Technology (XLK) continues to weaken. Today the PMO crossed beneath its signal line and generated a SELL Signal. There are all kinds of problems with the chart. The only positive we could give it would be that it is still holding its long-term rising trend. Past that, we have the RSI in negative territory and Stochastics falling fast also in negative territory. Participation continues to weaken and is below our 50% bullish thresholds. The Silver Cross Index and Golden Cross Index are below their signal lines so there is a clear Bearish Bias in the intermediate and long terms. If you're looking for a hedge, this might be a candidate.
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/SPX SECTOR INDEXES
Change 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: End-of quarter options expiration produced very high SPX Total Volume, as expected. Low volatility is also expected on Thursday and Friday, and with a SPY two-day trading range of about 1.5%, we think that expectation was met. This is the kind of day that demonstrates why we are so obsessive about monitoring options expiration volume. With today's strong decline, some might mistakenly interpret the high volume as being related to the decline, not options expiration. That would be wrong.
The rising trend remains intact in the long term and price is currently holding above the 50-day EMA. The PMO generated a whipsaw Crossover SELL Signal today after a whipsaw BUY Signal yesterday. Clearly it is indecisive and unhelpful. The VIX remains above its moving average on the inverted scale, but Stochastics have turned down. We read this as a deterioration of prior internal strength.
SPY Weekly Chart: The weekly PMO narrowly avoided a Crossover SELL Signal, but we would prepare for it next week. This is sign of weakness that we don't want to ignore.
New 52-Week Highs/Lows: New Highs and New Lows narrowed this week. The 10-DMA of the High-Low Differential continues to move lower and could reach into negative territory next week.
Climax Analysis: Yesterday we had a strong upside initiation climax, but today the market reversed strongly enough to generate a downside initiation climax, with climax readings on three of the four relevant indicators. We know that volume is attributed to options expiration.
*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 NEUTRAL.
Both of the Swenlin Trading Oscillators (STOs) turned down today which doesn't bode well. Less than half of the index hold rising momentum suggesting more internal weakness.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
IT indicators all confirmed the downturn on the STOs as they all moved lower.
PARTICIPATION: The following tables summarize 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 Industry Groups, and the 11 S&P 500 Sectors.
Regional Banks hold the highest IT Bias, but notice the deterioration of both its Silver Cross Index and Golden Cross Index. This isn't a strong group.
Semiconductors (SMH) hold the lowest IT Bias and it is getting worse based on the loss of percentage points on both the SCI and GCI.
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 outperforming by a mile so it is no surprise to see it leading the SCI table. Both the SCI and GCI are holding steady at very high 96 percentage points.
Utilities (XLU) may hold the lowest SCI reading, but that is improving quickly. XLU improved its SCI by the most percentage points this week.
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 lost the most points on the GCI taking it out of a tie with XLE. Tech is looking very bearish and SMH is one of the culprits.
KRE holds the lowest GCI reading and that is getting worse. While Financials (XLF) may be holding a rising trend, this industry group should be avoided.
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.
%Stocks > 20/50EMAs are below our 50% bullish threshold and are shrinking. The SCI may've turned up this week, but it is already flattening and could see a top beneath the signal line which would be especially bearish. While the GCI is above our 50% bullish threshold, it is in decline. The GCI holds a higher reading that %Stocks > 50/200EMAs so it will continue lower.
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 Silver Cross Index for Gold Miners (GDX) and Consumer Staples (XLP) crossed up through their 10-day EMAs, shifting their BIAS to bullish.
CONCLUSION: You may've noticed that defensive areas like Consumer Staples (XLP) and Utilities (XLU) are beginning to flourish. This is a bad sign for the market as these sectors are generally where you see positive movement before a big downturn. Technology is looking particularly weak and will likely carry the market lower. Seeing all of our ST and IT indicators shift downward is also an issue. This PMO SELL Signal on the SPY today is likely to hold up and given today's clear downside initiation climax, we would prepare for more downside. It isn't a bad idea to open some short positions or at least a hedge given the overall weakness of our indicators and the market in general.
Erin is 40% long, 0% short. She is looking into hedging on Monday.
Calendar: The Fed meets next week, and the interest rate announcement will be on Wednesday.
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Bitcoin is beginning to look bullish as it taps on the top of its trading range. The RSI has moved into positive territory and the PMO is adding merging between it and its signal line as it rises. Stochastics are popping higher as well. It will need to rally strongly out of this trading channel to avoid a Death Cross of the 50/200-day EMAs. It is certainly a possibility now.
This chart is to show where some of the support/resistance lines come from.
Yields backed off somewhat this week, but finished Friday with a move higher. Short-term rising trends are solid. We expect rates will continue to run higher.
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 hasn't aborted the possible reverse island formation, but the pattern is too stale, so we are erasing it. What is most important is the rally off the 20-day EMA. The biggest concern is a decline that would form a double top. It's still too early and the rising trend is sturdy so we are expecting this rally to catch on and overcome resistance. The PMO isn't confirming this yet, but the RSI and Stochastics look positive enough to expect a higher yield.
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 7.12 to 7.18.
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We can definitely write off the reverse head and shoulders idea with this week's final decline. Indicators are weak with the PMO nearing a Crossover SELL Signal and the RSI and Stochastics declining in negative territory.
We should look for price to at least test support at 92 with a high likelihood of a decline to 89.00.
TLT Weekly Chart: The weekly chart suggests 89 or 90 will be tested given the negative weekly RSI and failing weekly PMO on a SELL Signal. The 20-year yield is nearing overhead resistance, but we believe it will break out.
IT Trend Model: NEUTRAL as of 7/13/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar paused, but does not look bearish. The main issue is the overbought RSI, but given the bullishness of the chart and strong rising trend, it will likely remain overbought for some time. There isn't anything on the chart to suggest this rally won't continue.
Overhead resistance is very far away, leaving plenty of running room.
UUP Weekly Chart: Price came out of a cup-shaped base. The daily RSI may be overbought, but the weekly RSI is not. Notice that the weekly RSI can remain overbought as it did back in 2022. The weekly PMO is strongly rising. More evidence that the Dollar's rally is likely to continue.
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: BUY as of 1/5/2023
GOLD Daily Chart: Gold managed a rally today which prevented a PMO Crossover SELL Signal on GLD. Stochastics tipped upward and the RSI has moved into positive territory. While all of this is encouraging, today's bearish filled black candlestick doesn't inspire confidence. Still, with the market looking weak, Gold could find favor.
We have a large symmetrical triangle on $GOLD. These are continuation patterns. Given the trend prior to the development of the triangle was up, we should expect an upside breakout. We'd like to see Gold's relative strength to the Dollar trend upward, but given how strong the Dollar looks, we doubt the Dollar will give Gold a break.
GOLD Weekly Chart: The weekly PMO is bearish and the weekly RSI is neutral. This looks like a very strong area of support for Gold to bounce off, but it has some negative momentum that needs to clear to keep price afloat. While we look for a reversal off this support level at 1900, the weekly PMO suggests it may take more time before a rally gets going.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners look very bullish right now. They have some difficult overhead resistance to overcome at the late August top and 200-day EMA. The RSI is positive and Stochastics are rising in positive territory. The PMO is rising as well. Participation looks very healthy right now and today's Bullish Shift by the Silver Cross Index tells us we should expect the breakout.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: Crude Oil is on the rise and with production cuts abroad and problems with supply in the U.S. we expect price will move even higher. The technicals on the chart confirm this with the rising PMO and strong Stochastics. The RSI is very overbought, but we expect this condition to persist.
USO/$WTIC Weekly Chart: The weekly chart is suggesting higher prices as well. The weekly RSI is positive and not yet overbought and the weekly PMO is rising and adding to the margin between it and its signal line. Overhead resistance lies at about 91.00 for USO and $100/barrel for $WTIC. We expect those levels to be tested.
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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