Today the Industrial Sector 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating a Silver Cross BUY Signal. It is hard to see on the chart, but this is the ninth 20/50-day EMA crossover in the last year, and six of those crossovers took place in the last three months. This signal gives us an idea of the bias of this sector, but it is not much help otherwise. Participation is far healthier this time around with all indicators above our bullish 50% threshold.
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: We saw a bearish engulfing candlestick today that implies we could see a decline tomorrow.
The top ten capitalized stocks in the SP500 had terrible days today so seeing a decline on the index that was somewhat negligible speaks to broader market strength.
Yesterday's puncture of the upper Bollinger Band on our inverted scale for the VIX did result in downside today. It remains above its moving average and Stochastics are above 80 indicating internal strength.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: The negative divergence persists between New Highs and price highs. Today the 10-DMA of the High-Low Differential turned back up which generally bodes 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 UP and the condition is OVERBOUGHT.
Swenlin Trading Oscillators (STOs) continued higher but have now reached overbought territory. Certainly we've seen much higher readings so we don't see this as a problem yet. Participation actually improved on today's decline with more stocks now above their 20-day EMAs and slightly more stocks added with rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
All of our IT indicators are confirming the rise in our short-term indicators. We have more PMO BUY Signals even on a decline and that percentage is not yet overbought.
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 short-term market bias is BULLISH.
The intermediate-term market bias is BULLISH.
The long-term market bias is NEUTRAL.
We see participation of stocks above their 20/50/200-day EMAs breaking declining trends. All participation percentages are well above our 50% bullish threshold and that should lift the SCI and GCI higher. The Golden Cross Index is still declining so we are leaving the long-term bias as Neutral.
CONCLUSION: Considering the decimation of the mega-caps today, our indicator charts continue to show broad market strength. Indicators are all moving higher. Participation is not seeing any damage on these small declines. We could see another decline tomorrow based on today's bearish engulfing candlestick but overall, the bias is bullish in the short term and the intermediate term. If you are expanding your exposure, do so carefully. One area highlighted in DP Diamonds was Energy (XLE).
Erin is 20% long, 0% short.
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BITCOIN
Bitcoin struggled today after yesterday's strong upward thrust. The indicators are weak. The PMO is on a SELL Signal, the RSI topped in negative territory and Stochastics are in a declining trend. Support looks especially weak right now.
INTEREST RATES
Short-term rates saw declines, but longer-term rates all rose on the day.
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 bottomed well above support within a bullish falling wedge that suggests an upside breakout ahead. The PMO has surged above its signal line (bottom above the signal line) and the RSI is positive. Stochastics have reversed in positive territory so we should expect that upside breakout.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The "handle" on the cup is getting extended and the PMO is in the process of losing its last and brief Crossover BUY Signal. Stochastics have topped and the RSI is firmly negative. More than likely this bullish cup with handle will bust with a drop below support at the May low.
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 finished higher, but set a lower high and a lower low. This formation looks very toppy, however, the RSI remains positive and the PMO is moving higher. Additionally, Stochastics are oscillating bullishly above 80. We are looking for an upside breakout after the prior rally has been digested.
GOLD
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: The bearish rounded top dominates the Gold chart and suggests a loss of support is ahead. The RSI is negative and the PMO is declining in negative territory. Stochastics look sickly.
GOLD Daily Chart: We also see that $GVZ is clustered around the upper Bollinger Band on the inverted scale. This leaves Gold vulnerable to decline. We expect the bearish rising wedge on $GOLD to resolve as expected to the downside.
GOLD MINERS Golden and Silver Cross Indexes: We continue to see no leadership within the Gold Miners as participation numbers remain very weak. Indicators are looking bearish with the RSI falling in negative territory. Stochastics are rising tentatively but are in negative territory. With Gold looking ready for a breakdown, we expect this group will be under fire.
CRUDE OIL (USO)
IT Trend Model: SELL as of 5/3/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: The Energy sector is beginning to look more bullish partly because Crude Oil is bullish. It hasn't done much, but indicators are just beginning to ripen. The RSI pushed past net neutral (50), the PMO is rising on a Crossover BUY Signal and Stochastics are rising in positive territory. We expect the rally in Crude Oil to continue past the May highs.
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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