It was an interesting day. For most of the day the Dow was down about one percent, but the S&P 500 and Nasdaq were holding their own, down about a half percent but looking resilient. However, everything seemed to slide lower toward the end of the day.
Here we can see that the strongest in the Magnificent Seven had the worst day, which explains why the Nasdaq was down over one percent. We have been discussing how mega-caps are leading the market higher. Today they led it lower.
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A substantial part of the 330.06 point loss for the Dow Industrials can be attributed to a stunning -20% loss on Salesforce.com (CRM) due to earnings. CRM is not one we follow, but whenever giant down gaps occur we like to look at the chart to see if the technicals provided any warning. In this case the chart was a giant red flag. First was when the 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. Next the PMO topped below the zero line (especially bearish) a full three days before today's crash. The signs were clear and left plenty of time to exit.
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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: Price lost near-term support today and closed beneath the 20-day EMA for the first time since April. The PMO is nearing a Crossover SELL Signal.
Stochastics dropped a great deal today but managed to stay in positive territory. This is a blow to internal price strength. On the bright side, the VIX penetrated the lower Bollinger Band on our inverted scale and that will sometimes lead to an upside price reversal. We're not so sure about that.
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S&P 500 New 52-Week Highs/Lows: New Highs did pop a bit higher today, but we still see the trend is falling with price. The High-Low Differential continues to be a problem in its decline.
Climax* Analysis: There were no climax readings today.
*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.
In an interesting turn of events, the Swenlin Trading Oscillators (STOs) both turned up. They are oversold and they are oscillators that must oscillate, but they never got THAT oversold. We think this is likely a pause, not a sign of relief yet. We did see a little bit of pick up in participation and the number of rising PMOs, but not enough to look for a price reversal yet.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM did not reverse today so STOs were not confirmed. %PMO Xover BUY Signals is not oversold yet and continues lower. It will continue to move down as long as we have fewer PMOs rising. With only 21% showing rising PMOs, this indicator could fall to that level soon.
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 time frames.
While we did see an uptick in participation of stocks above their 20/50-day EMAs, they are still well below our 50% bullish threshold. Both the Silver Cross Index and Golden Cross Index are falling and are below their signal lines so the IT and LT Bias remains bearish. Both are not done falling given there is a much lower percentage of stocks above their 50/200-day EMAs.
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: It was the mega-cap stocks that got in the way of a rally today. Salesforce (CRM) didn't help matters with its 19%+ decline. If we continue to see them fail, the indexes will be in trouble as there really is no underlying strength to keep the market elevated. Based on the Bias Table above, all of the major indexes and most of the sectors hold bearish biases. STOs may've turned up but the ITBM/ITVM did not confirm this upside reversal. Negative divergences are now sealed as we have a market top now. They suggest we will see further downside. Usually these divergences lead into a longer-term decline. Honor your stops!
Erin is 30% long, 8% short.
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BITCOIN
Yesterday's comments still apply:
"We now see a short-term double top formation that implies we will see a breakdown below the 20-day EMA. So far the rising trend is holding up, but given the now declining PMO and Stochastics, we think Bitcoin is vulnerable."
BITCOIN ETFs
INTEREST RATES
We saw a break in rising yields today as they pulled back sharply. This is likely a pause in their rally, not a sign of new weakness.
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 pulled back, but the steep short-term rising trend wasn't compromised in the least. We now have a PMO Crossover BUY Signal and Stochastics are above 80. Look for a test of the April high at a minimum.
BONDS (TLT)
IT Trend Model: SELL as of 3/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT caught a break today as the 20-year yield pulled back significantly. The PMO has yet to trigger a Crossover SELL Signal, but it is very close. Stochastics just dipped below 20. Look for more downside.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: A flat PMO has led to mostly sideways churn. It is technically in decline. Stochastics are rising and lead us to believe we will see an upside breakout.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold was up, but not as much as the Dollar was down so we still have relative weakness. The PMO is in decline so we don't expect this level of short-term support to hold up much longer. Stochastics are also declining. This looks like a small bearish reverse flag formation.
GOLD MINERS (GDX): Gold Miners held their own today which was somewhat surprising given the market's decline. Gold did see a small rally and that could've helped them today. The rising trend is still intact, but the PMO looks very negative and participation didn't see much improvement as far as stocks above their 20-day EMA. Stochastics tipped over in negative territory. We expect an eventual breakdown of the rising trend.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 5/20/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: We have a failed breakout on Crude Oil. Price is moving mostly sideways as is the PMO. The RSI is negative, but Stochastics haven't broken down just yet. More than likely we are in for more sideways churn.
We have what looks like a triple bottom on the 200-day EMA. This bullish chart pattern also suggests higher prices for USO, but we need the indicators to ripen.
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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