Today the Consumer Staples Sector (XLP) had a positive PMO Crossover BUY Signal trigger as it crossed up through its signal line. As the market began to stumble, defensive areas like Consumer Staples and Utilities (XLU) began seeing some rising momentum. The bullish characteristics of the chart are the newly positive RSI and the Silver Cross Index (SCI) having its own positive crossover its signal line. We particularly like the bullish falling wedge. However, the PMO is suspect as it has been very flat. Overall, we aren't impressed with participation. While it has been improving of late, it has basically been moving sideways as far as %Stocks > 20/50/200-day EMAs. XLP could see a continuation of the current rally, but our belief is that when the market takes a turn for the worse, every sector will likely be hit hard. Be mindful and keep stops in play.
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: NEUTRAL as of 3/13/2023
LT Trend Model: BUY as of 2/9/2023
SPY Daily Chart: Yesterday we mentioned the possibility of a price bottom forming, and today we saw a breakout from the four-day cluster of candlesticks. We had very strong volume as well, which tends to confirm the move.
The PMO tipped upward and the RSI is making its way toward positive territory above net neutral (50). Stochastics are rising but are in negative territory. The VIX closed within its Bollinger Bands but had yet another puncture of the lower Band. It's taking awhile, but punctures do usually lead to rallies.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Lows contracted again which is confirming today's rally.
Climax* Analysis: There were solid, unanimous climax readings on the four relevant indicators today, giving us an upside exhaustion climax. One might think it is an initiation, but we have a very short-term rising trend that precedes today's 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 DOWN and the condition is NEUTRAL.
STOs are in agreement that this is likely a bear market rally in the making as they rise. We are also seeing expanded participation of stocks above their 20-day EMAs and most importantly, we have over 1/3rd of the index exhibiting rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The best news is that we have confirmation from the ITBM/ITVM and even a positive crossover the signal line for %PMO BUY Signals.
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.
Despite today's rally and improvement in participation, the bias remains BEARISH in all three timeframes.
We have low readings on %Stocks above their 20/50-day EMAs and they are 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: Yesterday we discussed that we didn't think yesterday's downside initiation climax would result in lower prices. We also told you that we needed to see a rising PMO and expanding participation before getting too optimistic in the short term. We now have rising short-term indicators, but most importantly, the IT indicators are confirming. With options expiration upon us, we could see some short-covering that would juice the market and likely get a bear market rally started. However, we can't forget there is still a bearish bias and participation while improving isn't particularly strong as well as the pall of an upside exhaustion climax.
Erin is 13% long, 2% short.
Calendar: End-of-quarter options expiration this week. Expect low volatility and very high SPX Total Volume tomorrow.
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Yesterday's comments still apply:
"Bitcoin is beginning to digest its strong rally. Indicators are all very bullish with a new PMO BUY Signal, positive RSI and Stochastics which should get above 80 tomorrow barring a large decline. We see consolidation and digestion continuing for a few days before it begins rising again. If indicators turn south on a big decline, we will change our bullish tune."
Rates rebounded in most cases today. The market likes lower rates and with Bonds showing some life, we do expect them to move lower or at least move sideways.
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
We mentioned that if Stochastics began rising higher we would be less bearish on yields. Support is holding well and now the RSI is headed higher. The PMO tells us to still expect a breakdown here, but things are far less bearish than they were yesterday.
IT Trend Model: BUY as of 2/27/2023
LT Trend Model: BUY as of 2/24/2023
UUP Daily Chart: The Dollar isn't doing much, but the rising trend is staying intact. The PMO is still on a SELL signal, but a positive close will likely change that given the margin is so thin between it and its signal line. Stochastics are moving higher alongside a positive RSI. While there is a rising trend, we don't expect to see the Dollar rally strongly; we'll likely continue to see it trickle upward.
IT Trend Model: NEUTRAL as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: GLD formed a second bearish filled black candlestick which implies a breakdown ahead. however, indicators are still showing strength and $GVZ has punctured its lower Bollinger Band on the inverted scale. This is likely a pause to digest the rally. Indicators are bullish. Stochastics did top, but they remain above 80 and aren't sailing lower. As long as they oscillate above 80 it implies internal strength.
GOLD Daily Chart: We don't have today's updated Discount/Premium data for PHYS, but we do know the reading is about the same today. What we want to point out is that Discounts are beginning to contract and that tells us traders are getting interested in Gold again. We expect Gold to continue to be a bright spot in the market.
GOLD MINERS Golden and Silver Cross Indexes: GDX retreated from overhead resistance today. Indicators and participation didn't really suffer and we like Gold. This should lead this group past resistance and likely to the $33.00 level.
CRUDE OIL (USO)
IT Trend Model: SELL as of 2/2/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Yesterday we wrote: "We do think a rebound is likely tomorrow based on the enormously high readings on the Crude Oil Volatility Index ($OVX)." Erin also wrote an article discussing why she believes Crude Oil will find support. Partly due to volatility, but mostly due to long-term support begin tested on the weekly chart which is also below. Stochastics are reversing which is good, but until the PMO turns over, we can't get too bullish here.
Yesterday's comments still apply:
"We decided to include the weekly chart today so that we can see where new support might lie. Interestingly, USO's low landed right on very strong support. There is still some room for $WTIC to drop lower. As bad as the daily chart looks we do find at least some comfort when we see how this support level sits on gap support from 2020, the 2021 high and end of year lows in 2022. The weekly PMO certainly doesn't inspire confidence as it dipped into negative territory. If this support level is taken out, we would look for support around $50.00."
IT Trend Model: SELLas of 2/21/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: After a bearish filled black candlestick, we got a decline as expected. We didn't count on a bearish engulfing candlestick to appear today. The indicators are still in Bonds' favor with the PMO reaching positive territory. Yields are looking shaky, but today's rebound in the 20+ year yield has us less bullish. We ultimately must expect a breakout here given the positive RSI, rising and positive PMO and Stochastics decelerating in positive territory.
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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