The Silver Cross Index (SCI) is an excellent indicator of market participation and particularly internal strength. Here's a quick refresher on the what it measures. While participation indicators %Stocks above their 20/50-day EMAs give us an understanding of price pressure, the Silver Cross Index adds another dimension. It calculates how many stocks within an index/sector/industry group have a 20-day EMA that is already sitting above the 50-day EMA.
We showed you the chart of the Silver Cross Indexes for the broad market a few days ago. Below we have the same chart for the SP500, SP400 and SP600. Note that every SCI has turned down in the S&P. Note that we add red vertical lines at cardinal tops in the SPY. Then note what happens when the SCI tops or in particular, has a negative crossover the signal line. Market declines follow. We believe the decline is underway. We do not think it out of the question that the October lows could be tested.
Here is the updated chart with the Nasdaq and NYSE Silver Cross Indexes.
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: BUY as of 3/30/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: Today's decline took price to support in one fell swoop. This took the RSI into negative territory below net neutral (50). The PMO is about to trigger a crossover SELL signal.
Stochastics and the VIX are now signaling internal weakness. Stochastics have dropped below net neutral (50) and the VIX is now beneath its moving average on the inverted scale.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Highs were higher than yesterday, but remember this is an intraday indicator. Those New Highs may not exist by the time the market closes. We have a strong feeling that is what occurred today. New Lows certainly expanded. The 10-DMA of the High-Low Differential is overbought, but it is still rising (probably the only positive indicator left).
Climax* Analysis: There were strong, unanimous downside climax readings on the relevant indicators today, giving us a downside exhaustion climax because the prior downside climax was an "initiation". This is the first strong decline coming off last week's price top, makes us believe this is more of an "initiation" than "exhaustion". We could see a decline similar in amplitude to the one that followed the March 7 downside 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.
Not surprisingly, the Swenlin Trading Oscillators (STOs) moved lower again today. Neither should be considered oversold. More breathtaking was the decline in %Stocks > 20-day EMA and %PMOs Rising. This has moved both indicators below our 50% bullish threshold.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Also not a surprise, IT indicators continued to contract. We believe they are still overbought and could accommodate far more downside. PMO BUY Signals are disappearing as well. We expect that indicator to dive much lower now that only 37% of stocks have PMOs that are rising.
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 BEARISH.
The intermediate-term bias is BEARISH.
The long-term bias is BEARISH.
The bias moved quickly to 'bearish' in all three timeframes. This was due to the major pullback in participation of stocks above their 20/50/200-day EMAs, all of which are now below the 50% bullish threshold. This decimation of participation caused both the SCI and GCI to turn lower and given the %Stocks > 20/50/200-day EMAs hold percentages that are lower than the SCI and GCI, we know the SCI/GCI will continue lower.
CONCLUSION: Market participation was slashed on today's decline. This has moved the bias to bearish in all three timeframes. While today's downside climax is labeled an "exhaustion", we think the best we will get out of it is a pause or snapback tomorrow followed by more downside. Why more downside? Every indicator is declining or negative. The New Highs/New Lows chart is the only one that could be read as somewhat bullish. The top four sectors today were defensive (Consumer Staples (XLP), Utilities (XLU), Real Estate (XLRE) and Healthcare (XLV)) and they were down as well. Even longs in defensive areas of the market might struggle. Stops are a necessity.
Erin is 30% long, 4% short.
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BITCOIN
Today's rally in crypto and its effect on our indicators has given us food for thought. We were looking for a breakdown at this support level due to negative indicators. Those indicators are beginning to look a bit better, even the PMO is attempting to turn back up. We would look for another test of the 29,000 level. If the PMO turns back up, we would look for a breakout there.
INTEREST RATES
Yields fell heavily today, but it didn't help the market. More than likely, investors will book a flight to safety in Bonds, so rates could fall further from here.
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
We had been looking for a breakout for $TNX, but instead a huge breakdown occurred. This reversed the PMO, giving it a top beneath the zero line which is especially bearish. Stochastics are falling vertically and the RSI is falling in negative territory. Currently it is traveling within a bullish falling wedge. Price didn't make it back to the top of the pattern on three different rallies. Investors may get their wish of the 10-year yield falling below 3.2%.
BONDS (TLT)
IT Trend Model: BUY as of 3/17/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We've obviously reversed our position on Bonds and yields based on the write-ups above for them. TLT is likely to see new strength if the market continues to fall. The RSI is rising in positive territory and isn't overbought. The PMO is nearing a Crossover BUY Signal and Stochastics are rising.
We now expect TLT to breakout. It is traveling within a bullish ascending triangle (rising bottoms, flat top). The last two lows did not have to touch the bottom of the pattern. That usually signals a breakout ahead on the next test.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 3/28/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: The Dollar is now in a small rising trend, but we see it as the bottom of a short-term symmetrical triangle. Symmetrical triangles are "continuation patterns" meaning the breakout/breakdown is based on the trend prior to the formation of the pattern. In the Dollar's case, it was in a short-term declining trend, so our expectation is a breakdown with the likely stopping point being 27.25.
Longer-term we also have a symmetrical triangle, but in this case the prior trend was up. This means that eventually we should see a breakout from the longer-term declining trend. We don't favor that conclusion based on the shorter-term chart above.
GOLD
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold held its own today in spite of a rising Dollar. They have a near perfect inverse so anytime we see Gold up and the Dollar up, we know that gold showed internal strength. The PMO certainly isn't encouraging nor are Stochastics, but the RSI continues to hold its own, primarily because we've seen such low volatility over the past month and half.
GOLD Daily Chart: Gold is holding support and very likely may continue to given Gold is often considered a flight to safety, that could be why we saw Gold rise while the Dollar rose as well. We note that discounts have pared back significantly meaning investors are looking more favorably toward Gold. A breakdown isn't out of the question, but we would look for Gold to hold support while the market declines.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"Gold Miners have pulled back to support at the January high. With downward pressure on the Dollar and a likely market decline on tap, it will be difficult for this level of support to be held, particularly given the thinning participation. The Silver Cross Index had a negative crossover and the PMO has had its own giving us a PMO Crossover SELL Signal. This has been a nearly teflon area of the market, but we'd play the reversal only if the PMO and/or participation begin moving up again."
CRUDE OIL (USO)
IT Trend Model: BUY as of 4/10/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude dove lower today after hinting at an upcoming rally. It was a deep decline, one that took our indicators down with it. The RSI moved into negative territory and the PMO is just barely holding onto its BUY Signal. The OBV declining tops are confirming the decline out of the April high. Stochastics continue to fall. We were looking at Energy positions as a "hold" yesterday, today it looks like tight stops or possible profit taking is key.
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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Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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