Today the Health Care Sector (XLV) 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. XLV participation as measured by % Stocks > 20/50/200EMAs is dismal, so there is probably more downside ahead.
The weekly chart shows XLV right at long-term support (snapshot intraday). There is more support just below at about 134, then again at about 120. Notice the weekly PMO is currently holding a Crossover SELL Signal.
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: BUY as of 11/14/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: Support has now been reached. At this point we could see some churn along support, but we wouldn't be surprised if this level of support is also broken.
The VIX continues to penetrate the bottom Bollinger Band on our inverted scale. These punctures typically lead to a short-term upside reversal, but not this time. It is indicative of investors' fear. Certainly it is extended, but it doesn't look like price is ready to move back up. The PMO continues to plunge lower and Stochastics are now below 20. Internal price weakness abounds.
Here is the latest recording from April 15th:
S&P 500 New 52-Week Highs/Lows: No New Highs were recorded today, but so far we haven't seen a large amount of New Lows. Likely this is due to the extended rally that brought most stocks well above their 52-week lows. The High-Low Differential continues lower in bearish fashion.
Climax* Analysis: There were climax readings for the four relevant indicators, giving us another downside exhaustion climax. Today's market churn was about normal after yesterday's strong decline, and it is likely that more decline will follow.
*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 OVERSOLD.
Swenlin Trading Oscillators (STOs) are very oversold. There is no reason they can't move lower, but we need to remember these are "oscillators" and oscillators must oscillate. We shouldn't put too much emphasis on direction changes to these indicators. It is hard to believe, but we only have 2% of stocks holding rising momentum. This bus will be difficult to turn around.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
Both ITBM and ITVM are now in negative territory. They are far from oversold and can accommodate far more downside. Only 6% of stocks hold PMO BUY Signals, another reason we could see lower prices continue.
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 big news today is the Bearish Shift on the Golden Cross Index. It moved beneath its signal line and that is what caused the bias shift. The Silver Cross Index is below its moving average and is dropping perilously. With %Stocks > 20/50-day EMAs so far below our 50% bullish threshold, we must list the ST Bias as BEARISH too.
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.
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CONCLUSION: We have signs that could point to an upside reversal. STOs are oversold as is the VIX. We also saw a downside exhaustion climax for the third day in a row. Unfortunately, we don't have supporting actors as only 6% have PMO BUY Signals. The ball is finally rolling on this decline and it will take some effort to get a new rising trend. We would look for churn at best, but decline seems most likely. Hedges can be added for some protection. Tighten stops and don't 'marry' your positions. Be prepared to let them go. You can always reenter.
Erin is 40% long, 0% short.
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BITCOIN
Bitcoin is holding support so far, but this looks a lot like a triple top formation or you could look at it as a complex double top. In either case the expectation is a breakdown here. The PMO and Stochastics agree with that conclusion.
BITCOIN ETFs
INTEREST RATES
Rates continued to move higher overall. Bond funds will continue to feel the pain.
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
Yesterday's comments still apply:
"$TNX broke out from a bearish rising wedge. Bullish conclusions to bearish chart patterns are especially bullish. The PMO is accelerating higher. The RSI isn't overbought yet, but it is getting close. We don't see any serious resistance until the October top is reached."
BONDS (TLT)
IT Trend Model: SELL as of 3/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT is beginning to accelerate lower and given the positive outlook on the 20-year yield, this isn't likely to change. The PMO is now putting margin between it and its signal line. Stochastics are well below 20.
Support will arrive at about 87.00 but we don't believe it will hold at this point.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar continued its rally after Friday's gap up move. The RSI is very overbought and needs relief in the form of a decline, but the PMO and Stochastics are still flashing strength. A pause would be welcome, but we wouldn't be surprised to see higher prices continue.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Once again the Dollar was up and Gold felt no pain. It was up about as much as the Dollar today. It is pushing the top of a rising trend channel. We would be prepared for a possible drop to test the bottom of the channel given the overbought RSI and falling Stochastics.
GLD has put in a low that allows us to back off from parabolic concerns. It could still resume a steeper ascent, but right now we consider the rising trend channel the dominant structure.
GOLD MINERS (GDX) Golden and Silver Cross Indexes: Gold Miners have now hit the bottom of the rising trend channel. Market winds are not doing GDX any favors, but Gold should be alleviating some of the issues. The PMO has topped, but the RSI remains positive. We also have strong participation despite the speed bump. Price has landed on support and we believe it has a good chance of rebounding off this level.
CRUDE OIL (USO)
IT Trend Model: BUY as of 2/12/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: Crude Oil remains in a rising trend despite a decline today. We see two flags coming out of the cup with handle pattern. The last flag suggests we will see an upside breakout, but we wouldn't be surprised if the flag extends a bit further, drifting out of the rising trend.
We do see a small double top formation too. With competing chart patterns, we will follow the primary rising trend, but caution is warranted.
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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