Today the S&P 600 Index ETF (IJR) 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating an LT Trend Model BUY Signal. Additionally, on Friday price made a high that was higher than the December high, which officially began a new rising trend. One problem with this higher high, it sets up a negative divergence with On-Balance Volume (OBV). There are rising price tops alongside declining OBV tops. This doesn't mean price will necessarily fall apart, but it does tell us to temper expectations. Unfortunately, this isn't the only negative divergence visible on today's charts.
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: We've annotated where we should look for an "official" or certainly 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. First price must deal with the bearish rising wedge. Price did hold above 400.00 which is good, but the PMO is beginning to top.
As for our other primary indicators, the RSI and Stochastics, they are showing some deterioration. The VIX fell on our inverted scale, but remains above its moving average. Stochastics topped, but remain above 80. Technically there is still some internal strength to be found.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: Now that we have a price top, negative divergences are now official. New Highs is just one of the negative divergences.
Climax* Analysis: Three of four indicators had climax readings today, and one, SPX Net A-D, was very close, so we definitely have a downside initiation climax.
*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 dropped precipitously, moving them back into neutral territory. Less than half of the index have rising momentum. These short-term indicators are all holding negative divergences with price.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM and ITVM confirmed the decline in the STOs with a drop of their own. Only the ITVM escaped a negative divergence.
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 NEUTRAL.
The long-term bias is NEUTRAL.
With the destruction of %Stocks above their 20/50-day EMAs (and the negative divergences they hold with price), we consider the short-term bias as bearish. The Silver Cross Index is still technically rising, but given there are now fewer stocks above their 20/50-day EMAs, it will likely turn lower. The Golden Cross Index turned down, but with more stocks above their 50/200-day EMAs compared to the number of golden crosses, the Golden Cross Index still has an opportunity to improve.
CONCLUSION: All of our charts imply downside ahead. There are indicator declines and negative divergences all over the place. Adding insult to injury is today's downside initiation climax. Given the Fed announcement on Wednesday, the market may escape some volatility tomorrow as investors tend to hold their breath beforehand, but we can't count on that. Indicators couldn't be more clear; the market is due for a pullback. Caution is paramount.
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.
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Bitcoin had a bad day, but it did manage to close on support. We can't count on this as a flag formation as the 'flag' is rising. Indicators were yanked lower on today's big decline. That was good for the RSI which was extraordinarily overbought. It's not good for the PMO or Stochastics. The PMO has topped in overbought territory and Stochastics have now fallen below 80. Bitcoin is long overdue for a pullback. This could end up being all it needs, but we think a test of 21,500 is more likely.
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 is nearing 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.
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is doing a whole lot of nothing. However, indicators are beginning to lean bullish. The RSI is still negative, but it is rising. The PMO is on a crossover BUY signal now and Stochastics, which we consider an early warning indicator, is rising.
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold is looking toppy. Indicators favor a pullback. While the RSI may be positive, the PMO is about to trigger a crossover SELL signal and Stochastics have dipped below 80. We'd look for GLD to test support at 175.00.
GOLD Daily Chart: $GOLD is in a rising trend, but the PMO is a huge problem. Like GLD it is hundredths of a point away from a PMO crossover SELL signal. Gold is holding a near perfect inverse correlation. If the Dollar does get some legs, Gold will feel the pain. We also note that the Relative Strength of Gold to the Dollar is turning over as well.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners pulled back to support at the 20-day EMA. We're finally starting to see some damage on this decline after a failed test of overhead resistance. We now have more silver crosses than stocks above their 20/50-day EMAs. This means the Silver Cross Index is vulnerable to decline. Stochastics dove lower. Another problem is the bullish rising wedge. Tighten your stops as it appears a pullback is starting in this group.
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 hit overhead resistance and after over a week of attempts, it finally gave up and headed lower, breaking support at all EMAs. The RSI has moved negative and the PMO has topped. Stochastics are falling. We would look for a test of the rising bottoms trendline.
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: 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
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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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