The Fed raised rates 25 basis points, which initially had a generally positive effect on the market. But later (about 2:45 E.T.) in his remarks Fed Chairman Powell said that Fed Members don't see any rate cuts this year. That pretty much sank the market. Here's a two-minute bar chart of today's action.
Today the Financial Sector (XLF) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL Signal. Note that yesterday XLF gapped up based once again on the fantasy belief that the Fed was going to become dovish thanks to the bank crisis. Today the gap was filled with a sharp decline. Generally price will continue in the direction it was going when it filled the gap. That means more downside.
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: NEUTRAL as of 3/13/2023
LT Trend Model: BUY as of 2/9/2023
SPY Daily Chart: Ultimately today's intraday high did test the intermediate-term declining tops trendline and poked above the short-term declining tops trendline, but the close was beneath both. In fact price lost newly found support at 395. Damage was done to numerous indicators today.
The PMO has topped beneath its signal line which is especially bearish. The RSI has dipped back into negative territory below net neutral (50). Stochastics did hold up today and continue slightly higher. The VIX spent most of the day above its moving average and that suggests a little internal strength.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Lows expanded and interestingly the 10-DMA of the High-Low Differential ticked upward. That is likely due to the slight expansion in New Highs combined with drop off effect on the moving average. Still, that indicator is in a strong negative divergence with price.
Climax* Analysis: The four eligible indicators had strong downside climaxes today, giving us a downside initiation climax. All things considered, we think this is definitely an indication of more downside to come.
*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.
The air went out of the sails of our short-term indicators. Both STOs moved lower. The fuel we had yesterday in the form of %Rising PMOs disintegrated with today's decline. There are still a quarter with rising momentum, but that is not what we'd call strength.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERSOLD.
All but the ITBM turned lower today. The ITVM confirmed today's decline by the STOs. Improvements had started on %PMO BUY Signals, but today it dropped. It is reading the same as %PMOs Rising so we know there is nearly zero chance that it will reverse.
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 market bias is BEARISH.
The intermediate-term market bias is BEARISH.
The long-term market bias is BEARISH.
The short-term bias had just turned bullish, but it is back to bearish as participation was slashed on today's decline. The Silver Cross Index was beginning to turn back up, but instead it topped beneath the signal line which is especially bearish. There are fewer stocks above their 50/200-day EMAs than those with "Golden Crosses" (50-day EMA > 200-day EMA) and both of those conditions make the long term bearish.
CONCLUSION: We alluded to the FOMC announcement causing a hiccup in what looked like a solid bear market rally. Well, it was more like a choking incident instead of a hiccup. We rely heavily on the STOs and they began moving downward today. There was a clear downside initiation climax and participation was gutted. There really is only one conclusion, more downside.
Erin is 15% long and 2% short.
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Bitcoin finally stumbled. The RSI had gotten overbought so was time for some digestion. While the RSI and Stochastics turned down, they are still located in positive territory. The PMO is decelerating somewhat and we would expect that to continue during a probable digestion phase for Bitcoin.
Rates sunk. With the market looking scary again, we will likely see the flight to Bonds increase, meaning lower yields.
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 is still holding above support, but as noted in the Yields section, we could see investors move back into Bonds with a market decline. The PMO has decelerated but is still declining. The RSI is negative and Stochastics, while they ticked up, are still in very negative territory. This support level is looking more vulnerable.
IT Trend Model: BUY as of 2/27/2023
LT Trend Model: BUY as of 2/24/2023
UUP Daily Chart: The Dollar has landed on support, but it isn't likely to hold based on the falling PMO and Stochastics. The RSI is also negative and falling. There may be a period of consolidation here, but we expect the February low to be tested.
IT Trend Model: NEUTRAL as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: During Monday's DP Trading Room, Carl speculated that the GLD rising trend line was too steep, and that we might see a pullback to set a less accelerated rising trend. GLD broke the trend on Tuesday, and today appeared to set a new trend. This has relieved some of the stress of the steeper trend, but it is still not what we would call a relaxed angle of ascent.
GOLD Daily Chart: Gold is seeing more strength against the Dollar. The Dollar is weak so the road is already smoothed and with the additional strength Gold is showing, it should continue higher.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners reawakened as Gold rallied. Even a declining market couldn't keep them down. The PMO has just moved into positive territory. The RSI is positive and rising and Stochastics are firmly above 80. Participation remains very strong with the Silver Cross Index rising quickly. The Golden Cross Index has had a positive crossover its signal line. It doesn't look like the rally is over, they have more ground they can cover.
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 rally is back on for Crude Oil, but we'd feel more bullish if it would close above the December low. The gap was technically filled so on that technical alone we should expect the breakout. The PMO hasn't quite turned up, but it is close. Stochastics are very encouraging as they curve upward. It's still early, but a breakout here would tell us it is time for USO to test the top of its long-term trading range. The Energy sector will likely begin to benefit.
IT Trend Model: BUY as of 3/17/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We have a large bullish engulfing candlestick today that suggests TLT will rally again tomorrow. As traders get more nervous about the market decline, Bonds will likely see strength. The chart is mostly neutral right now. The RSI is positive, but flat. The PMO is flat. Stochastics are flat. Based on today's candlestick and the current market environment, we would look for higher prices on Bonds.
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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