After returning from vacation, Erin reviewed the charts to get a feel for what the market has been up to while she has been away the past two weeks. One chart in particular caught her eye. The American Association of Individual Investors (AAII) Sentiment Survey showed a nearly 2 to 1 ratio of bulls to bears. It came in below that this week at 1.86, but last week it was nearly 2.5 to 1.
We've highlighted the major market tops with red vertical lines. It doesn't always take these lopsided readings to get a significant market top, but generally speaking the Bull/Bear Ratio peaks in some manner. Looking at prior times that ratio has been this high, it's mixed as to the result. We could be looking at a situation as we had in 2021. Just remember sentiment is contrarian so this is one more environmental factor to consider as we move forward.
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 Today:
For the Week:
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.
For Today: 
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: There was no downside follow through from yesterday's decline. In fact prices bounced quite nicely, and on its face, it looked like a great day . . . until we put today's price movement into the context of the price chart. The close is about in the middle of yesterday's candlestick range. A good day, but not great.
The PMO was primed to give us a Crossover SELL Signal, but the rally had it tick upward. The VIX's narrow range is indicative of the complacency of investors. Stochastics are oscillating above 80 which implies internal strength.
We'll be back this Monday!
SPY Weekly Chart: The market is increasing its angle of ascension which gives us a parabolic advance. The weekly RSI is now overbought as the market pushes toward a new all-time high.
SPY Monthly Chart: The monthly PMO is rising, but remains on a SELL Signal.
New 52-Week Highs/Lows: We have a negative divergence between New Highs and price highs in the short term. Today's nearly 1% advance did not expand New Highs which is a negative divergence on the day.
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 SOMEWHAT OVERBOUGHT.
Negative divergences are stark on this chart, particularly given yesterday's top. The STO-B continued lower while the STO-V managed to move higher. Today's rally should've turned them both upward. While %Rising Momentum moved higher, it barely moved higher.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM and ITVM continued lower on today's strong rally. We continue to see erosion of PMO Signals.
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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.
NEW SECTORS ADDED! We have begun collecting SCI and GCI data for four new sectors: Biotechnology (IBB), Regional Banking (KRE), Retail (XRT), and Semiconductor (SMH).
Regional Banks (KRE) are rallying strongly, seeing a 19 point gain on the SCI. It holds the highest IT Bias as we await improvement on the GCI. The group has been badly beaten so it will take some time before the GCI gets moving.
Utilities (XLU) are seeing great improvement in the shorter term as evidenced by its strong IT Bias.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
Semiconductors (SMH) and Transportation (IYT) are incredibly strong in the IT, but they sit at 100% on the SCI. The only place the SCI can go is down.
Biotechs are the weakest and are getting weaker. Communication Services (XLC) are breaking down as well given it is the only other ETF that saw a decline in the SCI.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
SMH continues to hold the top spot on the GCI, but as noted earlier, there isn't too much room for it to move higher. The group is incredibly overbought.
KRE is at the bottom, but given the vast improvement to the SCI, we should see the GCI expand more concretely soon.
The following chart objectively shows the depth and trend of participation in three time frames.
The market bias is NEUTRAL.
The short-term bias is NEUTRAL.
The intermediate-term bias is NEUTRAL.
The long-term bias is BULLISH.
The market bias is beginning to deteriorate as we lose more stocks above their 20/50-day EMAs. Those percentages are lower than the SCI, so the SCI should begin topping soon. %Stocks above the 50/200-day EMAs are shrinking somewhat but remain above the GCI percentage, so we are keeping the long-term bias as bullish.
CONCLUSION: Indicators for the most part were unimpressed with today's nearly 1% rally. We saw a higher intraday low, but not a higher high. We see numerous negative divergences with yesterday's top. New Highs contracted in spite of a rally of this magnitude. While we didn't see blowoff level volume, this does seem more like a last gasp than a rallying cry. Be careful not to get carried away with the complacently bullish investors. Stops should be placed if they aren't already.
Erin is 50% long, 0% short.
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BITCOIN
Bitcoin is in a declining trend but is clinging to support at the March highs. Stochastics have turned back up but the RSI remains negative and the PMO holds a SELL signal. Support is vulnerable. There is a large bearish rising wedge.
This chart is to show where some of the support/resistance lines come from.
INTEREST RATES
Yields are trending higher putting downside pressure on Bonds. Resistance is nearing.
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 shows a bullish saucer formation. The PMO triggered a Crossover BUY Signal today. Stochastics are rising strongly and the RSI is positive so we are looking for resistance to be broken.
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 6.78 to 6.81.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Rising yields are pressuring TLT lower. Support has arrived, but we don't expect it to hold given the PMO SELL Signal and falling Stochastics. It doesn't help that the RSI is negative too.
TLT Weekly Chart: There is a new PMO Crossover SELL Signal which adds insult to injury.
TLT Monthly Chart: Bonds are in a long-term declining trend that we expect to continue.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 7/13/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: Erin lucked out that the Dollar began to surge shortly after she left for Europe. It appears the Dollar has more rally to go given the new PMO Crossover BUY Signal this week. Stochastics suggest internal strength.
UUP Weekly Chart: Overall the Dollar has been in a wide trading range this year. We don't expect that to change.
UUP Monthly Chart: The monthly PMO suggests the Dollar is weak in the long term.
GOLD
IT Trend Model: BUY as of 7/26/2023
LT Trend Model: BUY as of 1/5/2023
GOLD Daily Chart: Carl wrote an excellent article on Gold yesterday and we believe the analysis still applies today so we are repeating those comments below.
"As of today, GLD declined back below the 20-day and 50-day EMAs, which will result in the new BUY Signal being reversed (probably tomorrow) unless price gets back above them quickly. As I said yesterday, Gold's upward progress is usually tedious at best.
Also on the chart I have noted a bearish rounded top formation between March and June, but Gold is in a long-term bull market and that formation failed to execute. Currently, we have a bullish cup with handleformation in progress."
GOLD Weekly Chart: "On the weekly chart we can see that Gold has been turned back by resistance three separate times, but I think the third time may be charmed. The first two attempts were parabolic moves, which are usually doomed to failure. The third advance from the 2022 low has been more deliberate, advancing within a rising trend channel. While it too was turned back, I think there is a good chance of a successful break through this time."
GOLD Monthly Chart: Finally, the monthly chart shows that Gold has been in a trading range for 13 years. That is a bullish continuation pattern. There is also a bullish cup with handle, implying that a long-term breakout is likely.
"Conclusion: Gold has been doing a lot of long term work by consolidating the huge advance from the 2001 lows. We think that the most recent attempt to break to new, all-time highs will ultimately be successful, but we may find ourselves grinding our teeth through the process."
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are in a declining trend, but today's strong rally turned the PMO up in time to avoid a SELL Signal. Participation dropped perilously and today's rally didn't do much to improve the picture. Still, the SCI is reading at 50% and support is now arriving. This group is highly vulnerable given the weak internals.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: USO is ready to break out, but we note that price is within a bearish rising wedge. The PMO is rising strongly and Stochastics flash internal strength. However, we believe this rally will cool given the RSI is overbought and resistance is nearing.
USO/$WTIC Weekly Chart: The weekly PMO generated a Crossover BUY Signal and the weekly RSI is positive and not overbought. While we could see USO stumble at overhead resistance, we don't see it as fatal.
WTIC Monthly Chart: Price is back above resistance at the 2018 top which pushed the monthly RSI into positive territory. Still, the bias is bearish in the longer term given the monthly PMO continues to fall.
Good Luck & Good Trading!
Erin Swenlin And Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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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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