intermediate-term bias is BULLISH.
The long-term bias is BULLISH.
With the expansion of stocks above their 20/50-day EMAs to bullish levels, we have to look at the short term as being bullish again. The IT turned bullish as the Silver Cross Index began to rise again. The Golden Cross Index turned back up and we have more stocks above their 50/200-day EMAs than Golden Crosses.
CONCLUSION: Investors have consistently overly optimistic regarding what the Fed might do. One of the latest fantasies is that the Fed will cut interest rates twice this year. We don't know what future Fed actions might be, but it doesn't seem rational that rate cuts are in our future. Chairman Powell's comments will be parsed as usual so any indication that rates will not be lowered this year could send the market into a tailspin. As far as the indicators are concerned, we still don't like the negative divergences that plague the charts, but we have to acknowledge the bullish bias. The market is still exceedingly overbought, so we must tread lightly.
Calendar: There is an FOMC meeting tomorrow with the announcement on Wednesday. The Fed is expected to raise rates again, but by only 25 basis points this time.
Erin is 15% exposed.
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!
Bitcoin is consolidating its last rally that put price above overhead resistance at 23,000. The RSI has moved out of overbought territory but the PMO is pulling back and could trigger an overbought SELL signal. Stochastics are flat and now below 80. We don't think a collapse is ahead for Bitcoin, but it is very overbought. Believe it or not, since November lows, Bitcoin has rallied over 54%. It is time for a pullback.
Rates are beginning to develop rising trends. If those trends stick around, we'll have quite a few bullish double-bottoms.
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
$TNX tested the rising trend and December lows successfully. Indicators have really shaped up. The RSI is almost in positive territory above net neutral (50) and the PMO has a crossover BUY signal. Stochastics are rising strongly and pushed above 50. We aren't going to call this a bullish double-bottom yet (it won't be confirmed until a breakout above 39.00), but it is close. Right now the next level of resistance is the 50-day EMA and 36.25. We believe rates will continue to rise.
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: SELL as of 1/31/2023
UUP Daily Chart: With price hovering well-below the primary moving averages, they have all started to make their way down. This is what caused today's "death cross" of the 50/200-day EMAs. We think that this SELL signal may have arrived too late. The Dollar is beginning to show signs of life. Price is forming a cup-shaped bottom. The PMO is on a BUY signal and rising. Stochastics are in negative territory but have begun to rise.
The price pattern is working against UUP in the longer term as we have a declining trend channel. On the bright side, price is coming off the bottom of the channel so even if it holds this declining trend, it could see a short-term rally back to the top of the channel.
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold finished higher, but the chart is still deteriorating. The RSI is fine, but the PMO is triggering a crossover SELL signal and Stochastics are headed lower. Gold's strength is beginning to fade somewhat as the reverse correlation with the Dollar is near perfect. This means that when the Dollar rises, Gold is likely to fall equally as far as percentage.
GOLD Daily Chart: $GOLD is holding up within a rising trend channel, but it has touched the top of the channel and could now head down to hit the bottom of the channel. Discounts are beginning to expand as the market gets less bullish on Gold. This all seems a recipe for a decline in Gold.
GOLD MINERS Golden and Silver Cross Indexes: If Gold begins to fail, Gold Miners will have an uphill battle. They are currently in a bearish rising wedge and that implies a breakdown. Price is still holding above the 20-day EMA and while participation did deteriorate a bit as far as stocks above their 20-day EMA, the percentages are still high. We would still prepare for a decline here. The PMO is on a SELL signal now.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/23/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil formed a bullish engulfing candlestick today. The chart was beginning to get bearish, but today, the RSI returned to positive territory and the PMO has started to turn up above its signal line. Stochastics are the big problem and as we often say they are a good early warning system. Energy is beginning to show signs of deterioration (here's a link to the Sector ChartList). We should be careful with Energy positions right now.
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday's comments still apply:
"As yields rally off support, Bonds are consolidating along support at the 20-day EMA and mid-December lows. Stochastics suggest that support will be broken. The PMO is about to confirm this with a crossover SELL signal. Bonds are looking shaky at best."
A symmetrical triangle has formed. These are continuation patterns, meaning they continue the prior trend they were in before the triangle emerged. That trend is clearly downward so a breakdown should eventually be expected.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
(c) Copyright 2023 DecisionPoint.com
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
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:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.