The regional bank failures led to a swift and painful decline for the Regional Banks ETF (KRE). After scrambling, the big banks came mostly to the rescue. It was done to prevent further problems, but mainly to reestablish confidence in the system. The FOMC penned a letter on Sunday to reinforce the position that this isn't a failure of our financial system.
Kristina Hooper, Chief Global Market Strategist at Invesco wrote an excellent article that I found on LinkedIn. She explains that this isn't a systemic problem and any new problems that are identified are being quickly dealt with. All of this positioning by big banks and the Fed should allay fears and that seems to be what is happening right now.
Obviously the rally didn't really improve the chart much, but it does suggest that a bottom may be in, particularly if the market continues to rally. A clear problem is participation is virtually zero and the Silver Cross Index is reading at less than 1%. However, there are a few improvements that should be noted. The PMO has halted its decline and positive volume is starting to come in based on the OBV. The RSI has left oversold territory and Stochastics have turned up slightly.
We're not saying this is the bottom as pretty much everyone agrees this isn't over yet and more banks are likely to make news. What we are saying is that inverse positions on this group or the Financials may need to go by the wayside. While a breakdown is possible, it appears traders are dismissing the issue and are swooping in to possibly profit from beat down stocks.
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: The short-term declining tops trendline drawn from the mid-february top, is being tested. After that will be the declining trend drawn from the February high. Price traded above all key moving averages today. The RSI is now back in positive territory above net neutral (50). The PMO has turned up and is ready to go in for a crossover BUY signal.
Stochastics are back in positive territory and the VIX managed to get back above its moving average on the inverted scale. Both suggest new internal strength.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: Yesterday's comments still apply:
"New Lows are contracting and therefore confirming the short-term rising trend. However, we do note that the 10-DMA of the High-Low Differential is falling below zero, setting up a negative divergence with price."
Climax* Analysis: Of the four eligible indicators, only SPX Net A-D didn't have a climax reading, so today was an upside exhaustion 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 rising and are not at all overbought. They are reaching positive readings we haven't seen since the January rally. More than half of the stocks now have rising momentum. That will definitely provide fuel to keep the rally going.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERSOLD.
IT indicators continue to confirm short-term indicators as they rise out of oversold territory. We expect a steep recovery ahead for %PMO Crossover BUY Signals given 59% have rising PMOs and only 28% have 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.
The short-term market bias is BULLISH.
The intermediate-term market bias is BEARISH.
The long-term market bias is BEARISH.
We now have more stocks above their 20/50-day EMAs than we have "Silver Crosses" (20-day EMA > 50-day EMA). This means we should see the Silver Cross Index rise very soon as those 20-day EMAs are dragged up through the 50-day EMAs. There are fewer stocks above their 50/200-day EMAs than those with "Golden Crosses" (50-day EMA > 200-day EMA).
CONCLUSION: The technicals continue to improve with nearly every DP indicator rising. IT indicators are continuing to confirm short-term indicators, but most important are the rising Swenlin Trading Oscillators (STOs). They've been great predictors of market behavior of late and based on their bullish configuration we do expect the rally to continue. We could see a hiccup tomorrow based on the upside exhaustion climax and the FOMC rate decision.
Erin is 13% long and 2% short.
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Yesterday's comments apply:
"The rally in Bitcoin is softening, but given current investor sentiment that Bitcoin and Gold are 'stores of value' or at least a better (in their minds) alternative to the Dollar, we see it keeping up the rally. The indicators are strong. The RSI is slightly overbought, but given how overbought it can stay (look at January), we don't see this as a negative. The PMO is rising strongly and isn't overbought. Stochastics are oscillating above 80. While price has gotten stretched, we do see Bitcoin moving higher from here."
Rates are beginning to climb again which could put more pressure on regional banks.
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 could be setting up a triple-bottom chart pattern. Support is holding but we have a few problems left to deal with before thinking about a bullish chart pattern like a triple-bottom. First is the "Dark Cross" of the 20/50-day EMAs. The PMO has also moved below the zero line and Stochastics are well-below 20. The RSI is negative. This appears to be an excellent area for an upside reversal, but until indicators firm up, we are cautiously bullish.
IT Trend Model: BUY as of 2/27/2023
LT Trend Model: BUY as of 2/24/2023
UUP Daily Chart: The Dollar closed below its 200-day EMA today making it vulnerable to a "death cross" of the 50/200-day EMAs. We expect it to materialize given the negative RSI, falling PMO and Stochastics quickly dropping below 20. The next level of support lies at 27.75.
IT Trend Model: NEUTRAL as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: The Dollar fell slightly today and instead of GLD moving up slightly to keep the inverse correlation strong, it tumbled almost 2%. We noted yesterday that the rising bottoms trendline was very steep and a new rising trend was likely going to be established with a breakdown. We believe that is what is occurring now.
GOLD Daily Chart: The indicators were definitely not happy with $GOLD's 2.1% drop today, but the PMO is still rising. That will change if Gold pulls back further. Discounts pared back considerably which tells us investors are finally getting more bullish on Gold. That could keep the rally going.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners were hit hard by the decline in Gold. Even though it fell over 3.5%, the internals really weren't shaken at all. The RSI is still positive, the PMO is almost in positive territory and Stochastics remain above 80. We also note robust participation and a strongly rising Silver Cross Index. The Golden Cross Index just moved above its signal line. This pullback could offer latecomers a nice entry.
CRUDE OIL (USO)
IT Trend Model: SELL as of 2/2/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: We had a feeling that Crude Oil would find support here. The indicators aren't completely bullish, but they are showing enough improvement to look for the gap from last week to be covered. The RSI is rising and so are Stochastics. Neither are in positive territory, but it is encouraging.
IT Trend Model: BUY as of 3/17/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday we opted to look for a breakout on TLT from the symmetrical triangle. Apparently we chose poorly, but indicators weren't too enlightening yesterday. Now the PMO has topped and we must say that the yield chart is looking bullish. We will look for a test of the bottom of the current trading channel at 99.
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.
Helpful DecisionPoint Links:
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DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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