Today the Consumer Discretionary ETF (XLY) 20-day EMA crossed down through the 50-day EMA (Dark Cross), generating an IT Trend Model NEUTRAL Signal. Last Friday we reported on a new XLY BUY Signal, but we expressed doubt that it would amount to much. This illustrates why we view mechanical signal changes as information signals, not action signals. Always look at the chart before taking any action. This chart never had much going for it, and the slow fade in the last week (not counting what happened today) was a definite red flag.
In the long term, the weekly chart shows XLY in a rising trend, but it is contained within a rising wedge formation, which we know is most likely to break down. The weekly PMO negative divergence adds to the bearish picture.
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: Today we saw a giant bearish engulfing candlestick. It engulfs the prior five trading days. The expectation is more downside. Notice that the PMO topped today.
The VIX remains above its moving average on our inverted scale, but it is very close to breaking below it. Stochastics took a turn for the worse, but so far remain above 80. Still, this does not bode well. Look at the relative strength line of the SPY to equal-weight RSP. It has been in a rising trend throughout this rally which tells us the big guys are holding things together, but for how long?
Here is the latest recording from Monday, 5/20:
S&P 500 New 52-Week Highs/Lows: The negative divergence with New Highs continued and we see an expansion of New Lows. The High-Low Differential has topped and shows its own negative divergence. This looks similar to the beginning of the April decline.
Climax* Analysis: Today there were unanimous climax readings on the four relevant indicators, which gives us a downside initiation climax. SPX Total Volume expanded and was close to the one-year daily average, so it is likely people are selling with conviction.
*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) moved into negative territory today and participation took a dive. Only one quarter of the index have rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Both the ITBM and ITVM continued lower today out of overbought territory. They confirm already falling STOs. We saw a negative crossover on %PMO Xover BUY Signals.
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 (but deteriorating).
The market bias is BEARISH in the long term.
The short-term bias quickly switched to BEARISH today as participation dove below our bullish 50% threshold on %Stocks > 20/50EMAs. The only reason we still have a BULLISH Bias in the intermediate term is the Silver Cross Index remains above its moving average, however, that is quickly deteriorating and given lower percentages of stocks above their 20/50-day EMAs, it should drop below soon. The long-term Bias turned BEARISH yesterday as it dropped beneath its 20-EMA.
Negative divergences are also a problem with participation.
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: NVDA was unable to hold the market together today and boy did it fall apart. The internals were already shifting bearish as we have been pointing out all week. Participation dove lower leaving few stocks left to keep the index rising. A bearish Bias has returned in the short term and STOs hit negative territory. Today's downside initiation climax and bearish engulfing candlestick portend lower prices tomorrow. Add to this the negative divergences that are piling up and we have a recipe for further decline. It may be time to investigate some market hedges. Erin presented two in today's DP Diamonds Report. Tighten up your stops and consider selling underperforming positions, they'll only get worse.
Erin is 35% long, 5% short.
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BITCOIN
The decline in Bitcoin continued and it has compromised the PMO which is now in decline. Stochastics look sickly too. Unfortunately we see more decline in Bitcoin's future now.
BITCOIN ETFs
INTEREST RATES
Yields popped higher today and look ready to continue back toward prior highs. As the Fed back pedals on interest rate cuts, we will likely see them rise further.
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
The short-term declining trend was broken on today's advance, but it hasn't quite recaptured the prior rising trend. The indicators are leaning bullish, even the PMO is reversing. We expect more upside.
BONDS (TLT)
IT Trend Model: SELL as of 3/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The declining trend remains intact and today we saw a bearish engulfing candlestick. The PMO is still rising slightly, but Stochastics are trending lower again. Interest rates are on the rise again so we expect very little from TLT.
Price is breaking below support.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The PMO on the Dollar has reversed upward. The RSI is positive and far from overbought. Stochastics are rising strongly. The Dollar has preserved its rising trend channel and appears ready to make another run higher.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold compounded yesterday's loss with an even bigger decline. We now have a bearish double top on the chart that suggests a longer pullback is likely for Gold. If the pattern is confirmed with a drop below the May low, the minimum downside target would be down to where we had the long-term breakout around 194.
GOLD MINERS (GDX): Gold Miners continued to slide and with the outlook on Gold being so negative, this industry group will likely feel the pain. Participation of stocks above their 20-day EMA took a big hit today and suggests internals are breaking down. Probably a good time to shed Gold Miners.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 5/20/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: Crude Oil formed a bearish engulfing candlestick today, but it did manage to avoid a break down below the rising bottoms trendline. It puts price right on the 200-day EMA so it is on support. The PMO has turned back down though and Stochastics are back in negative territory. The technicals suggest price will break down not rally.
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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