Today the Real Estate Sector ETF (XLRE) 20-day EMA crossed down through the 50-day EMA (Dark Cross) below the 200-day EMA, generating an IT Trend Model SELL Signal. Once again, we have a situation where price has been flat for 10 months, and the moving averages are very close together, which tends to generate whipsaw signal changes. There have been seven 20/50EMA crossovers on XLRE in the last year, and we note that we recently came very close to an upside 50/200EMA crossover, which would have been LT bullish.
We emphasize that these signals are information flags, not action commands. In each case the chart should be assessed, and a decision made whether or not to take action. In this case, we think this is not a tempting setup.
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.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
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: The decline is picking up some speed, but support is arriving at 430. The PMO is declining and far away from its signal line. It will take concerted upside price movement to bring back a Crossover BUY Signal. The RSI isn't oversold yet so this decline could see even more followthrough.
Stochastics are about as negative as they can get as they near zero after topping below 20. The VIX gives us some sign that we could see a pause. When we see it puncture the lower Bollinger Band, that will often lead to an upside reversal. We suspect it will be a pause similar to the last time the VIX punctured the lower Bands. It remains beneath its moving average on the inverted scale which implies internal weakness.
Here is the latest recording (8/14):
S&P 500 New 52-Week Highs/Lows: New Lows are somewhat elevated and we could say near-term oversold. We still see strong internal weakness based on the decline of the 10-DMA of the High-Low Differential.
Climax* Analysis: There were no climax readings today. SPX Total Volume expanded somewhat, but it is still not at the level that would indicate possible seller exhaustion.
*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 DOWN and the condition is OVERSOLD.
We haven't reached our oversold threshold of -400 on the Swenlin Trading Oscillators (STOs), but it is fair to say they are near-term oversold. Readings of %Stocks > 20EMA and %Rising PMOs are oversold. They can maintain these levels in a decline, but we do have to consider that at least a pause could be in the works.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM/ITVM are still being listed as "neutral" given they have seen much lower readings that what we have now. %PMO BUY Signals are oversold, but have reached lower levels closer to zero. Given only 7% have rising PMOs, this indicator should continue lower.
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 BEARISH in all three timeframes.
The Golden Cross Index is finally seeing a more significant top and based on the deterioration of stocks above their 50/200-day EMAs, we should expect it to move even lower. This indicator is not oversold. The Silver Cross Index is falling fast and based on puny participation on %Stocks > 20/50EMAs, it will definitely continue to move lower. It gave us ample warning with its Bearish Shift beneath the signal line earlier this month.
CONCLUSION: Indicators may be reaching oversold levels, but in all cases, they can move even lower. Still, this could suggest a pause in this decline is ahead. We doubt we will see a forceful rally reversal off these oversold conditions primarily because the ITBM/ITVM aren't oversold and suggest more downside in the intermediate term. Healthcare which was the only sector holding a rising PMO yesterday. It saw a PMO Crossover SELL Signal today so there really aren't too many places to hide. Pockets of strength are usually visible, but not right now. Keep exposure light while the market is internally weak.
Calendar: Tomorrow is options expiration. Expect low volatility.
Erin is 10% long, 8% short.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact support@decisionpoint.com for more information!
BITCOIN
We expected followthrough on yesterday's decline but didn't expect the voracity of the decline. This has taken price below the long-term rising bottoms trendline (you can see where it begins on the LT chart below this one). The 200-day EMA is arriving to provide support, but this deep decline suggests more downside ahead. The decline has indicators looking especially weak.
INTEREST RATES
Longer-term yields are pushing toward March highs, but don't appear ready to settle back down soon. The rising rate environment continues.
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 is about to test overhead resistance. It has now reached it. Indicators are far too positive to expect this level not to be exceeded, but a pause could occur since we are at overhead resistance.
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 in a solid declining trend and based on bullish yields, we don't think the decline is over yet. The PMO is certainly oversold, but the RSI is not. Stochastics flash internal weakness as they remain below 20.
There really isn't any longer-term support at this price level so we do see lower prices ahead.
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 bit of a breather today, but held above support. We expect the rally will continue given the RSI is positive and not overbought, and the PMO is rising strongly and is also not overbought. Stochastics are strong above 80.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: GLD closed beneath support at the June low, barely. The Dollar didn't do much today but that didn't prevent Gold from taking a hit. It is very internally weak given Stochastics are in the basement. We would look for further decline.
GOLD Daily Chart: A weak market has done nothing for Gold so the safe haven adage isn't working yet. $GOLD dropped beneath the rising bottoms trendline. It does have support available unlike GLD at the June low and 200-day EMA, but given the continued weakness against the Dollar, we don't think it will hold. Interestingly, we aren't seeing elevated discounts, meaning investors aren't entirely bearish on Gold. Sentiment is also not working in its favor.
GOLD MINERS Golden and Silver Cross Indexes: We see this group as terribly weak right now. It is about to arrive at support, but given none of the stocks have price above their 20-day EMA and only 7% have a 20-day EMA above their 50-day EMA, this may not provide much support at all. Still with readings so oversold, we should be mindful when it reaches that level as new interest may arrive. It certainly would help if Gold would strengthen, but it doesn't look like GDX can count on that help.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: USO rallied but formed a bearish filled black candlestick. Those candle patterns suggest a decline the following day. We foresee prices moving lower to test the next level of support around the 50-day EMA based on the PMO Crossover SELL Signal and weak Stochastics.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
(c) Copyright 2023 DecisionPoint.com
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)
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.