Today the Materials Sector (XLB) 20-day EMA crossed down through the 50-day EMA (Dark Cross), generating an IT Trend Model NEUTRAL Signal. The sector is actually looking interesting with today's rally, but this Dark Cross and the Silver Cross Index Bearish Bias tell us to tread carefully. We did see some expansion in participation beneath the surface as far as %Stocks > 20EMA, but it is still early.
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: Today saw a pretty nice rally but price is beneath short-term resistance. The small break above the declining tops trendline is encouraging. We have been looking for a pause, but we can't count out followthrough yet.
Stochastics are in negative territory and look a bit wishy washy. The VIX is back above its moving average on the inverted scale, but is also near the upper Bollinger Band already. We would say these indicators suggest some returning internal strength.
Here is the latest recording from 8/28:
S&P 500 New 52-Week Highs/Lows: New Highs expanded as we would expect and are at the highest we've seen in the past few weeks. What is newsworthy is the 10-DMA of the High-Low Differential turned up today.
Climax* Analysis: There were unanimous climax readings on the four relevant indicators today, giving us an upside initiation climax; however, SPX Total Volume was only 68% of the one-year daily average and did not confirm the climax condition.
*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 NEUTRAL and the condition is NEUTRAL.
Swenlin Trading Oscillators (STOs) have hit positive territory and there was a healthy expansion in %Stocks > 20EMA and %Rising PMOs. Nearly half of the index have positive momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERSOLD.
Not only did the 10-DMA of the High-Low Differential turn up, the ITBM and ITVM both switched direction today as well. %PMO Xover BUY Signals turned back up and are headed toward the signal line.
PARTICIPATION: 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 NEUTRAL in the short term.
The market bias is BEARISH in the intermediate and long terms.
We are moving "Neutral" in the short-term bias because we have a nice expansion of stocks above their 20-day EMA. %Stocks > 20/50/200EMAs are not above our bullish 50% threshold. Nor are there more %Stocks > 20/50EMAs than the percentage holding Silver Crosses. Too early to go bullish.
BIAS Assessment: The following table expresses the current BIAS of various price indexes based upon the relationship of the Silver Cross Index to its 10-day EMA (intermediate-term), and of the Golden Cross Index to its 20-day EMA (long-term). When the Index is above the EMA it is bullish, and it is bearish when the Index is below the EMA. The BIAS does not imply that any particular action should be taken. It is information to be used in the decision process.
Today the long-term BIAS for the S&P 400 Index ETF (MDY) changed to bearish as its Golden Cross Index dropped below its 20-day EMA.
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CONCLUSION: The market is going to show us what it is made of tomorrow. We had an upside initiation climax combined with intermediate-term indicators reversing upward. This is coming on a nice expansion in rising momentum within the market. However, we wonder if there is enough conviction to keep this rally going given today's light volume. We wouldn't get too comfortable. Participation is still intrinsically weak based on the bearish bias in the intermediate and long terms.
Erin is 8% long, 0% short.
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BITCOIN
Bitcoin has made a home within a new trading range. This looks like a bearish reverse flag, but 25,000 has proved to be solid support in the longer term. The RSI is very oversold. The PMO has flattened and could turn up soon. For now we would expect this trading range to hold awhile longer.
INTEREST RATES
Yields backed off somewhat today. Rising trends remain intact.
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 has pulled back since hitting overhead resistance at the October top, but its rising trend is not yet in jeopardy. We still expect rates to move higher but in the short term, we could see them cool based on the nearing PMO Crossover SELL Signal.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The indicators are lukewarm on TLT. Price has been stunted at the 20-day EMA. The RSI is negative and Stochastics have topped. The PMO may have produced a new Crossover BUY Signal, but upside potential looks extremely limited.
DOLLAR (UUP)
IT Trend Model: BUY as of 8/3/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar took a breather but doesn't look bearish. The rising trend is still strong and indicators are positive. The decline actually helped the RSI move out of overbought territory. We see no weakness here.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold was up on the Dollar's decline and then some. The inverse correlation suggests Gold should've only been up +0.17%, but it managed a bit more. We like Gold's price action as it comes off support at the June low. It could be setting up a bullish double bottom.
GOLD Daily Chart: Indicators are also looking bullish. The RSI is nearly in positive territory, the PMO is nearing a Crossover BUY Signal and Stochastics are rising. Discounts suggest sentiment is working in its favor as there are still quite a few bears out there based on the elevated readings.
GOLD MINERS Golden and Silver Cross Indexes: With Gold looking up, Gold Miners are too. Today they confidently rose above resistance where they had struggled last week. Most impressive is the nearing PMO Crossover BUY Signal and the Bullish Shift on the Silver Cross Index. We are seeing a solid amount of participation under the surface, although still below bullish 50% thresholds at this time. This rally should get legs.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: Crude Oil formed a short-term bullish falling wedge. Today it technically broke above it, but then managed to close back within. Indicators are neutral. The RSI is positive and Stochastics are rising, but the PMO isn't showing its hand yet. Based on the chart pattern and positive enough indicators, we expect a rally higher.
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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