Today the Energy Sector (XLE) 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. XLE has been in a trading range. Today decline takes price below support at the August top; however, those December lows still offer some form of support. We wouldn't expect that level to hold given the awful participation numbers. The Silver Cross Index is tumbling lower and not one of the stocks within Energy have price above their 20-day EMA. This doesn't look like a sector getting ready to reverse higher.
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
SECTORS
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: BUY as of 2/9/2023
SPY Daily Chart: The bottom of the bearish rising wedge and the 200-day EMA are being tested. Today is ETF Day for DP Diamonds readers. Erin found that nearly every ETF had topping Price Momentum Oscillators (PMOs) in overbought territory. The most bullish ETFs were market inverses.
The indicators favor a breakdown. The RSI is in negative territory and the PMO is falling on an overbought SELL signal. The OBV is holding a negative divergence with price tops. Stochastics have now dropped below 20. One piece of good news would be the VIX closing again below the lower Bollinger Band on the inverted scale. This suggests a reversal day ahead, though not necessarily a new rising trend.
Here is the latest recording 2/13 (no recording on 2/20):
S&P 500 New 52-Week Highs/Lows: New Lows were negligible. We see this as a positive sign given another day of decline. We are waiting on the 10-DMA to pick a direction, it currently is holding the same reading as the past few days.
Climax* Analysis: Today's pause was a rational followup to yesterday's downside exhaustion climax, and there were no climax readings.
*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 DOWN and the condition is OVERSOLD.
STOs continue lower in near-term oversold territory. They can certainly move lower. Participation readings were essentially unchanged leaving the market with only 13% of stocks showing positive momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
Both the ITBM and ITVM continue lower. They are now in neutral territory so they have plenty of room to move lower should the market not rebound. More and more PMO BUY signals continue to be lost. Given only 13% have rising momentum, we know this indicator will continue lower.
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.
Yesterday's comments still apply:
"The overall market bias is now BEARISH. Every timeframe has problems. We have an anemic number of stocks above their 20/50-day EMAs. The Silver Cross Index is plunging lower. There are fewer stocks above their 50/200-day EMAs versus the number of Golden Crosses. That means the Golden Cross Index will be slipping soon."
CONCLUSION: Yesterday's downside exhaustion climax didn't result in higher prices; instead it was a pause. Given the negative indicators that was about all it could muster. Participation continues to slim with the Silver Cross Index charging lower. One piece of bullishness: the VIX continues to stay below its lower Bollinger Band on the inverted scale. Often that means a day or two of upside movement. However, indicators remain too bearish to expect a rally to stick.
Erin is 22% exposed.
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BITCOIN
Bitcoin has formed a bearish rising wedge. The indicators aren't that bearish, but we still don't have a PMO crossover BUY signal and Stochastics have ticked below 80. We would look for a test of support at 23,000.
INTEREST RATES
Many yields are making new 52-week highs. We don't see rates letting up yet.
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:
"$TNX broke above overhead resistance at the confirmation line for the double-bottom. The pattern calls for a challenge of the October high. Indicators are strongly positive so we expect a continuation. There is a possibility of a pullback after this breakout, but we expect yields overall to continue rising."
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: SELL as of 1/31/2023
UUP Daily Chart: The Dollar rallied today and is now testing overhead resistance at the December/January tops. It is in a bearish rising wedge, but the pattern is getting stale. It's so close to the apex that a move in any direction, including sideways, will execute the pattern. We keep it here to remind us there is a bearish element to the Dollar's rally. Indicators are still very strong and not overbought, so we do expect more upside out of the Dollar.
The declining trend has been broken.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: GLD is clinging to support at December highs. Indicators are very negative. The RSI is below net neutral (50) and the PMO continues lower on a SELL signal. Stochastics are in the basement showing no heartbeat so we don't expect this level to hold.
GOLD Daily Chart: Yesterday's comments still apply:
"Gold continues to lose strength against the Dollar. Discounts are very high telling us what we already know, investors are bearish on Gold. This does look like an interesting point for a reversal, but until indicators perk up, we would avoid Gold."
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners have reached support at the August high. We don't expect this level to hold primarily because there aren't any leaders to turn this ship around. There are no Gold Miners with price above their 20-day or 50-day EMAs. Gold is still under pressure so we expect this decline to continue for Miners.
CRUDE OIL (USO)
IT Trend Model: SELL as of 2/2/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil was hit hard again today. It is quickly headed toward support at 64.00. Given the negative RSI, a PMO moving below zero and Stochastics headed lower, a test of 62.00 seems more realistic.
BONDS (TLT)
IT Trend Model: SELLas of 2/21/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT rebounded today, but the large bearish double-top remains. The interest rate charts look very bullish so we know that downside pressure will continue to be applied to Bonds. The RSI is negative and the PMO is falling beneath the zero line. Stochastics are steady below 20. TLT will likely see a breakdown of the rising bottoms trendline drawn from the October low.
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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