The market finished down -0.25%, basically staying in its current trading range. It is important to realize that all is not copacetic "under the hood". Below is an array of all of the S&P Sectors. While it is an eye test, take our word for it, all of the Price Momentum Oscillators (PMOs) are moving lower with the exception of Communications Services (XLC). If the market is going to resume the bull market, it will need help from more than just one sector.
Also troublesome is this sector not being completely healthy on its own. Below is our "Under the Hood" chart for XLC. Participation is still very thin and the Silver Cross Index is in decline after topping once again beneath the signal line which is especially bearish. We also see that %Stocks > 20/50-day EMAs are below our 50% threshold. Negative divergences are visible going into this tiny breakout. Stochastics are now above 80 which is positive. Relative strength is improving, but remember it could still move lower and outperform. It would still be considered "outperformance" if it moves down slower than the SPY.
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
For the Week:
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.
For the Week:
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 market is in a trading range, but it hasn't lost its bearish double-top yet. We were able to reannotate the short-term declining trend. The RSI is flat, but managing to hold positive territory. Not a surprise given the flat price movement. The PMO continues lower.
Stochastics are also flat and within positive territory. The VIX continues to oscillate on its moving average. Given we don't see much movement out of either index, we would say that there is no internal strength. At the same time, there isn't really any internal weakness visible either. All of this is indicative a price moving in a trading range.
SPY Weekly Chart: The weekly PMO is still on the rise, but did see some deceleration this week. Most important to note on the chart is the new symmetrical triangle formation (declining tops, rising bottoms). These are continuation patterns. Given the prior trend was down, the expectation should be a breakdown so that trend will "continue".
New 52-Week Highs/Lows: New Highs did pop on Friday, but New Lows expanded as well. Of primary concern would be the continued decline of the 10-DMA of the High-Low Differential.
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.
At last, short-term indicators are moving lower. The Swenlin Trading Oscillators (STOs) in particular saw quite a jump downward. Participation continues to thin. We still only have 1/3rd of the SPX holding rising momentum. While 1/3rd of the market could get price to move higher, we know that the deterioration has affected %PMO BUY Signals.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
PMOs are declining so more stocks will likely lose their BUY signals. That deterioration is visible in %PMO BUY Signals which continues lower beneath our 50% bullish threshold. Both the ITBM and ITVM continue to decline so right now, they are confirming the decline in short-term indicators.
PARTICIPATION and BIAS Assessment: The following table 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 following table summarizes participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation. There are three groups: Major Market Indexes, Miscellaneous Sectors, and the eleven S&P 500 Sectors.
The strongest IT Bias belongs to XLRE. This sector is showing new strength as we saw it gain 10 percentage points on the Silver Cross Index. There is still much work to do given the low reading of the Golden Cross Index.
The weakest bias goes to Semiconductors (SMH). This industry group is seeing deterioration in the longer term as the Golden Cross Index lost 8 percentage points this week. We should be careful with this group.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
As far as the Silver Cross Indexes, the strongest remains Gold Miners (GDX). This group still lost 7 percentage points this week so this sector isn't strengthening, it is weakening.
Regional Banks (KRE) continue to hold the bottom spot and will likely continue to as the banking crisis rears its ugly head again.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
Similar to the Silver Cross Index, Gold Miners are at the top and Regional Banks at the bottom. Commentary for both is the same.
The following chart objectively shows the depth and trend of participation in three time frames.
The market bias is BEARISH.
The short-term bias is BEARISH.
The intermediate-term bias is BEARISH.
The long-term bias is BEARISH.
A bearish bias permeates all timeframes. We have shrinking participation of stocks above their 20/50/200-day EMAs, with all three indicators holding below our 50% bullish threshold. The Silver Cross Index continues lower at less that 50%. While the Golden Cross Index is above our 50% bullish threshold, it is in decline and will likely continue to deteriorate given fewer stocks have price above their 50/200-day EMAs.
CONCLUSION: The market remains in a trading range, but holds a bearish double-top. This doesn't look like a market preparing to start a new up leg. Indicators are in decline with IT indicators confirming contracting Swenlin Trading Oscillators (STOs). Participation is getting thinner and thinner. There is a clear bearish bias in all three timeframes. While there are pockets of strength like XLC, even this sector and all positive momentum industry groups are weak at best. We should be getting our house in order for a future deep decline.
Erin is 18% long, 7% short.
Calendar: Next week is options expiration. It is not an end-of-quarter expiration, so SPX Total Volume should be normal on Friday. We normally expect low volatility on Thursday and Friday.
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Bitcoin followed through on the negative indicator configurations with a drop below support. Currently this weekend it is trading right around the "close" for Friday (Bitcoin trades 24/7). Indicators continue to flash warning signals so we would prepare for a test of at least the February high. There is a clear topping formation that could be considered a complex bearish head and shoulders pattern.
This chart is to show where some of the support/resistance lines come from.
Interest rates seem to be finding equilibrium for the moment. We do expect this level to hold for most rates, but a flight to Bonds during a deep market decline could shake things up and possibly see the 3.4% level broken.
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 in a choppy trading range. As noted in the yield section above, this seems to be an area of equilibrium. While rates could see a move to the top of the bullish falling wedge, we expect rates to continue sideways until we see demand for 10-year bonds again.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount. As buying power has been shrinking, home prices have come under pressure.
This week the 30-Year Fixed Rate changed from 6.39 to 6.35.
IT Trend Model: BUY as of 3/17/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT narrowed its trading range from 99 - 108, to 103 - 108. The symmetrical triangle could honestly break in either direction given that prior to this triangle, price was in a sideways trading range. Indicators are flat with the exception of Stochastics which are moving higher suggesting it will be an upside breakout rather than a downside breakdown.
Longer-term, we do see a bullish ascending triangle (flat top, rising bottoms) that would suggest a breakout rather than a breakdown.
TLT Weekly Chart: The weekly PMO continues to rise and the weekly RSI is flat and unresponsive due to the trading range. We see a bullish bias when we consider the daily charts in conjunction with the weekly PMO.
IT Trend Model: NEUTRAL as of 3/28/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: The Dollar is on the rise. After spending weeks below the 200-day EMA, it has broken out above it. The RSI is rising strongly in positive territory above net neutral (50). The PMO is increasing the margin between it and its signal line. Stochastics are rising strongly and should reach territory above 80 soon. We expect more upside out of the Dollar which will continue to pressure Tech stocks lower.
This breakout isn't only a bust out of the trading range on the above chart, it is a clear break above a longer-term declining tops trendline. This is what was expected based on the symmetrical triangle formation given the prior trend was up. The triangle was busting, but this is not a "drift" from the pattern, it is a deliberate breakout which gives it more weight.
UUP Weekly Chart: This week's rally also preserved the long-term rising trend. This week's breakout also improved the weekly indicators a great deal. The weekly PMO has now turned up and the weekly RSI is back in positive territory. All speak well for the Dollar.
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GOLD Daily Chart: GLD is under pressure now given the bullish Dollar. Indicators are breaking down more deliberately with the PMO adding margin to the signal line as it declines. The RSI is still positive due to the tight trading range, but Stochastics combined with the PMO give the Gold chart a clear bearish bias.
On the bright side for Gold, it has decoupled from the Dollar somewhat based on the inverse correlation easing. This tells us that Gold could still rally while the Dollar rallies. The strength of Gold to the Dollar is beginning to weaken, but that easing of the inverse correlation to the Dollar means Gold could overcome this.
GOLD Weekly Chart: The weekly chart certainly suggests Gold could continue higher. The weekly RSI is strongly positive and the weekly PMO is still rising. The vulnerability lies in the rising trend channel. Price is due to test the bottom of the channel or at least support at 1950. Look for Gold to struggle a bit more, but expect a resurgence should the market decline in earnest.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners have now formed a bearish double-top that would be confirmed with a drop below current support. Participation has thinned greatly, otherwise we would consider this a good reversal point. While it could reverse here, the declining Silver Cross Index below its signal line makes us favor a breakdown rather than a rebound.
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 failed to continue the rally that began last week. The indicators don't look good, but Crude has found a way to rebound when we don't expect it. A close look at the indicators tells us that it isn't likely to reverse on this support level. More than likely we are in for a test of at least the May low. Keep a close eye on your Energy positions.
USO/$WTIC Weekly Chart: The longer-term picture suggests to us that price will continue to move sideways. The weekly PMO is flat and indecisive. The weekly RSI is negative and falling. If anything we could see the rising trend broken with a continuation of the current trading range. More than likely that drift sideways will kill that rising trend.
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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Price Momentum Oscillator (PMO)
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