While Technology stocks have been lifting the market higher, beginning Friday they have been taking an exhale, with today showing some downside acceleration. It should be no surprise that Nasdaq Composite (ONEQ) and Nasdaq 100 (QQQ) were the worst performing indexes today. This pullback has been sorely needed. The RSI was very overbought. Participation of stocks above their 20-day EMA took a hit today, but is still reading above out 50% bullish threshold. However, this decline as caused the Price Momentum Oscillator (PMO) to top. We expect to see more decline in this sector as the market begins relieving overbought conditions.
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: Price continued to make its way lower out of the parabolic rally. We expect to see more decline as these formations typically see a 50% retracement from the top to the low of the pattern. That means a test of support around 425.
The PMO has topped, but we note that the VIX remains low at just 13.20, meaning market participants are taking this decline in stride. Stochastics have dropped below 80 so internal strength, while visible, is beginning to deteriorate.
Here is the latest recording (6/12 - no recording on 6/19):
S&P 500 New 52-Week Highs/Lows: New Highs did expand slightly today, but remain well off the highs of Monday. There are no New Lows. The 10-DMA of the High-Low Differential has decelerated, but is still rising so internals are still positive.
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.
The Swenlin Trading Oscillators (STOs) continued to decline. We continue to see rising PMOs lost, but the reading of %PMOs Rising is still above the 50% bullish threshold.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
In a not so surprising move, both the ITBM and ITVM notched lower today which confirms the decline in our short-term indicators. Like many of our indicators, these are overbought and need to see some relief. While we are losing rising PMOs, %PMO BUY Signals is staying strong at 85%.
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 is BULLISH in all three timeframes.
The short-term bias is bullish but deteriorating. We are leaving it bullish as %Stocks > 20/50/200-day EMAs hold readings above our 50% bullish threshold. The Silver Cross Index (SCI) and Golden Cross Index (GCI) are both rising but today, the SCI paused. %Stocks > 20/50/200-day EMAs percentages are all above the SCI and GCI so they should continue rising.
CONCLUSION: Yesterday's downside initiation climax played out as expected with a decline in the market. We suspect that this decline isn't over as many of our indicators, particularly our intermediate-term ITBM/ITVM are very overbought. Speaking of these indicators, they turned down today, confirming the decline in short-term indicators. The pullback is in motion and indicators suggest it isn't over. We would look for a test of 425 for the SPY. This pullback will likely offer more opportunities for entry. With the majority of the market holding rising PMOs and holding support at key moving averages, expansion can be done carefully with the understanding that pullbacks aren't likely over.
Erin is 45% long, 0% short.
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BITCOIN
A perfectly lovely rounded top, predicting lower prices has been trashed. This recent Bitcoin rally has to do with, among other things, Blackrock filing to start a Bitcoin ETF. Click here for a related article if you are interested in digging deeper. The indicators have moved very bullish, but the RSI is already overbought. A look back to January and we do know that the RSI can remain overbought for some time. Most important are the PMO reaching positive territory and Stochastics reaching above 80. This move begs for a pullback, but indicators suggest that is all it will be.
INTEREST RATES
Yields are beginning to trend lower in the longer term offering Bonds an opportunity to break out.
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:
"It appears that a short-term Adam and Eve Double-Top is being formed which would mean a trip to the bottom of the bullish falling wedge or at least a test of 3.4%. The RSI is positive, but the PMO has turned lower and is nearing a Crossover SELL Signal. Stochastics turned down last week and could move below net neutral (50) soon. The bias is bearish on this chart, but indicators haven't fallen apart yet."
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT is stubbornly holding below the confirmation line of an Adam and Eve double-bottom formation. Longer-term yields are beginning to trend lower so we do expect a breakout. Indicators certainly suggest this with the RSI rising in positive territory, the PMO rising and Stochastics moving above 80.
DOLLAR (UUP)
IT Trend Model: BUY as of 5/18/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: The Dollar resumed the decline and formed a giant bearish engulfing candlestick. This candlestick not only engulfs yesterday's candlestick, but Monday's too. The RSI and PMO are clearly bearish. Stochastics don't look that bad, but they are beginning to turn lower. Expect the Dollar to remain weak.
GOLD
IT Trend Model: NEUTRAL as of 6/8/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: The rally in the Dollar like yesterday, did no favors for Gold which was down on the day. Support has now been broken and this bearish rounded top suggests more downside ahead. Indicators are in agreement.
GOLD Daily Chart: Discounts have expanded greatly and are now higher than we have seen since March. Typically when discounts get extended, Gold reverse higher. Gold is now uncoupled from the Dollar given the near zero correlation. This means we could have more days where the Dollar declines and Gold does too. We can't count on the Dollar to help Gold right now.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners broke near-term support. The RSI has been negative for well over a month. Today the PMO topped beneath the signal line which adds insult to injury. The injury being little to no participation. The SCI is falling almost vertically. We would look for price to drop down to 26.00 unless participation finally begins to improve.
CRUDE OIL (USO)
IT Trend Model: SELL as of 5/3/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Yesterday's comments still apply:
"Crude Oil remains in a messy trading range. The indicators show a bullish bias, but we note that just when the indicators get bullish, price falls apart. USO hasn't tested the top of the range at 66.00 so bullish indicators tell us to look for another test of overhead resistance at 65 or 66."
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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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