We wanted to open with the 5-minute bar chart for the SPY as we did see expansion in some of our participation indicators including the Silver Cross Index.
The market was up much of the morning and really didn't fall apart until the last 30 minutes of trading. We have annotated a bullish falling wedge on the chart that does imply an upside breakout eventually; however, the final price decline is already testing the bottom of the pattern. We wouldn't count on a reversal just yet.
Part of the problem today was the underperformance by the most capitalized stocks in the market. Notice the deep declines.
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: Last week's decline saw a continuation today. The RSI is still positive, but the PMO is about to trigger a Crossover SELL Signal. We noticed the VIX reading was higher today than it has been. It's above its moving average on our inverted scale so it isn't what we would call bearish. It tells us that participants are feeling less comfortable about this pullback.
Stochastics are declining and will drop below net neutral (50) soon. They are an early detection indicator so we won't be looking for a bottom until it turns back up.
Here is the latest recording (6/27):
S&P 500 New 52-Week Highs/Lows: New Highs only contracted slightly. We did see fewer New Lows. The 10-DMA of the High-Low Differential is flat and near-term overbought.
Climax* Analysis: There were no climax readings today. Despite positive Net A-D on both the SPY and NYSE, the SPY was ultimately lower.
*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 OVERSOLD.
Swenlin Trading Oscillators (STOs) are getting oversold, but we do see they have certainly been lower and can accommodate more downside. Here was where we were surprised on today's decline. We saw an expansion in %Stocks > 20-day EMA and an expansion in rising momentum. In fact, both readings are at or above our 50% bullish threshold. Those indicators are not oversold and today's expansions suggest internal strength.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
We are listing the ITBM/ITVM as overbought still. We believe there is more decline as these indicators need unwinding. PMO BUY signals were lost on the decline, but mainly they were lost because even before today we had a much lower percentage on %PMOs Rising. We will continue to see damage on this indicator as only 50% currently list rising PMOs.
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 NEUTRAL.
The market bias in the intermediate term is NEUTRAL.
The market bias in the long term is BULLISH.
We have moved the market bias in the short term to Neutral given the expansion in stocks above their 20/50-day EMAs today as well as both indicators reading above 50%. The Silver Cross Index turned up today on the decline so we don't want to go completely bearish in the intermediate term. %Stocks > 20/50-day EMAs is lower that the Silver Cross Index so we can't be bullish in the IT. Long-term, the Golden Cross Index is declining; however, we have a higher percentage of stocks above both their 50/200-day EMAs so it could reverse at any time.
CONCLUSION: We saw an expansion in most of our participation indicators. We also saw positive Net A-D on both the SPX and NYSE. The decline in the SPY was likely due to the deep declines in some of the power houses like Alphabet (GOOGL) and Nvidia (NVDA). They do need more pullback and we expect to see them continue lower. The SPY was skewed, going up while the rest of the market languished due to mega-cap players rallying strongly. Now it seems the opposite is occurring. We don't believe the rest of the market will be immune, the big guys generally lead the market. Expect more churn. Stops should be set in case this decline becomes destructive rather than constructive.
Erin is 45% long, 0% short.
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BITCOIN
Price has now hit major overhead resistance at 31,000. The rally was practically vertical so we would expect a pause. This does look like a bull flag. The indicators are suggesting Bitcoin will breakout given the positive, rising and not overbought PMO. The RSI is no longer overbought and Stochastics hover in territory above 80 suggesting internal strength.
INTEREST RATES
Long-term rates are mostly in a holding pattern, although we notice that the 20 and 30-year yields are in short-term declining trends. The yield curve remains inverted.
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 appears to be forming another top so we should be prepared for a possible bearish double-top. The PMO has triggered a Crossover SELL Signal and Stochastics just dipped below net neutral (50). The longer-term chart pattern is a bullish falling wedge, but it appears it won't be executing this time around.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: As noted in the section on yields, the 20-year yield is in a declining trend. This has given TLT a bullish bias. However, it has not been able to hold a breakout. The short-term double-bottom suggests the breakout will eventually occur, but our early detection, Stochastics are in decline. We will side with the RSI and PMO and look for the eventual breakout.
DOLLAR (UUP)
IT Trend Model: BUY as of 5/18/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: Short-term, the Dollar has broken a declining trend and is holding above the 20-day EMA. The PMO and RSI are neutral and no help. Stochastics are negative so we would look for more indecision by the Dollar.
Erin is hoping the intermediate-term bearish rising wedge doesn't fulfill given her upcoming trip to Europe in a few weeks. Given price did turn back up before testing the rising bottoms trendline, an upside breakout isn't out of the question. However, based on Erin's prior experience, the Dollar usually takes a beating before she leaves.
GOLD
IT Trend Model: NEUTRAL as of 6/8/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: In an interesting turn of events, the Dollar and Gold are actually positively correlated. They have decoupled so the Dollar dropping won't insure that Gold goes higher. Indicators are very wishy-washy. The RSI is negative but rising slightly. The PMO is flat and on a SELL Signal. Stochastics are very weak. This is the second bearish filled black candlestick for Gold so we should expect a decline tomorrow.
GOLD Daily Chart: Discounts on PHYS have gotten very high. This means investors are very bearish on Gold right now. Given sentiment is contrarian, this is setting up a good environment for a rally in Gold. For now, we watch for the 200-day EMA to be tested.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners rallied today, but we saw no improvement "under the hood". The Silver Cross Index is still in decline and participation of stocks above their 20/50-day EMAs is near zero. This is a nice price level for a rally, but we don't see anyone in the group that can lead the charge.
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 is range bound and given the flat RSI and PMO, we don't see that changing anytime soon.
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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