This week the Financial Sector (XLF) had a bank-led selloff, but we can see that it began the week before. We note that price seems to have found support at around 31.00, but we would caution that it is unlikely that the bank failure issue has been resolved yet. (Last Friday in the DecisionPoint Diamonds Recap, Erin discussed a few ETFs that could take advantage of further weakness in this sector, SEF and SKF.)
Today T-Bonds (TLT) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model "Silver Cross" BUY Signal. We'll discuss this in the section on Bonds.
Also, the Russell 2000 ETF (IWM) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating a LT Trend Model SELL Signal. Regional banks are taking a beating and likely this is why IWM looks far worse than the SPY.
Finally, the Industrial Sector ETF (XLI) 20-day EMA crossed down through the 50-day EMA above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. (NEUTRAL is a 'soft' SELL signal -- position is cash or fully hedged.) The sector is seeing major weakness under the surface given less than 18% of stocks have price above their 20/50-day EMAs. The RSI is negative, Stochastics are falling and the PMO is falling below the zero line. The OBV's decline is confirming this breakdown. Price has found support at this level previously, but we need expanding participation in order to get a bottom.
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
For the Week:
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 the Week:
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: Yesterday's breakout gave way to today's pullback into a resumption of a tortured trading range. Quadruple Witching Options Expiration resulted in ultra-high volume today. Remember, we don't attribute the high volume to blowout/blowoff events. Today's candlestick was "inside" yesterday's candle body. This signifies indecision; the short-term rising trend is intact, but price is not getting above key moving averages
The PMO which had turned up yesterday, has already reversed course. The RSI was unable to reach positive territory and Stochastics have halted their ascent. The VIX managed to stay above its lower Bollinger Band on our inverted scale, but it is oscillating below its moving average so internal weakness is still a problem.
SPY Weekly Chart: This week's rally didn't reverse the declining trend and the weekly PMO continues lower with a negative weekly RSI that is below net neutral (50).
New 52-Week Highs/Lows: New Lows contracted this week and that confirms the very short-term rising trend.
Climax Analysis: Yesterday's upside exhaustion climax seems to have called the reversal. Today was almost an equal reversal setup with strong downside climax readings on all four relevant indicators. One caution we must point out is that EOQ options expiration pumped volume numbers, as usual, so we have reason to question volume indicator climaxes, but they are ratios which alleviates some of those concerns. We'll still settle in with today being a downside 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 UP and the condition is NEUTRAL.
In spite of today's big decline, the STOs continue higher. This is good news for a bear market rally on tap. However, we need more stocks with rising momentum to get it to start on the right foot. Still, we find it bullish that we didn't lose that much rising momentum on a decline of this magnitude.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The ITBM and ITVM began to decline again today, so we no longer have confirmation on our short-term indicators. We did, however, get more PMO BUY Signals on a decline. That indicator can still rise more given 26% have rising momentum and only 20% have BUY signals.
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 INDUSTRY GROUPS ADDED! We have begun collecting SCI and GCI data for four new sectors: Biotechnology (IBB), Regional Banking (KRE), Retail (XRT), and Semiconductor (SMH).
This week no sector or industry group IT Biases that were positive. Participation is mostly sinking throughout the market with a few exceptions.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
Semiconductors hold the highest Silver Cross Index percentage, but it did lose 8 percentage points this week. Still that is very good participation within that group. Notice that Technology is in third place, a major reason is due to the success of Semiconductors this week.
Not surprisingly, Regional Banks (KRE) is in last place with only 1% of stocks having a 20-day EMA above the 50-day EMA. As noted in the opening, we think this industry is still highly vulnerable to more decline.
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 Golden Cross Index goes to Semiconductors as well. Internal strength is still very positive. Again Regional Banks are the loser.
The following chart objectively shows the depth and trend of participation in three time frames.
The market bias is BEARISH.
The short-term bias is BEARISH.
The intermediate-term bias is BEARISH.
The long-term bias is BEARISH.
We determine market bias based on participation of stocks above their 20/50/200-day EMAs as compared to the Silver Cross Index and Golden Cross Index percentages. We have less than 23% with price above their 20/50-day EMAs, that is short-term bearish. Those percentages are below the Silver Cross Index reading so it will continue lower giving us a bearish intermediate-term bias. Long term, we have fewer stocks above their 50/200-day EMAs as compared to the Golden Cross Index percentage so the long-term bias is also bearish.
CONCLUSION: Next week, Wednesday, the Fed makes the next interest rate announcement. Last week Chairman Powell said that the rate hikes will continue, but the banking crisis that developed over the weekend has resulted in speculation that rate hikes will abruptly halt. We don't have an opinion, but we do not believe that the banking crisis has been resolved yet. This will weigh heavy on the SPY and small-/mid-cap indexes like IJH and IWM. However, the market is bifurcated. The Technology sector held up this week with the Nasdaq up +4.41% in comparison to the SPX which finished up only +1.44%. We believe that area of the market will continue to show strength so a bear market rally isn't out of the question. STOs certainly bolster that position. However, with IT indicators not confirming and a new downside initiation climax, we must remain cautious.
Erin is 13% long, 2% short.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact email@example.com for more information!
Bitcoin had a great week while the Banks were under pressure. Some are touting investor confidence in crypto based on the banking crisis. It is acting like an inverse to Banks. Indicators are strong and this week's breakout suggest we will see more upside for Bitcoin.
This chart is to show where some of the support/resistance lines come from. 30,000 is the next target.
Interest rates took a tumble this week giving Bonds a shot in the arm. Should the FOMC abort its rate hike, these yields could fall further making Bonds even more attractive.
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 joined other yields in a big decline this week. Support is holding at 3.4%, but the RSI is negative and the PMO has now hit negative territory. Stochastics have dipped below 20. We see $TNX breaking down next week or at best consolidating above this current support level.
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 fell from 6.73 to 6.60.
IT Trend Model: BUY as of 2/27/2023
LT Trend Model: SELL as of 1/31/2023
UUP Daily Chart: The Dollar set up a rising trend channel this week, but ultimately didn't do much. The RSI just moved into negative territory and the PMO triggered a crossover SELL signal this week. Stochastics are hinting that the rising trend channel will hold up, but until the PMO turns around, we remain neutral to bearish on the Dollar.
This sure looks like a bearish rounded top on the one-year daily chart.
UUP Weekly Chart: This week the weekly PMO turned down below its signal line which is especially bearish. As noted above, it appears a rounded top has developed. More than likely we will see a test of support at 27.75.
IT Trend Model: BUY as of 11/14/2022
IT Trend Model: NEUTRAL as of 3/7/2023
GOLD Daily Chart: Gold took off this week likely spurred on by the banking crisis. Today saw a strong breakout above overhead resistance. The RSI is overbought, but we expect it to remain so. With the Dollar looking weak and the strength of Gold to the Dollar building alongside a strongly rising PMO that isn't overbought, we expect this rally to continue.
$GOLD also saw a breakout today. Interestingly we saw a pop in discounts on PHYS. This generally means that investors are bearish on Gold. We don't think investors are bearish necessarily so we actually like seeing this pop as it implies higher prices on the way.
GOLD Weekly Chart: The weekly chart improved greatly on this week's rally, but we do note that price is up against overhead resistance right now. This could lead to a digestion phase. However, the weekly PMO has bottomed above its signal line which is especially bullish. We are expecting Gold to continue to rally with a possible pause early next week to digest this week's strong rally.
GOLD MINERS Golden and Silver Cross Indexes: With the rally in Gold, Gold Miners have enjoyed quite a rally. Today saw another breakout above overhead resistance. Participation is strong and Gold is strong. Gold Miners will likely test prior January highs. The RSI is positive and amazingly not overbought so that is a good sign. Additionally the PMO is rising on a BUY signal and the Silver Cross Index just saw a positive crossover its signal line. This is definitely a pocket of strength.
CRUDE OIL (USO)
IT Trend Model: BUY as of 3/17/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Erin wrote a free article this week that subscribers got to see three times (we apologize for that). While the daily chart is ugly, there is hope on the weekly chart. The daily chart does show price holding on support after it broke down through a long-term trading range. Indicators are terrible, but the RSI is quite oversold and many times that will lead to some upside. We aren't bullish on Crude Oil; we can't be based on this chart. But...
USO/$WTIC Weekly Chart: ...the weekly chart shows strong support being met. The one problem USO has is that $WTIC still hasn't reached its next support level. The weekly PMO turned vertically down. It's not a bullish picture, but there is some hope. We wouldn't be holding Energy positions on hope. Be careful here. While a reversal could gel here, all indicators still point to more decline.
IT Trend Model: BUY as of 3/17/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: As noted earlier, yields tumbled this week, but TLT really didn't take advantage overall as it finished the week up +1.19%, and let's face it, had it not had such a good day today, TLT would've finished the week down. Indicators are positive with the RSI above net neutral (50). The PMO moved into positive territory this week and Stochastics have turned up in positive territory. A breakout should occur here.
You can see TLT is at the top of a trading range. Today's Silver Cross of the 20/50-day EMAs also bolsters the bullish case for Bonds right now.
TLT Weekly Chart: The weekly indicators also favor a breakout. The weekly PMO is accelerating its rise and the weekly RSI hit positive territory this week. We do note the 20-year yield hasn't reached support yet. We believe yields will test that support level so we should see a breakout for TLT.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
(c) Copyright 2023 DecisionPoint.com
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:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.