Today we had so many downside signals (four!) we couldn't enumerate them in the title.
First the Health Care Sector (XLV) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL Signal. These signals do tend to arrive late to the party and XLV is starting to show a tiny bit of strength in participation. Certainly volume has been up.
Additionally, the S&P400 Mid-Cap Index ETF (MDY), the S&P600 Small-Cap Index ETF (IJR), and the Materials Sector (XLB) 20-day EMAs crossed down through the 50-day EMAs (Dark Cross) above the 200-day EMAs, generating IT Trend Model NEUTRAL Signals on all three. (NEUTRAL is a 'soft' SELL signal -- position is cash or fully hedged.) Had these crossovers occurred beneath the 200-day EMA, they would've been IT Trend Model SELL Signals.
Participation isn't showing much improvement, but we know Gold and Gold Miners (as well as Silver and Silver Miners) are doing well.
The rebound is beginning after deep declines on both MDY and IJR. They are occurring just above support at their December lows. Financials are the likely culprit to these dastardly declines. PMOs need to improve before we would start expanding your portfolio in these indexes.
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
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: NEUTRAL as of 13/13/2023
LT Trend Model: BUY as of 2/9/2023
SPY Daily Chart: Yesterday's bullish hollow red candlestick resulted in a up day as expected. The market was stretched downward sharply and it was time for a snap back.
The RSI is beginning to show signs of life and the PMO is decelerating its decline somewhat. Stochastics have turned up but remain well within negative territory. Still they tend to be an early warning indicator and a turn up is constructive. The VIX popped on our inverted scale back into the Bollinger Bands. It remains below its moving average so internal weakness is still a problem.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Lows contracted and the 10-DMA of the High-Low Differential is turning back up which is a good sign.
Climax* Analysis: There were strong climax readings on three of the the four applicable indicators today, giving us an upside initiation climax. SPX Total Volume was also strong.
*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.
To go along with the upside initiation climax we have STOs rising again which is a good indicator that this rally will continue. We now have more than a quarter of the SPX with rising momentum. That could catch on.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
We didn't get confirmation on the STOs from the ITBM and ITVM which are still in decline. We did get an oversold bottom on %PMO BUY Signals and given 28% have rising PMOs, we know that indicator will likely continue to rise out of very oversold territory.
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 bias is BEARISH in all three timeframes. Today's rally didn't change that.
We have anemic readings on %Stocks above their 20/50-day EMAs and they are well below the Silver Cross Index percentage. Similarly, we have both the Silver Cross Index and Golden Cross Index declining with not enough stocks above their 50/200-day EMAs to allow for improvement.
CONCLUSION: The market's decline pushed market indicators into oversold territory and now we are seeing signs of life with some of those indicators turning up like the STOs. A snapback rally is now upon us and given today's upside initiation climax and improvement in short-term indicators, we should expect this rally to continue into the end of this week. At this point, we don't see this leading to a longer-term rally. We need the PMO to turn up as well as intermediate-term indicators before we look for this to last past this week. The bias is still bearish.
Erin is 13% long, 2% short.
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 support@decisionpoint.com for more information!
BITCOIN
While the rally continued for Bitcoin, it fell off intraday highs in a big way after breaking above resistance at the February high. We think it is chalked up to amazingly, consumer confidence in crypto. We see it as unfounded exuberance. With the decline of highs today, we should expect more downside in the near term. Indicators are bullish so a pullback to 23,000 followed by a rally seems reasonable.
INTEREST RATES
Rates saw a rebound today. Fear seems to have pushed more investors toward Bonds and that caused rates to contract. A market rally may change that should traders shift back into stocks.
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 rebounded before testing the February low which does suggest they will continue to rise from here. However, indicators haven't firmed up yet. This seems more of a snapback condition where $TNX was stretched downward quickly and was followed by a strong rally.
DOLLAR (UUP)
IT Trend Model: BUY as of 2/27/2023
LT Trend Model: BUY as of 2/24/2023
UUP Daily Chart: Given there was no change on the Dollar today, yesterday's comments still apply:
"The rising wedge was confirmed with Friday's decline which saw continuation today. The 200-day EMA is nearby for support, but given the deterioration of all of our primary indicators, we are looking for the decline to continue."
GOLD
IT Trend Model: NEUTRAL as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: With the Dollar unchanged, Gold showed weakness today with a more than 1/2 percent decline. We aren't particularly concerned given the PMO just hit positive territory and Stochastics are above 80. The RSI is also positive. It seems GLD hit resistance and was turned away. Additionally, the last three days of strong rally needed to be digested.
GOLD Daily Chart: Discounts are contracting which means investors are less bearish on Gold. That's another sign that this rally will continue after the recent rally is digested.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners rallied again today. Participation has shot straight to the sky which has the Silver Cross Index rising and the Golden Cross Index flattening. There is now internal strength that can be exploited.
CRUDE OIL (USO)
IT Trend Model: SELL as of 2/2/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: USO is about to test the lowest support level in the trading range. Although the indicators remain bearish, we have a strong feeling that we'll see a rebound. However, on the world stage with Iran and Saudi Arabia brokering a peace accord with the help of China, we could see production increased which would keep prices low on Crude Oil.
BONDS (TLT)
IT Trend Model: SELLas of 2/21/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday's big bearish filled black candlestick hinted that Bond prices would be lower today. Early warning Stochastics did turn down and the PMO is beginning to flatten already. If we see a rally in the markets continue this week, pressure will likely be on for Bonds which provided comfort during the declines seen last week. Interest rates appear ready to rebound as well.
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.