Today the Russell 2000 ETF (IWM) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL Signal. We have drawn a line of potential support at 167.5, but . . . .
. . . . . in the longer term 160.0 looks more convincing. Also, we note that this year's high fell 20% short of matching the all-time high in 2021. Small-cap stocks are very sickly.
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!
MARKET/INDUSTRY GROUP/SECTOR INDEXES
CLICK HERE for Carl's annotated Market Index, Sector, and Industry Group charts.
THE MARKET (S&P 500)
IT Trend Model: NEUTRAL as of 9/22/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: Yesterday's hollow red candlestick did not come through with a rally today. Instead, price fell perilously and closed beneath the 200-day EMA.
The VIX punctured the lower Bollinger Band on the inverted scale, but did close above. Many times we will see higher prices over the next day or two after one of these punctures. However, Stochastics topped beneath 20 which is especially bearish in the short term.
Here is the latest recording from 10/2:
S&P 500 New 52-Week Highs/Lows: New Lows hit oversold territory, but given what happened last October, we could see even more. The 10-DMA of the High-Low Differential has dropped below previous lows. Again, another oversold reading, but not nearly as low as it can go based on last October.
Climax* Analysis: On the four relevant indicators there were three climax readings and one close to a climax, so today we have a downside exhaustion climax. Tomorrow's open could give a good indication as to what comes next, but for now let's look for some churn.
*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 SOMEWHAT OVERSOLD.
In an interesting turn of events, Swenlin Trading Oscillators (STOs) turned back up on today's big decline. STOs are setting up positive divergences with price lows and we have extremely oversold readings on %Stocks > 20EMA and %Rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The ITBM/ITVM picked up speed to the downside so STOs are not being confirmed. Readings are oversold, but we do see that %PMO Cover BUY Signals could move even lower, particularly given only 8% have rising momentum.
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.
The best we can say about the bias chart is that %Stocks > 20/50EMAs are oversold. Past that we note very little participation with the Silver Cross Index moving lower alongside the Golden Cross Index. Both the SCI and GCI could continue lower given their percentages are higher than %Stocks indicators. Additionally, while the SCI is getting oversold, it isn't as oversold as it could be. The GCI has plenty of room on the downside.
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 bias is completely bearish in the intermediate term with only XLE and XLB seeing a bullish bias in the long term. XLE is less than one percentage point away from switching to a Bearish Bias.
_____________________
CONCLUSION: Today's deep decline took price below the 200-day EMA which is very bearish. Price is very extended to the downside with indicators being very oversold. We are due for an upside reversal and today's downside exhaustion climax suggests we will see a snapback. This climax is also coming alongside STOs which have reversed upward even on today's giant decline. With participation incredibly weak and the bias being bearish in all three timeframes, we vote for churn ahead rather than a lasting rally, but we'll be ready to pivot if positive divergences start cropping up.
Erin is 10% long, 2% 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
Stochastics have topped and that suggests to us that we will see more downside for Bitcoin. The PMO is rising and the RSI is positive so we suspect we will see some consolidation along the 200-day EMA or 26,500.
INTEREST RATES
Yields shot skyward putting downside pressure on the market and Bonds. We don't see any relief in sight, but they have gotten very extended to the upside and need to decompress.
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
We see a parabolic rise in the 10-year yield that begs for a breakdown to bring it back to the original rising trend line. The RSI is very overbought as well. Stochastics turned back up and the PMO continues to rise so while we see the need for a breakdown, it isn't out of the question that they will continue vertically higher. We're just waiting for the big breakdown that is overdue.
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 accelerating lower. The RSI is very oversold but given the bullish rise in rates, we expect that condition to persist. Stochastics are oscillating below 20 and the PMO continues to decline. It's time for a pause in rising rates, but even if they do reverse, we see that as only temporary with TLT likely to continue lower.
DOLLAR (UUP)
IT Trend Model: BUY as of 8/3/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: Yesterday's comments still apply:
"The Dollar marches higher on a steady rising trend. The trend is not steep and could persist given the unbelievable internal strength. Stochastics have been oscillating above 80 for weeks. The one problem is the overbought RSI, but in a strong rally like the Dollar is experiencing it isn't unusual for this overbought condition to hang on. We could see a hiccup along the way like we did in late August, but for now we would settle in for higher prices."
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: There's no safe haven in Gold. The market has been declining and Gold is picking up speed to the downside. The RSI is very oversold, but until we at least see Stochastics above 20, look for Gold to fall further.
GOLD Daily Chart: We noted yesterday the spike in discounts on the Sprott Physical Gold Trust (PHYS). Readings are now oversold. Investors are very bearish on Gold right now and given sentiment is contrarian, we could see an upside reversal. 1800 is arriving as the perfect level for price to reverse. We also noticed that $GVZ is has been puncturing the lower Bollinger Band on the inverted scale. That can signal a reversal ahead as well.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners were one of the few winners on today's decline, but it didn't make the chart bullish. We now have zero Gold Miners with price above the 50-day EMA. The Golden Cross Index isn't as oversold as it can get so we expect more downside from Gold Miners barring an incredible rally on Gold.
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 paused its decline. We do expect Crude prices to continue rising, but we wouldn't look for the reversal just yet given Stochastics are in free fall. The RSI is still in positive territory so the chart isn't that bearish. Stochastics will be our first clue that the decline is over.
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.
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.
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)