Today the S&P 500 Index (SPY) 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating an LT Trend Model BUY Signal. While 50/200-day EMA crossovers normally imply long-term trend changes, that just isn't the case this time. In fact, SPY had a 50/200-day EMA downside crossover (Death Cross) last Thursday. At the time we said, "In spite of the dramatic crossover name, we note that all three of the three EMAs are extremely close together, and a price move in either direction could generate new signal changes." These comments, unfortunately, apply for today's signal change. We can't see that anything has been resolved in any time frame.
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: NEUTRAL as of 3/13/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: Today the rally was strong and forceful, more than likely forming a breakaway gap now that price has broken away from the declining tops trendline drawn from the mid-February top. The RSI is in positive territory above net neutral (50) and the PMO is rising on a crossover BUY signal. We would definitely like to see the PMO build margin between it and its signal line.
Stochastics nearly crossed above 80 and are rising strongly now. The VIX is well above its moving average on the inverted scale. Both now confirm internal strength. We also have spotted what could be a bullish reverse head and shoulders on the chart.
Here is the latest recording (3/24):
S&P 500 New 52-Week Highs/Lows: No New Lows as expected with a slight expansion in New Highs. The 10-DMA of the High-Low Differential is rising out of near-term oversold territory.
Climax* Analysis: Today there were strong, unanimous climax readings on all four of the eligible indicators, giving us an upside initiation climax. SPX Total Volume was short of the one-year daily average, throwing a little shade on the climax day.
*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 UP and the condition is NEUTRAL.
STOs quickly reversed course today with strong readings to the upside. Notice the huge expansion in participation of Stocks > 20-day EMA and %PMOs Rising.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
IT indicators continue to confirm the short-term indicators as they rise on their own. We saw a big expansion of PMO BUY Signals today. The indicator is nearly above the bullish 50% level.
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 bias is BULLISH.
The intermediate-term bias is BULLISH.
The long-term bias is BEARISH.
We are moving the intermediate-term bias to BULLISH. The incredible expansion in participation has pulled the Silver Cross Index (SCI) upward. Given there are plenty of stocks above their 20/50-day EMAs, the SCI should continue higher. We remain bearish in the long term because there are fewer stocks above their 50/200-day EMAs as compared to the Golden Cross Index (GCI). This means the GCI could continue lower.
CONCLUSION: Today's gap up appears to be a breakaway gap. There is still the concern it could end up being a reverse island, but given the incredible improvement on participation and today's upside initiation climax, we see this as a breakaway which means upside follow-through. It is likely time to let inverse positions go. Expansion right now appears safe, but we must remain vigilant about setting stops, particularly given the possibility of a reverse island building.
Erin is 28% long, 2% short.
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BITCOIN
Surprisingly (or maybe not given we're talking about Bitcoin) Bitcoin reversed course after forming a bearish rounded top and deteriorating indicators. While this was a nice shot in the arm for Bitcoin, the indicators are still less than exciting. The PMO is flat and Stochastics have also flattened, basically revealing very little about what to expect. The RSI is positive. We still believe Bitcoin will have a hard time breaking out here given the very strong overhead resistance at 28,500 on the longer-term chart.
It makes sense that Bitcoin would begin to fail here. Major overhead resistance has been met.
INTEREST RATES
Higher interest rates continue, but it didn't bother the market much. The flight to safety in Bonds is over so we should continue to see yields rise.
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
Yesterday's comments still apply:
"$TNX continued higher. We now have a loose triple bottom pattern developing which is bullish. The PMO has flattened out of its decline and Stochastics are rising again. The RSI remains negative, but a break above the 20/50-day EMAs will fix that. That seems likely given the improving indicators."
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 3/28/2023
LT Trend Model: BUY as of 2/24/2023
UUP Daily Chart: We agree with yesterday's conclusion regarding the Dollar:
"More than likely we will continue to see more sideways consolidation. This support level is strong so we don't expect a big breakdown. Likewise, we don't see a big rally either."
GOLD
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold stalled but maintained the short-term rising trend. Unfortunately that rising bottoms trendline forms the bottom of a bearish rising wedge. The RSI is still positive, but the PMO and Stochastics are beginning to weaken. We continue to look for a pullback to about the 50-day EMA.
GOLD Daily Chart: $GOLD looks healthy. The PMO is still rising, not flattening like we see on GLD. The RSI is also positive. We aren't thrilled with Stochastics, but they flattened today and could reverse. We still believe a pullback is likely, but this also could be a pennant on a flagpole. We will err on the side of GLD and look for more short-term downside.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners paused the rally today, but the rising trend is still going strong. Participation is excellent and the Silver Cross Index is rising strongly. We are looking for a breakout from the January high.
CRUDE OIL (USO)
IT Trend Model: SELL as of 2/2/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: While USO did decline today, the PMO triggered a crossover BUY signal. Price didn't break below the 20-day EMA nor did it compromise the rising trend. Stochastics are rising nicely so we do expect the rally in Crude Oil to continue to at least the 200-day EMA where it has stumbled previously.
BONDS (TLT)
IT Trend Model: BUY as of 3/17/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Intraday price broke below support at 104, but it did close above. While that is positive, we are still looking for Bonds in general to break down. The RSI is back in negative territory and the PMO is nearing a crossover SELL signal. Stochastics are tumbling lower. The long-term rising bottoms trendline should be tested soon.
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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