Today the Financial Sector (XLF) 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. (A NEUTRAL Signal is a soft SELL Signal, meaning that the position is in cash or fully hedged.) Part of the Financial sector's problems is attributed to the Silvergate and Silicon Valley Banks and their entanglement with crypto. It's another collapse that took all banks into the basement. It fits the analogy of "throwing the baby out with the bathwater". This crash is likely to follow-through given the lack of participation within this sector. We now have zero stocks above their 20-day EMA and a mere 6% above their 50-day EMAs. We expect XLF to test support at 31.00 if not 29.00.
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 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: BUY as of 1/12/2023
LT Trend Model: BUY as of 2/9/2023
SPY Daily Chart: As we expected given yesterday's big bearish engulfing candlestick the market continued the decline. We didn't expect the velocity of the decline today. The PMO is now in negative territory and the RSI is tumbling lower in negative territory below net neutral (50).
The VIX closed beneath the lower Bollinger Band after venturing toward a reading near 30. This implies a great deal of internal weakness.
SPY Weekly Chart: The "bull market" rising trendline was compromised with a decisive 3%+ breakdown. The weekly PMO has now topped and the weekly RSI is now in negative territory. This isn't likely the end of the decline.
New 52-Week Highs/Lows: New Lows expanded as expected, but note that they really aren't oversold at all. The 10-DMA of the High-Low Differential dropped below zero.
Climax Analysis: Today there again were unanimous climax readings on the four relevant indicators, giving us another downside exhaustion climax. SPX Total Volume expanded to a point to where we may have seen a final downside blowout. With two consecutive exhaustion days, we should be looking for a bounce. The VIX puncture bolsters that thesis.
*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 OVERSOLD.
There is no denying that all of these indicators are oversold. In the case of %Stocks > 20-day EMA and %PMOs Rising, they are extremely oversold. Don't get too excited yet, these indicators have actually seen lower readings.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
We are listing intermediate-term indicators as oversold, but in reality, the ITBM and ITVM have plenty of room to the downside to get far more oversold. %PMO BUY Signals is at a low 8%, but given only 3% have rising PMOs, that will get even more oversold. The relatively good news is that %PMO Crossover BUY Signals don't generally stay oversold for too long.
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 goes to Real Estate (XLRE). This may seem counter-intuitive given XLRE is probably second place in most bearish sector behind Financials (XLF). The IT Bias is only +10 because of the decimation of the Silver Cross Index combined with a mediocre Golden Cross Index. We don't see XLRE as strong.
The lowest IT Bias goes to Gold Miners (GDX). This is due to a Golden Cross Index not losing as much ground as the Silver Cross Index.
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 (SMH) holds the top spot on the SCI list. This group mostly held its own this week until Thursday, but we can see the SCI, while the highest, lost 8 percentage points this week.
We discussed Gold Miners above. After attempting a rally, it has begun to turn down again. The SCI was already beaten down by the decline out of the highs.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
Energy (XLE) still has the highest reading for the Golden Cross Index, but we note it did lose 5 percentage points this week, so we don't think of XLE as "strong" in the long term.
Communication Services (XLC) led the bear market rally, but has quickly faded. XLC lost 20 percentage points on its SCI and 4 percentage points on its GCI so it is getting weaker and weaker.
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.
With only a faint heartbeat on %Stocks above 20/50-day EMAs, the short term is clearly bearish. The Silver Cross Index is free falling now. The GCI had a negative crossover and with much fewer stocks holding above their 50/200-day EMAs, we know it will continue to tumble.
CONCLUSION: The market basically crashed this week and given the weak internals, we expect more downside. However, we do have a strong continuation of yesterday's downside exhaustion climax. The VIX and this climax suggest a snapback that could offer an opportunity to sell into strength before the decline continues. This wouldn't likely lead to a lasting rally based on our very negative indicators. Erin will be adding a hedge next week and likely let go of her positions on any strength.
Calendar: Next week is end-of-quarter options expiration, meaning we should expect low volatility toward the end of the week. The very high volume we will see on Friday is related to EOQ options expiration, and is normal. It should not be attributed to confidence, fear, or other market phenomena.
Erin is 25% long, 0% short.
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We're now looking at a confirmed double-top after the bearish rising wedge executed. The confirmation line is the February low. The minimum downside target of the pattern would take price to the next support area between 17,500 and 18,200. That seems highly likely given the very negative RSI, newly negative PMO and Stochastics flatlining in the basement.
This chart is to show where some of the support/resistance lines come from.
Yields dove lower to finish the week, but it did nothing to calm investors who were already in the throes of a vicious decline.
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
The 10-year yield held support for days, but it finally opted to bust the bullish double-bottom pattern and careen lower. The RSI has quickly dropped into negative territory and the PMO triggered a crossover SELL signal today. Stochastics are moving vertically downward in negative territory. With a likely flight to the safety of Bonds, rates will probably continue to move lower.
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 6.50 to 6.73.
IT Trend Model: BUY as of 2/27/2023
LT Trend Model: SELL as of 1/31/2023
UUP Daily Chart: UUP dropped below the bearish rising wedge, but it did form a hammer-like candlestick which is bullish. However, the PMO topped today and Stochastics made their way below 80. The RSI may still be positive, but we do expect the Dollar to consolidate at a minimum, if not decline below the 200-day EMA.
UUP Weekly Chart: The weekly chart doesn't look bad so any decline in the Dollar could be short-lived. The weekly PMO is rising and the weekly RSI is positive. Price paused this week, but there is still a short-term rising trend that is mostly intact.
IT Trend Model: BUY as of 11/14/2022
IT Trend Model: NEUTRAL as of 3/7/2023
GOLD Daily Chart: The Dollar was down, but not as much as the Gold rally would've suggested. Gold gained significant relative strength against the Dollar as the Dollar was only down -0.63% and Gold, instead of rising just 0.63%, soared 2.16%. We have a short-term double-bottom that was confirmed with today's breakout. Volume was incredible today suggesting investors are looking to Gold as a possible safe haven (along with Bonds) while the market crashes.
The PMO is rising again and the RSI managed to reach positive territory above net neutral (50). Stochastics managed to inch into positive territory as well. The upside target of the double-bottom pattern would be around 1920.
GOLD Weekly Chart: Gold stayed above longer-term support at the 43-week EMA and 1800. The weekly RSI has started rising in positive territory, but more exciting is the weekly PMO which is turning up, forming an especially bullish bottom above the signal line.
GOLD MINERS Golden and Silver Cross Indexes: Gold's rally likely helped Gold Miners today, but they weren't up as high as Gold given the decimation of the rest of the market. They formed a shooting star today as the wick on the OHLC bar is quite long. That is a bearish formation. We did see a bit of a rise in participation of stocks above their 20/50/200-day EMAs, but ultimately that kind of participation isn't likely to lift this ETF much higher if at all. Should Gold continue to rally it will likely prevent a precipitous decline for GDX. Still, we aren't bullish on this group yet.
CRUDE OIL (USO)
IT Trend Model: SELL as of 2/2/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil continues to travel in its trading range. It was one of the bright spots today alongside Gold. Today's candlestick tells us today was an "inside" trading day for USO. This denotes indecision, so we wouldn't count on the rally to take hold. The PMO is in agreement as it had a crossover SELL signal today below the zero line.
There was an attempt this week to break the intermediate-term declining trend, but it failed the next day.
USO/$WTIC Weekly Chart: The weekly chart is not enlightening. Indicators and price are flat. We expect more of the same from Crude Oil.
IT Trend Model: SELLas of 2/21/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds tore it up today on the drop in yields and TLT is no exception. Indicators have firmed up nicely with a new PMO crossover BUY signal and Stochastics popping above 80. If the market continues to weaken, we expect Bonds to surge alongside Gold as both are classic hideouts.
TLT Weekly Chart: The weekly chart had deteriorated, but this week indicators are looking up. The weekly RSI is above net neutral (50) and the weekly PMO has turned up above its signal line. Certainly this overhead resistance level at the mid-2022 low will be overcome.
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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