Today the Dow Jones Industrial Average ETF (DIA) 20-day EMA crossed down through the 50-day EMA above the 200-day EMA (Dark Cross), generating an IT Trend Model NEUTRAL Signal. Had the crossover occurred beneath the 200-day EMA it would have been an IT Trend Model SELL Signal. DIA has lost support at the 200-day EMA. Like all indexes, the PMO is in decline. There is one tiny piece of good news and that would be the small positive divergence between price lows (declining) and OBV lows (rising). The loss of support accompanied by this signal has us thinking a decline is more likely than an upside reversal.
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 Dow may have been up, but the SPY finished lower. There is bad news all over this chart with the exception that price did hold the support zone between 387.00 and 394.00. The RSI remains negative and not oversold. The PMO continues its decline.
Internal weakness is visible as Stochastics decline beneath 20 and the VIX holds below its moving average on the inverted scale.
Here is the latest recording (2/27):
S&P 500 New 52-Week Highs/Lows: New Lows expanded, but we did see a few New Highs as well. The 10-DMA of the High-Low Differential is moving lower which is generally not good for the market.
Climax* Analysis: There were no climax readings today.
*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.
Another decline and yet rising STOs again today. Erin hinted on Twitter (@_decisionpoint) this could be a sign of an upside reversal ahead.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
However, what she did not reveal (data wasn't available) is that IT indicators are continuing lower. We need to see a reversal on the ITBM/ITVM to confirm what we're seeing on the STOs before we go 'all in' on an upside reversal call. One piece of news is that we now have more PMOs Rising (14%) than %PMO BUY Signals (11%). This means %PMO BUY Signals could reverse higher as soon as tomorrow.
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 overall market bias is BEARISH.
As noted previously, we don't need to separate out the timeframes because all three timeframes show bearish biases. We have a very low number of stocks above their 20/50-day EMAs and no improvements are being made. The Silver Cross Index is falling and will continue to fall as long as we keep seeing fewer stocks above their 20/50-day EMAs. The Golden Cross Index has turned down and could drop below its signal line very soon given there are far fewer stocks holding above their 50/200-day EMAs.
CONCLUSION: For the second day in a row, STOs have risen while price has dropped. This calls for an upside reversal. However, intermediate-term indicators are not confirming as they are all declining. Participation also needs to improve more so we can get rid of the bearish bias in the short term. It is currently too low to expect anything positive out of the Silver Cross Index. Given the dichotomy between the STOs and ITBM/ITVM, we would expect to see this decline soften into consolidation phase. We are on the look out for a short-term upside reversal, but the indicators need to do more work before we can start looking for a new rally. For now, expect consolidation at best.
Erin is 22% exposed.
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BITCOIN
Bitcoin is traveling within a large bearish rising wedge. The pattern is close to confirming, but we don't have much of a breakdown. Support is currently holding at 22,500, but the PMO and Stochastics are very bearish. We expect a breakdown.
INTEREST RATES
Rates continue to trend higher after forming, and in some cases executing, bullish double-bottom chart patterns. The rising rate environment should continue.
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 had a strong day with a nearly 2% gain. The double-bottom has now been confirmed with a decisive (3%+) breakout. The upside target of the pattern would take $TNX back to the October high, if not further.
DOLLAR (UUP)
IT Trend Model: BUY as of 2/27/2023
LT Trend Model: BUY as of 2/24/2023
UUP Daily Chart: UUP is losing support at the January high. The RSI is positive, but is falling rather quickly. It could reach negative territory below net neutral (50) soon. Stochastics are also moving lower. We've been bullish on the Dollar, and still are, but this does look very toppy. The PMO is topping already. A decline seems likely with a likely test of the 200-day EMA. We don't see a collapse in the Dollar, just a small pullback.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold rallied on the Dollar's decline. Gold appears ready to rally. If price can get back above the 20-day EMA, the "Dark Cross" of the 20/50-day EMAs may be avoided.
GOLD Daily Chart: The indicators on Gold are getting favorable again. The RSI is rising and Stochastics have moved above 20. More importantly, we see that Gold's strength against the Dollar is beginning to increase. Given the Dollar's toppy chart, we would look for Gold to rally a bit longer.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are back on the move. Participation is improving quickly as more stocks rise above their 20/50/200-day EMAs. Stochastics have moved back above 20 and the RSI is rising out of oversold territory. Given Gold looks pretty good and the market could be on the cusp of a short-term reversal, GDX has potential to move much higher. The PMO hasn't turned up yet so this would be an early entry. We've certainly seen rallies fail quickly on Gold 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: The indicators are finally hinting that Crude Oil is likely to rally to at least the February top, if not the January top. Today's bullish engulfing candlestick also hints at more upside. The RSI is now in positive territory and the PMO is rising. Stochastics are a bit limp, but rising nonetheless.
BONDS (TLT)
IT Trend Model: SELLas of 2/21/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT lost its intermediate-term rising trend today. Support is still available at the December low, but given the bullish 20-year yield, we don't expect it to hold. Confirming this line of thinking is a negative RSI, declining PMO and falling Stochastics that are already below 20.
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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