Today the S&P 600 Small-Cap Index ETF (IJR) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL Signal. Participation has remained in a declining trend as far as %Stocks > 20/50/200EMAs. What is most worrisome about participation is the Silver Cross Index which is accelerating lower after topping beneath the signal line. We also note that Stochastics have topped in deeply negative territory. We would look for support to be tested at 90.
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: Before we show you the daily charts, we thought you should see the 5-minute chart which does have a bullish bias in the very short term given the double bottom pattern that finished the day.
The hollow red candlestick formed today is somewhat bullish as well. The short-term declining trend is intact. The RSI is negative and while the PMO has decelerated, it is still falling.
The VIX topped beneath its moving average on the inverted scale but Stochastics are trickling upward. We see internal weakness based on the VIX. Stochastics are well below net neutral (50) so we don't see them flashing strength yet.
Here is the latest recording from 10/2:
S&P 500 New 52-Week Highs/Lows: New Lows spiked today into oversold territory. This is where we've seen rallies develop before, but the 10-DMA of the High-Low Differential is accelerating lower.
Climax* Analysis: We saw one climax reading of our four relevant indicators, NYSE DOWN/UP Volume Ratio. SPX Net Advances/Declines were close to climax level, but we are opting not to list today as an official climax day. It could be considered a mild downside exhaustion climax. This matches well with the late day double bottom on the 5-minute candlestick chart.
*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.
Swenlin Trading Oscillators (STOs) reversed lower today. Their rise didn't result in much upside price activity which we find bearish overall. %Stocks > 20EMA are oversold as is %PMOs Rising. They were oversold before and we didn't see any upside and now they are declining again. There is room for them to move lower.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
Short-term indicators are back in line with declining intermediate-term indicators. All of these indicators are oversold, but none appear ready to reverse. As with all of our oversold indicators, these can also accommodate more downside.
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.
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: The market finished mostly unchanged, but this afternoon it pulled out of a decline to form a bullish hollow red candlestick and double bottom on the 5-minute chart. We have a whiff of a downside exhaustion climax and very oversold reading on New Lows. This says snap back to us. However, we cannot forget that STOs are in decline again. We would look for a small rally followed by lower prices. Oversold indicators tell us we are getting closer to a more significant bottom, but unfortunately all of them could accommodate lower prices at this time. We would continue to play defense. While the market is prime for a reversal, indicators aren't ripe yet.
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
Bitcoin broke out and did overcome resistance at the late August top. However, it immediately pulled back. Indicators are bullish with the PMO now entering positive territory. We just don't see much upside potential given price is nearing the top of a strong trading range at 29,000. Stochastics paused on today's decline as well.
INTEREST RATES
The rising rate environment continues with all of the yields rallying higher today.
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. Stochastics are falling and that could be setting up at least a pause. The RSI is overbought again so we expect $TNX to at least cool off.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bond prices continue to dwindle lower as yields are applying acute pressure. We don't expect to see any improvements for TLT other than the periodic day or two of rally before more 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 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 cover for Gold with the Dollar so strong. It not only is captive to the inverse correlation with the Dollar, it has been seeing its own relative strength to the Dollar tank in the process, adding insult to injury.
GOLD Daily Chart: One bright spot would be the spike in discounts on the Sprott Physical Gold Trust (PHYS). That reading isn't as oversold as it could be, but seeing a spike in bearish sentiment could be a sign that we're hitting capitulation on Gold. 1800 is arriving as support. We would look for a possible pause in the decline there.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners finally broke down. This huge decline took %Stocks > 20EMA down to zero. The Silver Cross Index is nearly at zero. We could still see more long-term damage given the Golden Cross Index has room to move lower. The RSI is now oversold, but the PMO is accelerating lower. We don't see significant support until you reach 22.00.
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 pulling back toward the rising bottoms trendline. Today it lost support at the 20-day EMA. The 50-day EMA has provided support and we expect it will again. Production and supply continue to suggest Crude Oil isn't done rising. The decline is helping the RSI move out of overbought territory and get the PMO less overbought. Stochastics are still falling so we would prepare for this decline to continue down to the rising bottoms trendline.
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)