We decided that it was time to come up with a name for Silver Cross Index and Golden Cross Index crossovers their signal lines. We've noticed that Silver Cross Index crossovers are excellent flags to intermediate-term changes in direction.
We've decided to name these crossovers "Shifts". A "Bear Shift" for a downside crossover the signal line and a "Bull Shift" for an upside crossover the signal line. These crossovers 'shift' the character of an index, sector or industry group from bullish to bearish or vice versa.
Today we had a Silver Cross Index Bear Shift on the SPY, SP600 (IJR), Nasdaq Composite (ONEQ), Dow Industrials (DIA) and the SP100 (OEX). The Nasdaq 100 (NDX) has already seen a Bear Shift of the Silver Cross Index.
On the chart below we've marked some of the most recent Silver Cross Index (SCI) crossovers on the SPY. Remember we use a vertical red dotted line to indicate cardinal market tops and a green vertical dotted line to denote cardinal market bottoms. These downside Bear Shifts have been quite prescient.
With participation dropping off the map for %Stocks > 20/50/200-day EMAs, the Silver Cross Index will continue to decline as it measures how many stocks have a 20-day EMA above their 50-day EMA. Therefore, those %Stocks > 20/50-day EMAs need to at least be close to the Silver Cross Index percentage in order to see upside movement.
Conclusion: Direction changes are important on the Silver Cross and Golden Cross Indexes, but crossovers are particularly important. Today's Silver Cross Index "Bear Shift" suggests we are in for more than a short-term decline.
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: The 20-day EMA was compromised yesterday and today, stronger support across the prior April low. It is very strong support as there are numerous 'touches' by price on that line. This is a significant breakdown.
Indicators are looking more and more bearish with a PMO Crossover SELL Signal, the RSI dropping below net neutral (50) and Stochastics falling fast. The VIX is below its moving average but hasn't quite pierced the bottom Bollinger Band on the inverted scale. In a way, we want to see that lower Band penetrated because that usually leads to a small snapback.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: The only bullish chart for some time has been this one. It is no longer. New Highs, as expected, contracted greatly and New Lows are now visible. What really moved this chart into the bearish category is the topping of the 10-DMA of the High-Low Differential in overbought territory.
Climax* Analysis: There were unanimous climax readings on the relevant indicators today, though not as strong as yesterday. As a result there was another downside exhaustion climax. SPX Total Volume has been strong for two days, assigning a sense of conviction to the two down days. It wouldn't be a surprise to see a small snapback and pause in this short-term decline. As noted earlier, the VIX is near the lower Bollinger Band. Many times we will see a small upside day or a pause when it gets "oversold". It really isn't oversold, but in terms of the Bollinger Bands it is.
*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.
No surprises here, participation was slashed on today's decline and STOs continue lower. The STO-V is in oversold territory, but we know it can move much lower based on the heavy declines in June and September.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM/ITVM continue to confirm short-term bearish conditions as they continue lower. Given there are now only 17% of stocks with rising momentum, we should expect %PMO BUY Signals to continue to careen lower.
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.
Yesterday's comments still apply:
"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."
Add that we had a "Bear Shift" on the Silver Cross Index.
CONCLUSION: Two days of heavy selling has killed participation and today's Silver Cross Index Bear Shift is ominous as we begin to move lower. Strong support was broken and all of our indicators are moving lower. We did get a downside exhaustion climax and given the strong selling of the past two days, it makes sense that we would see a pause or a little upside movement over the next day or two. Past that, expect this decline to persevere. We would continue to play defense. Erin is reviewing shorting opportunities. Any strength this week will likely see her moving her long exposure lower.
Erin is 30% long, 4% short.
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BITCOIN
Bitcoin nearly recaptured prior support, but ultimately finished lower on the day. Indicators are mixed. The PMO is falling, but it is beginning to decelerate. The RSI is almost back in positive territory. Stochastics are rising and that does suggest to us that support at the late March low should hold up a bit longer.
INTEREST RATES
Yields inched higher today. Many are at strong support levels in the near term so a rebound may be underway. The problem is a declining market will likely push Bonds higher and therefore, interest rates lower.
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
Yields rose today on support. If the market continues to slide as we expect it will, we actually expect rates to fall further as Bonds will become a safe haven. If the market surprises our indicators, we would look for a rebound in rates. For now we expect support to be broken.
BONDS (TLT)
IT Trend Model: BUY as of 3/17/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday's comments still apply:
"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 lost ground today but is still holding above two support levels and a rising bottoms trendline. The PMO did have an upside crossover today so the expectation at this point is a breakout from the short-term declining trend. A rising Dollar will add insult to injury to a weak market.
However, the RSI and Stochastics have a different mindset than the PMO. Both are below net neutral (50) and declining. This seems a recipe for more sideways movement.
GOLD
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold showed extra weakness today. With the correlation between the Dollar and Gold being almost a perfect inverse, when the Dollar falls, Gold should rise. That did not happen today. Additionally, a heavy decline should have given Gold a boost too. We also sadly note that GLD and $GOLD below formed bearish engulfing candlesticks which suggests more decline tomorrow.
GOLD Daily Chart: Stochastics on GLD started rising, but we haven't seen the same for $GOLD. The PMO also looks quite negative. Investors are getting more bearish as discounts rose sharply yesterday and today. We want to be bullish on Gold, but it keeps on disappointing. Indicators suggest we should be bearish a bit longer.
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 by 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 Oil kept the decline rolling today with a deep 3%+ decline. The PMO was already warning us of trouble ahead, but it also tricked us a bit on the last tiny rally as it flattened. Ultimately, the PMO has taken a stand with this week's Crossover SELL Signal. The RSI is negative and falling and Stochastics are now in very negative territory below 20. Look for a support test of the current trading range.
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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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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