Today the 20-Year Treasury Bond ETF (TLT) 20-day EMA crossed down through the 50-day EMA (Dark Cross) below the 200-day EMA, generating an IT Trend Model SELL Signal. This also confirms a bearish descending triangle (declining tops, flat bottom). The back of the napkin downside target would take price to support at 98.
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
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.
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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 double-top still dominates our shorter-term SPY chart. The short-term declining tops trendline is also in force. The RSI is neutral now, but headed to negative territory below net neutral (50). The PMO continues to decline on a SELL Signal.
Stochastics have now topped and the VIX is below its moving average on our inverted scale. This suggests internal weakness.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: We saw an expansion in New Highs, but similarly we saw an expansion of New Lows. The 10-DMA of the High-Low Differential continues to decline.
Climax* Analysis: Three of the four relative indicators had climax readings today, and one indicator was just shy of a climax reading, so today was a downside initiation climax. We note that the upside initiation climax we had seven days ago produced no upside follow through at all, which indicates internal weakness; therefore, we expect to see more downside following today's downside initiation.
*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 FLAT and the condition is NEUTRAL.
The Swenlin Trading Oscillators (STOs) continued their decline today. Participation is sliding lower. We now have less than 1/4 of the SPX with rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM are confirming the decline in our short-term indicators. %PMO BUY Signals dipped lower and shows only 1/3rd of the SPX holding PMO Crossover BUY Signals.
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 market bias in all three timeframes is BEARISH.
We have stark negative divergences on every indicator on our Bias chart. Readings are below the 50% bullish threshold with the exception of the Golden Cross Index but it remains beneath its signal line in a declining trend. %Stocks above their 20/50/200-day EMAs readings are lower than both the Silver Cross Index and Golden Cross Index, meaning they will likely continue lower.
CONCLUSION: We may finally have seen our final warning regarding a severe decline given today's downside initiation climax. Remember that positive indicators haven't resulted in much upside price movement. Typically, when those bullish signals don't pan out, we're in a bear market environment. Technically the bear market was abolished with the 20%+ rise in the SPX, but that doesn't mean we are safe from bearish tendencies. Both short- and intermediate-term indicators are in decline. Negative divergences are plaguing our charts. Brace your portfolios for a market decline.
Erin is 18% long, 7% short.
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Yesterday's comments still apply:
"Bitcoin is rallying after hitting strong support at 27,000. However, it hasn't erased the rounded top. The RSI is negative and the PMO just dropped below the zero line. Stochastics are turning up so we would look for more movement along support until the rest of the indicators firm up."
Interest rates are in a holding pattern overall as they move mostly sideways. We expect more of the same, barring a deep decline which will likely draw investors toward Bonds.
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 popped higher today, but remains in a trading range. Indicators are very bullish right now. The RSI has moved back into positive territory and the PMO is surging above the signal line (bottoming above the signal line). Stochastics are rising strongly. All suggest that we will see $TNX continue to travel to 3.7%.
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We discussed TLT in the opening paragraph. We would add that the indicators are very bearish right now. The RSI is in negative territory and falling. The PMO is on a SELL Signal and has just dropped beneath the zero line.
Our best guess is that the bullish ascending triangle will bust with a breakdown of the intermediate-term rising bottoms trendline. Today price did close above the intermediate-term rising bottoms trendline.
IT Trend Model: NEUTRAL as of 3/28/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: The Dollar rallied today, but didn't reach Friday's level. Given the very positive indicators, we would look for the rally to continue. The RSI is positive and rising. The PMO just entered positive territory and Stochastics are oscillating above 80.
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold broke down from the bearish rising wedge as expected. Support is nearby at the 50-day EMA and February top, but indicators are looking more bearish. The RSI dropped below net neutral (50) and the PMO is in decline. Stochastics are declining too. Look for support to be tested at a minimum.
GOLD Daily Chart: The inverse correlation with the Dollar has basically vanished. This will give Gold the opportunity to move in the same direction as the Dollar. The Dollar is rallying and pressuring Gold lower, but an easing of the inverse correlation could prevent deeper declines in Gold.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners confirmed the bearish double-top with a drop below the confirmation line. Price managed to close above the 50-day EMA, but we don't think it will stop there. The RSI is negative and falling, the PMO is falling on a SELL Signal and Stochastics have tanked. Participation is tanking as well. Probably a good time to shed any gold miner positions. The double-top's downside target is all the way down to about 30.
CRUDE OIL (USO)
IT Trend Model: SELL as of 5/3/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: While Crude appears to have found support, we aren't so sure it will hold it. The RSI is negative and the PMO is declining. Stochastics give us a glimmer of hope as they do appear to be bottoming. We would tighten stops on Energy positions in case this current level of support doesn't hold.
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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