The market appears to be in reversal mode. All of the sectors appear to be coming around, but a few are looking particularly interesting. We decided to review the Energy (XLE) sector as we noted yesterday's breakout covered the gap previously set a few weeks ago. Typically when gaps are covered, you will see a continuation of the move.
The participation numbers have certainly jumped. We now have far more stocks above their 20/50-day EMAs as compared to those with "Silver Crosses" (20-day EMA is above 50-day EMA). This means that the Silver Cross Index (SCI) has an opportunity to improve and move into a more comfortable area above 50%. It would also mean a possible positive crossover for the Silver Cross Index above its signal line.
The long term isn't quite so positive. With participation of stocks above their 50/200-day EMAs being much lower than the Golden Cross Index (measure how many stocks have a 50-day EMA above their 200-day EMA or a "golden cross"), the Golden Cross Index is doomed to continue lower.
Overall we like the Energy sector. The one problem it has is that most of the stocks are related to Crude Oil. We'll look more closely at Crude later, but it is in a large trading range. We believe that XLE will also be stuck in a trading range. That still means an over 7%+ move possible before it hits overhead resistance. A breakout would be great, but until Crude decides to break out of its range, we believe that XLE will be stuck in its own trading range.
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
For Today:
For the Week:
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.
For Today: 
For the Week:
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: Yesterday's strong rally pushed price back above prior support at 400. The rally also moved price back above all three key moving averages. Indicators are gelling right now too. The RSI is now back in positive territory above net neutral (50) and the PMO has ticked back up.
Internal strength is improving as we see the VIX well above its moving average on the inverted scale and Stochastics rising again.
SPY Weekly Chart: This rebound couldn't have come at a better time. It keeps the bull market rising trend intact. The weekly PMO is beginning to accelerate higher.
New 52-Week Highs/Lows: New Highs popped yesterday with negligible New Lows. This wasn't enough to switch the direction of the 10-DMA of the High-Low Differential, but it is encouraging nonetheless.
Climax Analysis: There were unanimous climax readings on the four relevant indicators today, giving us an upside initiation 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.
The STOs called it. They were rising on two days of market decline. They are now back in positive territory with plenty of room to the upside to accommodate a rally. We now have a bullish 51% of stocks with rising momentum and a clear improvement in participation of stocks above their 20-day EMA.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERSOLD.
It finally happened! Intermediate-term indicators are finally confirming the rising short-term indicators. We've included the thumbnail so you can better see the reversal. Given so many more stocks have rising momentum, we should see %PMO BUY signals spike soon.
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PARTICIPATION and BIAS Assessment: The following table 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 following table summarizes participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation. There are three groups: Major Market Indexes, Miscellaneous Sectors, and the eleven S&P 500 Sectors.
NEW SECTORS ADDED! We have begun collecting SCI and GCI data for four new sectors: Biotechnology (IBB), Regional Banking (KRE), Retail (XRT), and Semiconductor (SMH).
The strongest IT Bias belongs to Real Estate (XLRE) with a +23. This by no means tells us XLRE is strong. Looking at the values of the SCI and GCI sitting at 63 and 40 respectively is not bullish. XLRE lost 24 percentage points on the SCI last week; this is what is causing the huge difference between the SCI and GCI.
The weakest IT Bias is in Energy (XLE). This is caused because so many stocks have not lost support at 50/200-day EMAs after the strong rally last year. The GCI consequently remains very high. Unlike XLRE, its SCI gained percentage points.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
The strongest SCI belongs to Semiconductors (SMH). This is leftover from the rally out of the recent bear market low when growth stocks were leading the charge. It has lost 4 percentage points on the SCI, so it is a sector that has weakened this week, not gained strength.
The weakest SCI is on XLU. This sector has been beat down and continues to lose percentage points on both the SCI and GCI. It didn't benefit from the bear market rally as it is one of the most defensive areas of the market and growth led the way.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
The strongest GCI belongs to XLE. As noted earlier, XLE enjoyed a lengthy rally in October and consequently most of the stocks leap frogged their 50/200-day EMAs and triggered golden crosses. The GCI actually lost points, but XLE remains in the top spot.
The weakest GCI goes to XLC. This sector led the way out of the bear market low, but it was so beat down previously that not all of the stocks were able to get above both their 50/200-day EMAs. The sector has spiraled lower, but did have an interesting reversal Friday.
The following chart objectively shows the depth and trend of participation in three time frames.
The market bias is NEUTRAL.
The short-term bias is BULLISH.
The intermediate-term bias is BEARISH.
The long-term bias is BEARISH.
The improvement in participation of stocks above their 20/50-day EMAs have us bullish in the short term. While we are optimistic regarding the intermediate term, we still have an SCI in decline and there are fewer stocks above their 20/50-day EMAs than those with silver crosses, meaning the SCI will continue to slide. The GCI had a negative crossover this week, coloring the long term bearish.
CONCLUSION: We can finally get bullish in the short term given the ITBM/ITVM have turned up and participation is expanding in the short term. The STOs gave us excellent notification that a reversal might be on the horizon, but we couldn't get that bullish until the ITBM/ITVM turned back up. The PMO has turned back up and based on the weekly chart, price has bounced off the bear market rally rising trend. Friday's upside initiation climax is the icing on the cake. We see this a bullish opportunity for shorter-term traders, but advise caution in the intermediate term until the Silver Cross Index stops sliding or turns back up.
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BITCOIN
Bitcoin executed the bearish rising wedge pattern with gusto. It was a decisive (3%+) breakdown. The pattern suggests price could drop to the 18,500 level, but we need to see a breakdown below current support at the 200-day EMA and 22,000 before we bank on it. There is a new bearish double-top that would be confirmed on a breakdown below the February low or confirmation line. The bias is clearly bearish on Bitcoin.
This chart is to show where some of the support/resistance lines come from.
INTEREST RATES
Yields finished the week down or mostly unchanged. This has the appearance of a pause before another run higher. We say this because the double-bottom patterns haven't fulfilled their upside targets (height of pattern added to the confirmation line at the middle of the "W").
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
As noted above, rates finished mostly unchanged this week. After a big pop yesterday, $TNX formed a reverse island on today's gap down. The double-bottom pattern has executed so we continue to look for the October high to be tested. Indicators support this thesis with the RSI above net neutral (50), the PMO rising and Stochastics lingering above 80.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount. As buying power has been shrinking, home prices have come under pressure.
--
This week the 30-Year Fixed Rate rose from 6.32 to 6.50.
DOLLAR (UUP)
IT Trend Model: BUY as of 2/27/2023
LT Trend Model: SELL as of 1/31/2023
UUP Daily Chart: UUP has formed a bearish rising wedge that suggests a breakdown ahead. Indicators are mixed. Stochastics are dropping below 80 suggesting a possible decline ahead, but the RSI and PMO haven't broken down yet. We see a breakdown ahead for the Dollar. Global firms tend to benefit from a falling dollar and that could help fuel this short-term rally.
UUP Weekly Chart: The Dollar finished lower on the week, but the weekly chart remains bullish for the intermediate term. The weekly RSI is positive (albeit falling now) and the weekly PMO was unchanged on the week.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GOLD Daily Chart: Gold benefited from the Dollar's weakness on Friday with a strong move to the upside. Price has now been pushed back above both the 20/50-day EMAs, preventing a "Dark Cross" of those moving averages. Stochastics are rising strongly and the RSI is back above 50, not to mention the PMO is turning back up too.
$GOLD didn't close above its 20-day EMA, but it remains above its 50-day EMA. If that stays above the 50-day EMA, a "Dark Cross" of the 20/50-day EMAs could be avoided. We note that Gold is beginning to show strength against the Dollar.
GOLD Weekly Chart: The weekly chart also suggests that Gold could be ready to rally again. Primary are the weekly RSI and weekly PMO turning up. Price also managed to bounce off support at the 43-week EMA and was able to move above the 17-week EMA.
GOLD MINERS Golden and Silver Cross Indexes: With Gold showing some strength, Gold Miners have managed a bounce off support at 27.00. Price is still below all three key moving averages, but indicators and participation have improved greatly. The Silver Cross Index ticked slightly higher and while GDX isn't above key moving averages, many Gold Miners are seeing price above all three key moving averages. We would look for a move to 30.00 for GDX.
CRUDE OIL (USO)
IT Trend Model: SELL as of 2/2/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Friday saw a giant bullish engulfing candlestick on USO. Price managed a close above the 200-day EMA and indicators are looking excellent. The RSI is rising, positive and not overbought. The PMO just had a positive crossover and Stochastics are rising in positive territory. We also saw a strong pop on volume. We've been lukewarm on USO and remain so primarily since price is confined to a trading range. Short term, we do expect Crude to move higher, but suspect that price will be turned away again, maybe not at 72, but at 76 to 78. That would mean an 8% to 10% gain which is nothing to sneeze at, but on the way up we could see choppy waters.
The one-year daily chart is very encouraging. The long-term declining trend was broken this week. Additionally we see a new weekly PMO crossover BUY signal. The RSI and Stochastics are rising in positive territory above net neutral (50). The top of the longer-term range is 77.50.
USO/$WTIC Weekly Chart: The weekly chart is unhelpful. The weekly RSI is flat and neutral. The PMO is flat with no crossover. While it would be good to see an upside crossover, it really looks like it would be caused by sideways 'drift'. If we see a more decisive crossover we would see USO possibly testing that 77.50 area on the one-year daily chart.
BONDS (TLT)
IT Trend Model: SELLas of 2/21/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: After Thursday's ominous break of the rising trend, TLT righted the ship with a move back above the intermediate-term rising bottoms trendline. The bounce also occurred on support at 99.00. The indicators aren't yet on board, but they are certainly seeing improvement with the RSI and Stochastics rising with a PMO that does look ready to turn back up.
What is somewhat unfortunate, besides a rising rate environment, is the symmetrical triangle on the one-year daily chart. These are continuation patterns. This means that the triangle should resolve in the direction of the prior trend. That's not good for TLT which was in a strong declining trend before forming this triangle.
TLT Weekly Chart: There is a clear bearish double-top on the weekly chart. More troubling is the topping weekly PMO. Should the double-top pattern confirm with a drop below the confirmation line at the middle of the "M", the minimum downside target would take price to last year's low. We remain bearish on Bonds.
Have a great weekend!
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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