Stocks, led by Big Tech, were up big time at the open, but late in the day they reversed downward. I could not find a triggering event in the headlines, but the 10-Year Bond Yield shot up over the four percent mark, and that, we are told, has a negative effect on tech stocks. Here's what happened to the Nasdaq -- up about +1.55% after the open, then down about -0.90% before the close.
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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: As I opened my eyes at about 3:00 AM PDT to check the futures, they just continued rolling back into my head as I observed what was likely a tech rally driving prices strongly higher. After much of the day shaking my head in disbelief, prices reversed and most market indexes closed down. The daily PMO has topped and should cross down through the signal line tomorrow.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Highs expanded today, but that is not a positive. Remember, New Highs/Lows are calculated intraday, so the market closing down while New Highs expanded emphasizes internal confusion.
Climax* Analysis: There was one climax reading, one reading that was close to a climax, and SPX Total Volume exceeded the one-year daily average volume. This does not reach the threshold for a climax day, but it sure feels a bit like a downside initiation climax. Let's look for some follow through tomorrow.
*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 reversed to DOWN today and the condition is somewhat OVERBOUGHT. Price has finally responded to deteriorating internals.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The ITBM and ITVM topped today. This should usher in several weeks of falling prices.
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 Percent of Stocks Above the 20-EMA shows that participation is beginning to crash. The SCI and GCI are overbought and should turn down very soon.
CONCLUSION: It is weird how the financial media is constantly spinning yarns about why the market is doing what it is doing. But regarding today's reversal? Nothing. No matter where I looked. Today's action was surprising, but not unexpected. We've been watching the short-term indicators (STO-B and STO-V) falling from overbought levels, showing the technical undermining of prices. Intermediate-term indicators (ITBM and ITVM) are extremely overbought, and they topped today. We're in a period of unfavorable seasonality, which I think is about to exert some negative influence on prices. We should expect to see some selling.
Erin is 50% long, 0% short.
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BITCOIN
Bitcoin is in a rather large rising wedge, and price is trending toward the bottom.
INTEREST RATES
Rates rallied strongly today, and the trend from the May lows remains up.
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
The saucer formation continues to develop upward as the 10-Year Yield rallied over =the four percent level.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds crashed today as yields rallied strongly.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 7/13/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: My guess is that the rally in yields is favoring the Dollar.
GOLD
IT Trend Model: BUY as of 7/26/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Yesterday I said: The 20/50EMA crossover is not particularly robust, but we observe that upward progress with gold is usually tedious. Today we got a taste of the tedium that Gold likes to dish out. I still think that we'll see a bullish resolution, though maybe not without some teeth grinding.
GOLD MINERS: Today the Gold Miners ETF (GDX) 20-day EMA crossed down through the 50-day EMA (Dark Cross), generating an IT Trend Model NEUTRAL Signal. Yes, there was a new BUY Signal yesterday. Participation is dropping like a stone.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Price is now moving up just under the top of the rising wedge.
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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