The following is an excerpt from this week's subscriber-only DecisionPoint ALERT Weekly Wrap.
Today, the Technology Sector (XLK) 50-day EMA crossed down through the 200-day EMA, effecting what is widely (and dramatically) known as a Death Cross. In our vernacular, we call it a LT Trend Model SELL Signal. In any language, it is bad news for this sector that has led the secular bull market. Unfortunately, there doesn't seem to be any strength that can pull this sector out of its nose-dive.
The RSI is negative and falling. The PMO is in negative territory and accelerating lower on a prior crossover SELL signal. Stochastics have turned down in negative territory as well.
Participation is anemic. The Silver Cross Index (SCI), which tells us how many stocks have a 20-day EMA greater than the 50-day EMA (they hold a "Silver Cross"), is only 31% and getting worse. The SCI has even turned down below its signal line. The Golden Cross Index (GCI) is showing only 1/3rd of the sector having a 50-day EMA above the 200-day EMA (on "Golden Cross" BUY signals). The GCI is also continuing to fall.
%Stocks > 20-day EMA is less than 3%! It gets a bit better as we look at %Stocks > 50-day EMA, but that is only at 12%. It's a little better from there, with 21% having price above the 200-day EMA. The problem is the SCI and GCI will likely continue lower, given short-term weakness is increasing.
Conclusion: We have the low readings on the SCI and GCI. We have continued deterioration of %Stocks above their 20-day EMAs, which are less than %Stocks above their 50-day EMAs, which are themselves less than %Stocks above their 200-day EMAs. With all that in mind, the picture isn't likely to improve; it's just getting worse. We want to see %Stocks indicators moving higher to lower in each timeframe, NOT lower to higher. That implies serious weakness. This is a leadership sector, which tells us the market will continue to be led downward until we start to see improvement in Technology stocks.
Good Luck & Good Trading!
Carl & Erin Swenlin
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