Today the Crude Oil (USO) 20-day EMA crossed down through the 50-day EMA (Dark Cross) below the 200-day EMA, generating an IT Trend Model SELL Signal. Like other price charts, USO has been moving sideways for about a year, and the trading range has expanded since March. There is important support at 58.00, but we need to look at a weekly chart to fully appreciate that.
Note that the support line is drawn across the bottom of a gap in 2020, then a price top in 2021, then finally across the March bottom. That is a pretty strong line of support, but we can't ignore the weakness being displayed.
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With Crude heading south, it is not surprising that the Energy Sector (XLE) is also in trouble. Today the XLE 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA generating an IT Trend Model NEUTRAL Signal. Participation is almost non-existent right now with 0% of stocks having price above the 20/50-day EMAs and a mere 17% above their 200-day EMAs. Price is nearing support, but with no participation under the hood, it will be very hard for XLE to reverse course.
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
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 market traded higher for much of the day, but eventually gave in to negative news from the FOMC. We now have a short-term bearish double-top forming. It would be confirmed with a drop below the April bottom. The RSI has now moved into negative territory.
The VIX is below its moving average on the inverted scale and Stochastics are pointed vertically downward indicating internal weakness.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Highs expanded slightly while New Lows contracted. We chalk this up to trading being in the green most of the day. The 10-DMA of the High-Low Differential stalled a bit, but is still in decline.
Climax* Analysis: There was only one indicator climax reading today, so we don't have a climax day.
*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 technically UP and the condition is NEUTRAL.
Swenlin Trading Oscillators (STOs) did not reverse and continue to rise. Participation slipped only a little today, but again, given trading was higher much of the day, we aren't surprised the deterioration wasn't as big as yesterday.
Intermediate-Term Market Indicators: The intermediate-term market trend is RISING and the condition is OVERBOUGHT.
Our ITBM and ITVM continue lower so while STOs are rising, we believe we should be more concerned with these indicators right now. %PMO BUY Signals has now dropped below our bullish threshold and given only 31% have rising PMOs, that indicator will continue 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.
We are moving the bias to BEARISH in all three timeframes. The SCI has topped beneath its signal line which is especially bearish. Given there is a lower percentage of stocks above their 20/50-day EMAs than the SCI, the SCI has a high likelihood of topping again. %Stocks above their 20/50/200-day EMAs are all below our bullish 50% threshold. The GCI has topped.
CONCLUSION: The Fed added insult to injury to an already weak market. While prices were higher much of the day, rate hikes weighed heavy into the end of trading. Consequently, the STOs moved higher again today. That was overshadowed by the continued decline in IT indicators and participation. We are expecting lower prices over the intermediate term, not only the short term due to the Silver Cross Index topping beneath its signal line. Stops should be tightened. Aggressive investors might want to look for shorting opportunities. Erin presented two shorts today in DP Diamonds.
Erin is 28% long, 4% short.
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BITCOIN
As we noted yesterday, Bitcoin is indecisive and is forming a symmetrical triangle. These are continuation patterns. The prior trend was up overall before this pattern began forming so we would eventually expect a breakout from the pattern. The PMO is still in decline though, but the RSI has moved back into positive territory and Stochastics are now turning up. We thought this would be a breakdown ahead, but given improving indicators, we would look for more sideways action.
INTEREST RATES
A market decline had the effect we expected, a flight to Bonds which depressed interest rates.
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
Yesterday's comments still apply:
"$TNX has seen indicators do an about face. The RSI has moved back into negative territory and the PMO topped today. Stochastics completely tipped over. We had expected rates to continue rising...barring a deep market decline. The market decline is beginning in our opinion, so Bonds will likely overpower yields."
BONDS (TLT)
IT Trend Model: BUY as of 3/17/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT is beginning to reap the benefits of a flight to safety. It remains in a trading range and the PMO isn't that bullish, but given the RSI and Stochastics are rising, we expect a test of the top of the range.
The bullish ascending triangle (flat tops, rising bottoms) is still intact. More market decline could easily push Bonds above overhead resistance.
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 continued its pullback and is now back on support at about 27.50. This put price back in the original declining trend. Support is available here, but we are beginning to wonder if the debt ceiling problems could mean more deterioration of the Dollar.
The longer-term daily chart reveals a large symmetrical triangle. These are continuation patterns. The break from the triangle is determined by the prior trend. In the case of the Dollar, it is up. An upside breakout should be expected, but debt ceiling worries could prevent this from happening in the near term.
GOLD
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold showed more strength today. The Dollar was down about a half percent which means Gold should've only been up by the same amount. Instead it moved even higher. Likely due to the flight to safety which will continue to lift Gold up. The PMO is now rising in concert with Stochastics and the RSI is positive. It's time for Gold to break to new all-time highs.
GOLD Daily Chart: Another checkmark in the bullish column for Gold would be the Gold Volatility Index which is now puncturing its lower Bollinger Band on the inverted scale. This implies higher prices.
GOLD MINERS Golden and Silver Cross Indexes: Gold's fortune is translating well to Gold Miners. They do have downside pressure from the broad markets, but that didn't deter it today. Participation is expanding again and that has pushed the Silver Cross Index upward; it is now nearing a positive crossover. It appears Gold Miners are ready to resume their rally off what appears to be a textbook flag formation.
CRUDE OIL (USO)
IT Trend Model: SELL as of 5/3/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil dropped below strong support at 62.00. It is rushing toward the next line of defense at 58.00. The indicators look terrible right now so we do expect the decline to continue. One good sign is that this decline has pulled the Crude Volatility Index ($OVX) below its lower Bollinger Band on our inverted scale. That often means a reversal ahead. It's too early to look for it, it does tell us that support at 58.00 could hold for a bit longer.
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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