Today the Consumer Staples Sector ETF (XLP) 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. As with other signals that have been generated lately, this comes from a months-long trading range and is the seventh 20/50EMA crossover in a year. We do not find this to be a tempting setup. There are two levels of major support that could offer this defensive sector and opportunity at a reversal.
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: Options expiration week brings with it the expectation of low volatility on Thursday and Friday. The difference between Wednesday's close and Friday's close was about -1.0%, and the two-day range was about 2.0% -- certainly not super-low volatility, but not wildly volatile either.
Indicators remain very negative, but we again saw a puncture of the lower Bollinger Band on the inverted scale by the VIX which many times will lead to an upside reversal. We favor a pause versus a rally.
Here is the last recording from 8/14:
SPY Weekly Chart: The decline from the parabolic run up on the SPY is occurring as we would expect with a swift decline. Price did manage to stay above the 17-week EMA, but a very bearish development has occurred. The weekly PMO has topped.
New 52-Week Highs/Lows: As we would expect, New Highs pared back this week while New Lows were elevated. The 10-DMA of the High-Low Differential spent all week in decline and has now reached the zero line. This has been an area we've seen upside reversals, but this indicator can get far more oversold. We are watching closely for a bottom on this indicator as that would imply we might see a rally.
Climax Analysis: There were no climax readings today. We had two climaxes this week. A downside initiation climax which resulted in a strong decline, and a downside exhaustion climax which saw no followthrough. When bearish signals work and bullish signals don't, you know you have a bearish bias.
*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.
Swenlin Trading Oscillators (STOs) spent the week in decline and have now reached somewhat oversold territory. We say "somewhat" oversold as -400 is our typical threshold for oversold territory. These levels have resulted in upside reversals, but we haven't seen a continual decline as we have this time and we know they can get far more oversold. We did see %PMOs Rising tick up on Friday in very oversold territory, but we don't see that as significant given the very low reading. It does raise questions about an upcoming upside reversal given how oversold that indicator is.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
While this has been territory for reversals on the ITBM/ITVM, they aren't oversold yet and suggest we could see even more downside. %PMO BUY Signals is oversold and typically it doesn't stay there very long. For now it should stay in this area longer given there are fewer rising PMOs.
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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) may hold the most positive bias, but that group is deteriorating as the Silver Cross Index loses percentage points.
The most negative biases below to Gold Miners (GDX) and Semiconductors (SMH), two groups that were hit especially hard this week.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
Energy (XLE) is still clicking but is clearly very overbought given its 100% reading on the Silver Cross Index. There's nowhere to go but down and that does give us pause. Still, it isn't losing any steam yet.
You'll notice all but two managed to hold their Silver Cross Index percentages. We talked about Energy. We wouldn't bank on Communication Services (XLC) holding up based on its very negative chart.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
Semiconductors (SMH) were hit especially hard this week in the intermediate term as the Silver Cross Index lost 32 percentage points! The reading is not oversold so we could see more downside ahead for this industry group. Long-term, it is holding up given it holds the highest GCI reading.
Interestingly, Regional Banks (KRE) gained a few percentage points on the GCI while losing points on the SCI. This group isn't sitting pretty and holds the lowest GCI reading.
The following chart objectively shows the depth and trend of participation in three time frames.
The market bias is BEARISH in all three timeframes.
This week the Golden Cross Index turned down. It is nearing a "Bearish Shift" beneath the signal line. Given the much lower reading on %Stocks > 200EMA is only at 54%, we know that the Golden Cross Index will continue to make its way lower. %Stocks > 20/50EMAs are getting oversold, but still have further to fall. The Silver Cross Index is configured very negatively and given only 34% have price above the 50-day EMA, it will also continue to fall.
CONCLUSION: Oversold conditions do give us hope of an upside reversal, but we favor a pause in the action versus a reversal rally. We should continue to stay on the defensive as stocks are still overbought and internal weakness and falling PMOs within all sectors with the exception of Energy are a problem. A run through the industry groups and you'll find only a handful with rising PMOs. There are not enough pockets of strength to reverse this tide yet. The topping weekly PMO is also a harbinger of more decline ahead in the intermediate term. At best we see a pause next week with a high likelihood the decline will continue to bring price lower.
Erin is 10% long, 8% short.
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BITCOIN
We have been expecting that Bitcoin would break down from the rising wedge formation, and it happened after SpaceX sold all its $373 million Bitcoin holdings. We could see it holding its own on support given the oversold RSI, but with such an ugly PMO, we should be prepared for more decline.
This chart is to show where some of the support/resistance lines come from.
INTEREST RATES
Yields paused the strong rise and we see it as just that, a pause.
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
It wasn't surprising to see the 10-year yield pullback on Friday given it had reached overhead resistance at the October top. The rising trend was not at all compromised and indicators remain positive so we expect an upside breakout next week.
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.
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This week the 30-Year Fixed Rate changed from 6.96 to 7.09.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With yields pausing their rise, Bonds managed a modest rally. We don't see this catching on, but newly rising Stochastics in negative territory does add hope that at least a small rally will appear. We can't get too bullish given the very strong rising rate environment and the PMO still being in decline.
We would watch support at 90.00 as the most likely area for a real reversal.
TLT Weekly Chart: Price is pushing toward support and the weekly PMO topped in negative territory. It is still in decline alongside a very negative weekly RSI. We don't know whether support will hold in the intermediate term given the bleak indicators, but it does look possible.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 7/13/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar marched higher this week, overcoming overhead resistance and holding above. The brief decline on Thursday did bring the RSI out of overbought territory. The PMO is getting overbought, but certainly has room to move higher. Strong Stochastics suggest this rally will continue.
We do see some long-term overhead resistance nearing, but it is weak.
UUP Weekly Chart: The weekly PMO saw a Crossover BUY Signal this week and the breakout looks very bullish. The weekly RSI is not overbought either. We would look toward the 2022 high.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: BUY as of 1/5/2023
GOLD Daily Chart: Gold really wants to hold support. We have to wonder where Gold went as a "safe haven" during a market decline. The big culprit is the very strong Dollar, but that doesn't account for the relative weakness of Gold to the Dollar.
$GOLD still has support at the 200-day EMA and 1900, but given the bearish GLD chart, relative weakness and not that bearish sentiment, it isn't likely to hold.
GOLD Weekly Chart: We do not like the newly negative weekly RSI. Another negative development is the accelerating PMO as it declines. As noted above, discounts are not high enough to have sentiment work in Gold's favor yet. 1900 is a strong area of support, but it is definitely vulnerable.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners (GDX) saw a 'death cross' this week as it continued in its declining trend. Participation is barely there and continues to worsen. The PMO is getting oversold, but has seen lower readings. The RSI is now in oversold territory, but just barely. Support is arriving, but indicators don't support a reversal yet.
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 could be forming a reverse flag which would imply another decline ahead. However, it is holding above the 20-day EMA. The RSI is positive and rising. This is a neutral chart and isn't giving us enough information to make a proclamation about this starting up another rally. It is beginning to look a bit better as Stochastics did flatten and the PMO is trying to turn back up, but we would stay defensive regarding your Energy positions.
This top doesn't look encouraging on the 1-year chart, but we do notice that $OVX punctured the lower Bollinger Band on the inverted scale. Typically you'll see rising prices after a puncture.
USO/$WTIC Weekly Chart: The weekly PMO is already trying to top. The weekly RSI has topped but remains in positive territory. $WTIC shows us that this area is flirting with strong overhead resistance at prior 2023 tops, so it makes sense that USO would take a breather. That weekly PMO needs to stay upright if USO is going to reverse this week's decline.
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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