Today the S&P 400Mid-Cap Index SPDR (MDY) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL Signal. In spite of the dramatic nomenclature, the crossover is buried within a narrow band of moving averages, and cannot be taken too seriously. Nevertheless, the May price top is lower than the February top, so the pattern does have a negative connotation.
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 Market Index, Sector, and Industry Group 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: Yesterday we incorrectly said that the double-top pattern had been busted. That wasn't the case as the pattern has yet to be confirmed with a breakdown. So long as the next top doesn't overcome the previous two, the pattern could still be confirmed. Given the look of this topping formation, we do expect that breakdown to arrive soon.
The PMO has now topped beneath its signal line which is especially bearish. Stochastics are rising, but the VIX is back below its moving average on the inverted scale so internal strength is deteriorating.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: Both New Highs and New Lows expanded today. There aren't any divergences to point out currently. The 10-DMA of the High-Low Differential is falling and that doesn't bode well for the market.
Climax* Analysis: There were no climax readings today.
*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.
Interestingly, both STOs moved higher on today's decline. Normally we would consider this very bullish, but the IT indicator chart prevents us from getting bullish on these readings. We are losing participation and only 37% of the index hold rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The main reason we are somewhat dismissing STOs is that both the ITBM and ITVM moved lower today; they basically are not confirming rising STOs.
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 the short term is BEARISH.
The market bias in the intermediate term is BEARISH.
The market bias in the long term is BEARISH.
Negative divergences are stark on this chart. %Stocks above the 20/50-day EMAs has now dropped below our 50% bullish threshold. The Silver Cross Index is falling and we have %Stocks above their 50/500-day EMAs below the 50% bullish threshold leaving us bearish in the IT and LT.
CONCLUSION: While STOs decided to both rise today, IT indicators and shrinking participation has us discounting them. The PMO has topped beneath its signal line which is especially bearish. The bias is bearish in all three timeframes. We are still expecting a deeper decline and confirmation of the bearish double-top on the SPY. The "minimum" downside target of the double-top pattern is about 390 for the SPY. Continue to play defense and consider shedding positions where momentum is failing.
Erin is 18% long, 7% short.
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BITCOIN
Yesterday's comments still apply:
"Bitcoin didn't surprise. It broke down heavily, bring price back to strong support at 27,000. The PMO topped beneath the signal line twice. The RSI is now in negative territory below net neutral (50) and Stochastics are falling almost vertically. While this indicates a likely breakdown at this support level, we know this level is very strong over the longer-term. We would prepare for a breakdown based on these weak technicals."
INTEREST RATES
The 1-month yield has been all over the place but even so, the 3.4% level does appear to be strong support.
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 given there was no change on $TNX today:
"As with most yields, $TNX is holding its ground. The technicals are firming up with the RSI just moving into positive territory, the PMO turning up and Stochastics rising strongly. It appears it will be on the rise for some time, but a deep decline would likely push rates lower as the flight to Bonds would keep yields lower."
BONDS (TLT)
IT Trend Model: BUY as of 3/17/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT broke the short-term rising bottoms trendline but is still perched on strong short-term support. The indicators are leaning bearish with the RSI in negative territory and the PMO and Stochastics are falling.
We've been watching a bullish ascending triangle on the 1-year chart, but price never reached overhead resistance on the last try, suggesting the rising trend is definitely in jeopardy. We would look for the pattern to be busted with a decline.
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 has been in a trading range between the 200-day EMA and support at January tops. We don't expect this to change mainly because indicators are still somewhat muted. Stochastics are encouraging, but the PMO is flat and the RSI is neutral.
There is a large symmetrical triangle on the 1-year daily chart. The prior trend was up so ultimately in the intermediate term, we should expect a breakout. However, we do note that this triangle is beginning to disintegrate. Price is so close to the apex, a break in either direction will have to happen. We see a high likelihood that price will simply drift sideways out of the pattern.
GOLD
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: The Dollar was up, but Gold was up more. The inverse correlation between the Dollar and Gold continues to breakdown. Pretty soon we could see the correlation disappear altogether with a move to the zero line.
GOLD Daily Chart: Indicators continue to contradict. The RSI is in positive territory, but Stochastics are in decline. The PMO is on a Crossover SELL Signal, but it is beginning to rise slightly. We believe that Gold will begin to shine brightly when the market turns over in a meaningful way as many move toward this safe haven. Until then, we expect the current trading range above 1970 to continue.
GOLD MINERS Golden and Silver Cross Indexes: Even though Gold was higher today, Gold Miners saw a decline alongside the market. We did see slight deterioration of stocks above their 20-day EMA, but overall participation is strong. Until we see more significant weakness under the hood, we remain bullish on GDX.
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 formed a bullish engulfing candlestick today. The indicators are reacting as if this rally will see a continuation. The RSI is negative, but rising. The PMO has turned back up and Stochastics are rising. We expect this rally to continue.
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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