Today's headline has to be that our primary intermediate-term indicators, IT Breadth Momentum (ITBM) and IT Volume Momentum (ITVM) turned down today. This could suggest that our expected digestion phase could turn into indigestion with a more concerted decline than we previously thought.
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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 held up fairly well for the first part of the day, but then began a more perilous decline in the afternoon. This formed a bearish engulfing candlestick. It arrives right at overhead resistance and the intermediate-term declining tops trendline. The PMO is rising, but we expect it to deteriorate on price weakness soon.
The VIX reading increased today as fear begins to reenter the market. Stochastics have topped but at least remain above 80. That won't likely last if this decline picks up as we believe it will.
Here is the latest recording from 11/6:
S&P 500 New 52-Week Highs/Lows: In an interesting turn of events, New Highs expanded as well as New Lows. Remember these readings are intraday, meaning it shows the highest readings of the day. The market was still somewhat healthy this morning. We do like seeing the 10-DMA of the High-Low Differential rising as that is good for the intermediate term.
Climax* Analysis: There were three climax readings on the four relevant indicators today, giving us a downside initiation climax. SPX Total Volume was solid and confirming.
*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) accelerated their decline. Not surprisingly, we continued to lose stocks above their 20-day EMA as well as a loss of rising momentum internally.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM had just hit positive territory and now it is in decline again. The ITBM also declined on the day. %PMO Crossover BUY Signals have topped in somewhat overbought territory.
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 the short term.
The market bias is BULLISH in the intermediate term.
The market bias is BEARISH in the long term.
We have moved the bias in the short term to "Bearish". %Stocks > 50EMA aren't reading above 50% and while %Stocks > 20EMA are above 50%, they are declining quickly. The Silver Cross Index continues to rise above its signal line giving us a Bullish bias in the intermediate term. The Golden Cross Index reversed upward, but remains beneath its signal line so the long-term bias is Bearish.
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 items with highlighted borders indicate that the BIAS changed today.
CONCLUSION: We already were seeing weakness among our short-term indicators, but now we are seeing some weakness seep into the intermediate term as both the ITBM and ITVM reversed lower today. The PMO and Silver Cross Index are still rising as is the 10-DMA of the High-Low Differential so we don't want to get too bearish in the intermediate term. For now given today's downside initiation climax and declining STOs, we should be looking for lower prices in the short term. It is getting more 'iffy' in the intermediate term so stops are a must and profit taking isn't a bad idea. Do not keep any weak positions! They are sure to fail in the short term.
Erin is 55% long, 0% short.
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We didn't think that the rising bull flag would resolve to the upside given the topping PMO. Instead Bitcoin did rally strongly and the PMO consequently surged above the signal line (bottomed above the signal line). Stochastics are still declining so we don't think it will be smooth sailing yet.
This breakout did take Bitcoin above very strong overhead resistance so the bias is definitely bullish here. Stochastics just need to confirm the breakout.
Yields spiked today putting downside pressure on the market and of course Bonds. Declining trends are intact on the longer-term rates so we are looking for rates to eventually resume the decline.
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
This was an excellent area for $TNX to reverse, but we suspect the rising trend will eventually be broken given the negative RSI and declining PMO. Stochastics are especially bearish as they have dropped below 20.
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Carl wrote an excellent article on long Bonds today. Here is the link. Overall Bonds are set up better than they have been in some time. We have a double bottom that has been confirmed and a rising PMO. Stochastics have also moved above 80. Look for higher prices with a likely test of overhead resistance at 91.00.
IT Trend Model: BUY as of 8/3/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar fared very well today as it continues to digest the summer's long rally. We were feeling bearish on the Dollar of late, but the PMO is beginning to turn back up. Stochastics are also rising strongly and they tend to be a leading indicator. The RSI also moved into positive territory. We don't see a lengthy rally ahead at this point, but certainly a test of the October highs.
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: The Dollar was up and so was Gold. Given their currently non-existent correlation to one another this isn't altogether surprising. This looks like a prime area for a rebound at the 50-day EMA and horizontal support, however, the PMO is about to trigger a Crossover SELL Signal and Stochastics have dropped below 20. We're expecting a breakdown here for that reason.
GOLD Daily Chart: The next support level for Gold is around 1900. We should expect that level to be tested given the very negative indicators.
GOLD MINERS Golden and Silver Cross Indexes: The market had its way with Gold Miners today. Gold's rally wasn't enough to get this group going. Support is here and the Golden Cross Index had a Bullish Shift across its signal line moving the LT Bias to Bullish so if you want to hold out on your Gold Mining positions you could. But, the chart has gotten very ugly, very fast. There is a new PMO Crossover SELL Signal. Today, there was a Bearish Shift on the Silver Cross Index moving the IT Bias to Bearish. Participation is still visible based on %Stocks > 20/50/200EMAs. At the very least, you'll want to tighten up your stops.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/7/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: Crude Oil managed a meager rally, but formed a bearish filled black candlestick suggesting this current level of support won't hold tomorrow. We believe it will continue lower and test the next line of horizontal support at August lows. We do expect demand to creep back for the holidays so for now we will look for that level to hold.
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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