Today the Silver Cross Index (SCI) for the SPX dropped below its signal line for a "Bearish Shift". We had finally seen the bullish bias this week only to see it dashed. We note that while participation did decrease, it is currently showing a positive divergence. We wouldn't read too much into those divergences as we don't actually have a market bottom on this decline. It does give us a glimmer that the rally could resume.
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: NEUTRAL as of 9/22/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: The market moved lower all day long. Rising interest rates and the war between Israel and Hamas are not helping the cause. We did see price stop on support, but the PMO has topped well beneath the zero line.
The VIX penetrated the lower Bollinger Band and that often will result in higher prices over the next day or two. Stochastics dropped below 80 so we do see internal weakness seeping in.
Here is the latest recording from 10/16:
S&P 500 New 52-Week Highs/Lows: Considering the market declined all day long, it was surprising to see as many New Highs as we did. New Lows expanded as we would expect but they remain in a rising trend. Despite the decline, the 10-DMA of the High-Low Differential continued to rise.
Climax* Analysis: There were strong and unanimous climax readings on the four relevant indicators today, and solid SPX Total Volume confirmed the downside initiation climax. We would note that the upside initiation climax on Monday disappeared with a whimper.
*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.
Swenlin Trading Oscillators (STOs) declined quite a bit taking the STO-V into negative territory. We did lose rising momentum, but we still have over half the index with rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
Fortunately, the ITBM and ITVM have not cracked under the pressure of this period of churn. They continue to suggest that the rally will resume when the short-term decline is over.
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.
We are back to seeing %Stocks > 20/50EMAs declining. Today's drop took %Stocks > 20-day EMA below our 50% bullish threshold so we had to switch from neutral to bearish in the short term. The SCI dropped beneath its 10-day EMA moving the IT Bias back to bearish. The GCI continues to decline.
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 the S&P 500 (SPY) and Communications Sector (XLC) crossed down through their 10-day EMA, shifting their BIAS to bearish.
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CONCLUSION: The short-term decline isn't likely over given today's downside initiation climax and falling STOs. We didn't see IT indicators decline and we still have half of the index showing rising momentum so we would expect the rally to resume after more chop in the short term. Rising rates and the war could fuel more decline. We reserve the right to change our outlook should our IT indicators turn lower. There are still pockets of strength that can be exploited, particularly in Energy. Stops are required as the market does look highly vulnerable.
Erin is 55% long, 2% short.
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BITCOIN
Yesterday's comments still apply:
"Sparked by fake news that the SEC had approved iShares Bitcoin ETF on Monday, Bitcoin rallied strongly. BlackRock CEO, Larry Fink thinks that this is a flight to "quality". We disagree regarding 'quality', but certainly rising interest rates have had some looking toward unsupervised Bitcoin. Bitcoin came off highs but did close higher than it has in months. The RSI and PMO now look more bullish and Stochastics are rising again. The trading range between 25,000 and 29,000 is still viable, but we have to be open to a rally to 31,500 given the rising trend out of the September low."
INTEREST RATES
Interest rates are charged higher putting pressure not only Bonds but also on the market in general. We don't see this situation improving until the Fed decides to ease its rate. That isn't likely to happen for many months.
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 is soaring higher and we don't see any relief ahead. The prior breakdown failed to bring price to the basing level around 4.3% so a new slightly less extreme parabolic is forming. Given the PMO Crossover BUY Signal and rising Stochastics, it will continue to rise, probably vertically.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT has hit support, but we don't think it will stop here. The PMO is on a Crossover SELL Signal, the RSI is negative and Stochastics are declining in negative territory. Expect a breakdown and lower prices from there.
We have to look at the monthly chart for TLT in order to find the next level of support. That would be at 80. We doubt it will hold that level.
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 bearish filled black candlestick didn't execute with a decline today. The Dollar is apparently too strong for that. The PMO is already beginning to rise again. The RSI never left positive territory and Stochastics are flattening. The Dollar is likely to continue its rally which won't be good for Gold.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: SELL as of 10/5/2023
GLD Daily Chart: Gold wasn't bothered by today's rising Dollar and given its relative strength to the Dollar, this could and likely will have to continue as the Dollar is looking more bullish. The correlation between the two has eased so they should be able to travel somewhat independently of each other.
GOLD Daily Chart: The RSI is positive and the PMO is rising strongly on a Crossover BUY Signal. Stochastics are above 80. The outlook is very good for Gold, but it has hit overhead resistance so a brief pause may be ahead.
GOLD MINERS Golden and Silver Cross Indexes: GDX was down slightly today but it hasn't changed our bullish outlook. Participation is very strong with 100% holding price above their 20-day EMAs. The Silver Cross Index is back to rising again. We expect a breakout here, but if Gold pauses (it's at resistance too), we could see a hiccup on GDX.
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 has now recaptured the rising bottoms trendline. The PMO is rising alongside a positive RSI so the technicals are pointing to higher prices for Oil. Stochastics are also rising in positive territory. Given the war, we don't see prices cooling anytime soon.
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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