Today the Health Care Sector ETF (XLV) and the Materials Sector ETF (XLB) 20-day EMAs crossed down through their 50-day EMAs (Dark Cross), generating IT Trend Model NEUTRAL Signals.
XLV in particular has been in a tight trading range so this may not be the last signal to be generated in a short period of time. It is in a clear declining trend and participation is very thin and seeing no real improvement. More than likely we will get the breakdown here as suggested by the signal change.
XLB is also in a tight range and has already experienced some whipsaw of the 20/50-day EMAs. With the PMO in decline and participation so thin, it is vulnerable to a breakdown this time around.
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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MARKET/INDUSTRY GROUP/SECTOR INDEXES
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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 bearish double top was confirmed intraday, but ultimately price did close above the confirmation line. The minimum downside target of the pattern, should it be confirmed, is only down to the support level at about 430. Of course, it is called a minimum downside target for a reason.
The intermediate-term rising trend is now in jeopardy as price tapped the rising bottoms trendline today. The PMO is in decline and the RSI moved below net neutral (50). Stochastics look particularly bearish. The only positive is that the VIX remains above its moving average on the inverted scale. We see internal weakness in spite of the VIX.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Highs expanded on today's decline and New Lows contracted. That's a nice positive divergence, but we have to wonder how many of those New Highs existed at the end of the day. These readings reflect the highest totals for the day, not what they were at the close. The 10-DMA of the High-Low Differential is declining in negative territory.
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 DOWN and the condition is NEUTRAL.
We see price in a declining trend in the short term with two tops that are below the July top. Swenlin Trading Oscillators (STOs) continue to decline suggesting more downside ahead. Participation numbers shrank somewhat today as we would expect.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM continue to confirm declining STOs. We saw no gain or loss of PMO BUY Signals, but the percentage is below our 50% bullish threshold.
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 BEARISH in all three timeframes.
Our bullish threshold of 50% is not being met by %Stocks > 20/50EMAs making the short-term bias Bearish. We also are seeing no improvement to those indicators. The Silver Cross Index has topped beneath its signal line and today only saw the same reading. It hasn't turned back up. The Golden Cross Index did turn up today, but ultimately it isn't likely to move much higher given we have far fewer stocks above their 50/200-day EMAs versus the Golden Cross Index percentage.
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.
The Consumer Staples (XLP) Silver Cross Index moved below its 10-day EMA to give XLP a Bearish Bias in the long term.
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CONCLUSION: Tomorrow the Fed makes their interest rate announcement. They are not expected to raise or lower rates so it shouldn't have too much bearing on price direction unless expectations aren't met. STOs continue to decline alongside the PMO. The ITBM/ITVM are confirming these declines with their own decline. While we did see an expansion of New Highs on the decline, those falling indicators are a big problem and certainly suggest more downside ahead. Consider tightening your stops or adding a hedge given the market's internal weakness and Bearish Bias.
Erin is 40% long, 2% short.
** IMPORTANT ** Erin will be traveling to finish out the week so reports on Wednesday and Thursday may arrive later than usual. As always, they will definitely be in your inbox before the market opens the following day.
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BITCOIN
Bitcoin is now trading above the 200-day EMA. As long as this continues, a Death Cross of the 50/200-day EMAs can be avoided. So far it is holding above new support. The indicators are favorable so we expect this support level to hold up with potential to move higher.
INTEREST RATES
Rates were higher on the day and are likely to continue to rise given their bullish rising trends.
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
Yesterday's comments still apply:
"$TNX continues to avoid forming a bearish double top. Stochastics and the RSI suggest a breakout ahead, but we'd like to see some confirmation from the PMO which hasn't given us a Crossover BUY Signal yet."
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With the 20-year yield moving higher today, TLT saw a decline. It was really shaping up with a reverse head and shoulders, but it was never able to confirm the pattern. Now we are looking at support at the August low.
However, looking at the longer-term daily chart, the August low doesn't seem like the strongest support level. More than likely it will see the 89 to 90 range on the decline.
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 was up but we would say it is still in 'pause' mode. The rising trend is very strong and Stochastics are oscillating above 80. While the PMO appears to be topping, there is still quite a bit of internal strength on the Dollar. It is time for a decline. It just doesn't look particularly interested in that right now.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold was down slightly on the day, but the PMO managed to hold onto its Crossover BUY Signal. Stochastics are rising and this does look like a double bottom pattern. The RSI is positive. We like the way Gold is shaping up right now.
GOLD Daily Chart: Price is traveling in a symmetrical triangle. Given the prior trend was up, we should see an upside breakout soon. Discounts are still elevated so we don't see any bullish sentiment. We don't see excessive bearishness in discounts as they've been much higher than they currently are. Overall we like Gold and do expect an upside breakout.
GOLD MINERS Golden and Silver Cross Indexes: GDX pulled back today with Gold. We are bullish on Gold and that should put the wind at the back of the Gold Miners. We don't like that participation pulled back with today's decline. We've seen this type of activity before previous declines. The Silver Cross Index topped today so we would advise caution or tighter stops if you're dabbling in this industry group.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: Yesterday's comments still apply:
"Crude Oil is likely to move much higher given production cuts globally. This is going to continue to put pressure on Transports and consumers alike. It certainly could use a pause, but the PMO and Stochastics aren't deteriorating. The RSI tells us how necessary a pause is, but in a bullish environment like Crude is in, we expect that condition to persist."
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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