Today the Retail ETF (XRT) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL Signal. XRT lost very important support and is now losing ground quickly. This area is sensitive to tariffs and with all the tariff talk, it has taken its toll on XRT. Certainly participation readings are in the basement and are oversold, but we have Stochastics below 20 and still falling and a very negative PMO. We don't think this decline is over yet.
The XRT weekly chart is quite bearish, showing a breakdown from a rising wedge formation, followed by a waterfall decline. We are at a new support level, but that already looks weak. The weekly PMO is accelerating lower.
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Also today, the Communications Services Sector ETF (XLC) 20-day EMA crossed down through the 50-day EMA (Dark Cross), above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. XLC has hit strong support and the 200-day EMA is also near to provide support. However, participation is very thin and Stochastics are diving lower below 20. We don't think this level will hold.
The weekly chart shows XLC in the process of topping, and so far it has found support on the horizontal as well as the rising trend line. This does look double top-ish. The weekly PMO is accelerating lower suggesting the rising trend is highly vulnerable.
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Finally, the Utilities Sector ETF (XLU) 20-day EMA crossed down through the 50-day EMA (Dark Cross), above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. Unlike XRT and XLC, participation is low but is still reading above our bullish 50% threshold. Support is nearby and this is a defensive area of the market, but the PMO has just entered negative territory and Stochastics have topped in negative territory. While this level may hold, we don't see a lot of upside potential.
The weekly chart shows the XLU has been consolidating for about five months. The weekly PMO is declining suggesting to us that support may have to be tested.
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MARKET/INDUSTRY GROUP/SECTOR INDEXES
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THE MARKET (S&P 500)
IT Trend Model: NEUTRAL as of 3/4/2025
LT Trend Model: BUY as of 3/29/2023
SPY 10-Minute Chart: The declining trend continued into today's trading. There was an attempt at a rally around 2p but that quickly failed. The 10-minute PMO is flat, but still on a Crossover BUY Signal so we could see a bottom tomorrow.
SPY Daily Chart: The steep declining tops trendline continues to hold. Support was lost and is no longer visible on the 5-month chart. The PMO is still declining steadily and OBV tops are confirming the current declining trend. It is a steep declining tops trendline and we think that won't be maintained much longer.
The VIX is holding below its moving average on the inverted scale and that implies weakness. Stochastics are still dropping which does suggest this decline may not be over just yet.
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S&P 500 New 52-Week Highs/Lows: New Lows expanded greatly on the decline and we saw no New Highs which to us confirms the current decline. The High-Low Differential is falling and should reach the zero line soon.
Climax* Analysis: There were two climax readings on the four relevant indicators today, so we have a downside exhaustion climax, but a weak one. Remembering that we had a downside exhaustion climax on Monday, we cannot rule out a continuation of the decline. We appear to be in bear market conditions and must remember that oversold conditions are less likely to facilitate a bounce than they are to precede a further collapse.
*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 NEUTRAL.
The Swenlin Trading Oscillators (STOs) are getting oversold, but we aren't ready to label them that just yet as we've seen much lower readings previously. In bullish fashion however, we saw a slight increase in stocks above their 20-day EMA and new rising PMOs. Readings are getting oversold.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM and ITVM are dropping in negative territory and are not oversold so we should consider more decline ahead in the intermediate term. We lost a few more PMO BUY Signals.
PARTICIPATION CHART (S&P 500): The following chart objectively shows the depth and trend of participation for the SPX 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 intermediate and long terms.
We've really seen a drop off of stocks above their 200-day EMAs. It speaks to the weakness in not only the intermediate term but in the long term and does make us wonder if we are going into a bear market. Participation of stocks above their 50/200-day EMAs did fall unlike the %Stocks > 20EMA so it wasn't all good news. The increase on %Stocks > 20EMA was negligible so we shouldn't read too much into that. The Silver Cross Index and Golden Cross Index are below their signal lines so the IT and LT Biases are 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.
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CONCLUSION: It's probably time to start thinking in bear market terms and apply bear market rules. Bear market rules tell us that oversold conditions as we are seeing right now are "thin ice" and not likely to produce lasting rallies. They also may not lead to rallies. To that end, we need to take oversold indicators with a grain of salt including today's downside exhaustion climax. The decline is overextended to be sure, so we could see a little upside, but given the overall malaise over tariffs, we don't think the decline is over in the intermediate term. The ITBM and ITVM suggest this also with their own declines. We will need to take our cue from the open to determine if this downside exhaustion climax will materialize with a good rally. Consumer Sentiment is released tomorrow so maybe a good report will get a bounce.
Erin is 10% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
Yesterday's comments still apply:
"Bitcoin is still in a declining trend and the bearish double top looms, suggesting we could see more downside on Bitcoin. It is overdue for a good rally, but we aren't looking for a break in the current declining trend. Price is below the 200-day EMA. The RSI is still negative. The PMO has flattened, but it isn't configured strongly. It is flat below the zero line and that implies pure weakness. We could see a little more upside, but overall this topping formation doesn't look ready to dissipate."
BITCOIN ETFs
INTEREST RATES
New rising trends are still holding up on long-term rates and does suggest to us despite today's decline that we will start to 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 tops trendline was broken yesterday and $TNX stayed above it despite a decline today. The PMO and Stochastics are still rising so we are looking for this new rising trend to bring $TNX and long-term yields higher.
BONDS (TLT)
IT Trend Model: BUY as of 2/25/2025
LT Trend Model: SELL as of 12/13/2024
TLT Daily Chart: TLT rallied strongly today and formed a bullish engulfing candlestick that does imply we'll see it rise tomorrow. Long-term yields are showing new rising trends so we aren't so sure that this rally will amount to much. The PMO is nearing a Crossover SELL Signal and Stochastics are falling so more downside pressure is likely to be applied.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 3/5/2025
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar is bouncing off the 200-day EMA, but it hasn't really improved the indicators much. The PMO does look like it may be decelerating and Stochastics did rise a bit. However, Stochastics remain firmly below 20 indicating extreme weakness. We're still going to look for some more rally out of the Dollar here as this bounce looks interesting.
GOLD
IT Trend Model: BUY as of 1/10/2025
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold rallied strongly to new all-time highs. It looked as if it would consolidate sideways, but the deep decline in the market seems to be attracting buyers. This rally has turned the PMO back up well above the zero line and Stochastics have now moved above 80. Relative strength to the Dollar continues to rise. We wouldn't be surprised if we got a pullback after this breakout, but overall we do expect Gold to continue to rise on the market's weakness.
Discounts tell us that investors are still liking Gold as they are very low. We still worry that it is too bullish, but given price action, we have to look for higher prices.
GOLD MINERS (GDX) Daily Chart: The bearish double top was busted on today's rally above the second top. Gold looks very good and that means Gold Miners should enjoy more rally. The PMO is on a brand new Crossover BUY Signal and 100% of stocks have price above their 20-day and 200-day EMAs. This is overbought, but given the strong rally, we expect these overbought readings to persist. Both the Golden Cross Index and Silver Cross Index are rising strongly and aren't really overbought yet. They are above their signal lines so the IT and LT Biases are bullish for GDX. Resistance is near so it may stumble a bit, but ultimately given the strong outlook for Gold we have to expect higher prices.
CRUDE OIL (USO)
IT Trend Model: BUY as of 12/24/2024
LT Trend Model: BUY as of 1/10/2025
USO Daily Chart: Crude shows a small rising trend but ultimately it is encompassed in a strong declining trend. The PMO appears to have topped beneath the signal line which is especially bearish. However, Stochastics are trying to rise. Given this dichotomy, we vote for price to move sideways a bit longer.
The strongest level of support lies at 66 or the September low. There are multiple short-term support levels based on the multiple bottoms to finish 2024. Any of those areas could support a small rally, but the outlook is still very bearish for Crude right now.
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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