Editor's Note: The following is an excerpt from an article Carl published today.
At the end of November the Dow Jones Industrial Average ETF (DIA) advanced just above +20% from its October low and officially entered a new bull market; however, technically, an intermediate-term rising trend had not been established. There is a bottom above the September bottom (green arrows), but there is not yet a top above the November top. In fact the last top is lower than the November top, and the next thing we are looking for is for price to fall below the December bottom to establish a new falling trend. The PMO (Price Momentum Oscillator) has topped and crossed down through the signal line (PMO SELL Signal).
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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 12/28/2022
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: We saw a continuation of yesterday's breakdown. Price has breached the 20-day EMA, but closed above the 50-day EMA and on support at the late December tops. The RSI moved negative below net neutral (50). As noted in the opening, the Dow triggered a PMO SELL signal. The SPY isn't far behind. For bulls, we do see a possible cup with handle formation, but we need an upside reversal soon for that to be the case.
The VIX took a dip below its moving average today, but closed above so internal strength is slightly visible there; but our other internal strength indicator, Stochastics, is not looking healthy and suggests internal weakness is upon us.
Here is the latest recording (No show on 1/16):
S&P 500 New 52-Week Highs/Lows: As noted yesterday, we now have an official price top so the negative divergence between New Highs and price has been printed. Unlike yesterday, the 10-DMA of the High-Low Differential topped in near-term overbought territory.
Climax* Analysis: There were two marginal climax readings today. SPX Total Volume confirmed. While it was a bit iffy, we think it is reasonable to call it a downside exhaustion climax. This doesn't mean that the decline is over, but a pause is not out of the question, especially since tomorrow is the last trading day before options expiration.
*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.
The STO-B is the first to move down into negative territory. The STO-V will likely follow suit given it is so close to the zero line. Breadth has taken a huge hit in the short term. We have fewer than 1/3rd of the index with rising momentum. That is not enough to keep a rally afloat when the climate is bearish.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERBOUGHT.
After topping yesterday, the ITBM/ITVM continued lower, but remain in somewhat overbought territory. %PMO BUY signals topped well before getting really overbought. We don't like the look as it suggests more internal weakness.
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 BEARISH.
The intermediate-term bias is BEARISH.
The long-term bias is NEUTRAL.
The bias in all three timeframes continues to deteriorate and move more bearish. Given the serious decline of stocks above their 20/50-day EMAs, we have to look at the short term as bearish. The Silver Cross Index topped in the intermediate-term and while the Golden Cross Index is rising, the percentage of stocks above their 50/200-day EMAs continues to deteriorate so the Golden Cross Index is likely to top soon.
CONCLUSION: It was sometime in mid- to late-December when we expressed our concern that the market was taking too much time consolidating and not enough time rallying considering the indicators were so positive. This implied a brief rally ahead because, inevitably, those indicators were going to get overbought. Carl proposed this thesis and he was right on. All of those indicators are now falling out of overbought territory, leaving bulls with a major uphill battle. We did see a 'positive' downside exhaustion climax, but it will likely bring at best a pause. Pockets of strength are still out there, but they are getting slimmer.
Erin is 15% exposed.
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Yesterday's comments still apply:
"Bitcoin hit the top of the prior trading range and pulled back. The RSI has been extraordinarily overbought for some time. The PMO is also overbought. This seems the perfect place for Bitcoin to pause and digest the parabolic rally. It isn't out of the question that Bitcoin could crash based on that parabolic rally. Stochastics are still strong above 80 so maybe it will make a run for the September high. We believe it will need a pullback or more pause before that happens. Overbought conditions need to be cleared."
Long-term rates have been in correction mode giving Bonds an opportunity to rally. Support is being met and broken suggesting Bonds will continue to march higher.
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:
"Support is finally looking shaky for $TNX. A line of defense was broken previously, a short-term rising bottoms trendline drawn from the August low. Now it has broken support at 3.4% and the intermediate-term rising trend drawn from the March low. We see the next support level is at 3.25% and that is about to be broken. Indicators are bearish across the board."
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is beginning to digest the prior decline from 28.25. The indicators are not that helpful. The RSI is negative, but Stochastics are rising. The PMO is flat. It leaves us with little to go on. Therefore we will assume the current declining trend will continue, particularly since price dropped below a bullish falling wedge.
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: We've adjusted the short-term rising bottoms trendline as price rose after a bearish engulfing candlestick was printed yesterday. The RSI is back to being overbought, but the PMO is accelerating higher. Stochastics look very strong as they read in the 90's.
GOLD Daily Chart: $GVZ, the volatility index for Gold, continues to oscillate below its moving average on the inverted scale. That implies internal weakness; however, it hasn't resulted in any price damage. Price broke out of a bearish rising wedge which puts a strongly bullish backdrop on the current rally.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners reversed today and we're not really surprised. Participation has been incredible for Miners as over 90% have price above their 20/50-day EMAs AND their 200-day EMAs. The Silver Cross Index did have a negative crossover, but it has been twitchy since the rally began. It's reading well above 90 and that's bullish enough for us. The Golden Cross Index accelerated higher today. Our one issue...Stochastics have topped and moved below 80.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/21/2022
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: USO formed a giant bearish engulfing candlestick yesterday, but it obviously wasn't a problem. That suggests internal strength. The RSI is positive and the PMO is rising after crossing above the zero line. Stochastics are above 80 and volume is coming in based on the OBV. Additionally, $OVX is above its moving average on the inverted scale and that also implies internal strength.
We will get even more bullish on USO should the long-term declining tops trendline be broken.
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:
"TLT has now broken out from the symmetrical triangle. This is a very good sign as a symmetrical triangle normally breaks in the direction of the prior trend. The prior trend out of the summer highs was down so an upside breakout is good. We do have resistance looming ahead at the December high and 200-day EMA, but the PMO has accelerated higher and the RSI is positive with Stochastics above 80. Rates are due for a reversal, but for now Bonds look healthy."d
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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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.
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