The U.S. Dollar (UUP) has been rallying off the low earlier this month. Today the UUP 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. We'll discuss the chart further in the section on the Dollar.
Also today, the Utilities Sector (XLU) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL Signal. Overall XLU has been in a trading range which has caused the EMAs to "braid" which means multiple crossover signals. We had just seen a Golden Cross earlier this month. Participation is in the basement and that has caused serious damage to the Silver Cross Index. A market decline could bring love back to defensive groups like XLU, but that love could simply mean it doesn't move down as quickly as the rest.
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.
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: The bearish double-top officially was busted today with the breakout above the second top. We now have a rally that has taken us out of the trading range. This rally also created a PMO Crossover BUY Signal. The RSI looks very healthy.
Stochastics are rising strongly again but aren't quite above 80 yet. The VIX stayed above its moving average on the inverted scale, so we do see short-term relative strength. We do need to pay attention to the VIX as it is close to the upper Bollinger Band. Typically punctures of the upper Band lead to short-term declines.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Highs expanded as they should and we saw much fewer New Lows. This has turned the 10-DMA of the High-Low Differential back up before crossing the zero line.
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 UP and the condition is NEUTRAL.
STOs turned up on yesterday's rally so we aren't surprised they are still rising. Participation did expand to levels above our bullish 50% threshold.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
Both the ITBM and ITVM rose today. Yesterday results were mixed. This is a good sign. We still don't have that many PMO BUY Signals, but with over 50% now displaying rising momentum, that percentage should move up barring a decline.
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.
Although the Golden Cross Index turned back up, we still believe the bias to be bearish in all three timeframes.We have stark negative divergences on every indicator on our Bias chart. Readings are at or below the 50% bullish threshold. %Stocks above their above their 20/50-day EMAs are slightly higher than the Silver Cross Index, but it continues to move lower. Readings of %Stocks above their 50/200-day EMAs are lower than the Golden Cross Index so it is vulnerable to turning back down on any decline.
CONCLUSION: We did expect follow-through on yesterday's upside initiation climax, but like yesterday, the voracity of the rally was a surprise. We could still be experiencing short covering as options expiration arrives tomorrow. There were a lot of bears out there and many bulls who jumped on shorts. While indicators have shifted to the positive, we wouldn't trust this rally yet as far as the broad market. Be sure that we are ready to pivot to the bullish side, we aren't trying to make indicators or the market fit our bearish expectations. We just don't trust this rally.
Erin is 16% long, 7% short.
Calendar: Tomorrow is the last trading day prior to options expiration. Expect a day of low volatility and likely high volume.
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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 is 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."
Yesterday's comments still apply:
"Interest rates are seeing a boost, one that has us looking at more rally in spite of a possible big decline. With the debt ceiling looming ever closer, it will likely be a wild ride." For now, plan on a rising rate environment.
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
$TNX is now at the top of its trading zone. Indicators are very strong. The PMO just entered positive territory. Stochastics are very strong. There is a large bullish falling wedge on the chart so the expectation should be a move to at least the top of the wedge.
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT is struggling as rates continue to push higher. The indicators are very negative and based on our yield chart, we should expect them to move higher. This will continue to put pressure on Bonds.
The bullish ascending triangle (rising bottoms, flat top) has been busted with the recent decline below the longer-term rising bottoms trendline.
IT Trend Model: BUY as of 5/18/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: The Dollar is off to the races. This will begin to put pressure on large-cap stocks if it breaks out. Companies that are based or have operations outside of the US will be subject to rising costs to doing business. The indicators are very positive so we would expect the Dollar to continue to rally.
The symmetrical triangle on UUP has resolved upward as expected. Symmetrical triangles are continuation patterns so given the prior trend was up, we should expect an upside breakout which we got.
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold was extremely weak today as it declined more than the Dollar rose. It has been weak based on the relative strength to the Dollar. With the Dollar rallying strongly, Gold is going to continue to struggle. Holding this current level of support will be very difficult given the negative indicators. This looks like a topping formation so we expect price will be unable to hold support.
GOLD Daily Chart: Not surprisingly, bearish sentiment has reappeared as discounts on PHYS are getting larger. GLD may've held support, but $GOLD did not. More evidence that we should expect GLD to move lower.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners couldn't look much more bearish. We no longer have any Gold Miners with price above their 20-day EMA. The rest of participation has slid as well. The downside target of the double-top formation is about 30.00. Expect that level to be met quickly with more follow-through that could take price back down to 26.00.
CRUDE OIL (USO)
IT Trend Model: SELL as of 5/3/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: We saw a decline that unfortunately prevented USO from moving above the 20-day EMA. The RSI tipped over in negative territory. We still see enough bullish indications on the chart to expect the rally to resume. The PMO is still rising and Stochastics just entered positive territory above net neutral (50). $OVX, the Crude Volatility Index, is above its moving average on the inverted scale and that does imply there is some internal strength.
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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