Today the Utilities Sector (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. It is a "neutral" signal because the dark cross occurred above the 200-day EMA. XLU has been consolidating above support, but hasn't done much when you look at both price action and relative strength against the SPY. However, participation is improving for stocks above their 20/50/200-day EMAs which could mean internal strength is building. However, we don't subscribe to that mainly because both the Silver Cross Index and Golden Cross Index are in declining trends. Utilities have seen improvement, but not enough to go fishing here.
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.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
MAJOR MARKET INDEXES
SECTORS
Each S&P 500 Index component stock is assigned to one of 11 major sectors. This is a snapshot of the Intermediate-Term (Silver Cross) and Long-Term (Golden Cross) Trend Model signal status for those sectors.
CLICK HERE for Carl's annotated Sector charts.
THE MARKET (S&P 500)
IT Trend Model: BUY as of 1/12/2023
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: Today's Fed action wasn't worse than expected, so we got what we think is a nice short-covering rally. Volume expanded above the one-year daily average, showing investor confidence. We saw price breakout of the bearish rising wedge which is considered especially bullish. If we get the breakout above $415, we would officially be back in a bull market. However, view that as a cyclical bull, not a longer-term secular bull market.
Indicators continue to show strength as the RSI remains in positive territory above net neutral (50), the PMO is accelerating higher and isn't that overbought. Stochastics are rising again, keeping them above 80 which denotes internal strength. Additionally, the VIX is now near the upper Bollinger Band on the inverted scale. This also implies relative strength, although we don't want to see a puncture of the upper Band just yet. That usually implies a decline. So far so good.
Here is the latest recording (1/30):
S&P 500 New 52-Week Highs/Lows: New Highs are rising and could get back above the last reading. That would get rid of the current negative divergence between New Highs and price tops.
Climax* Analysis: Only SPX Net A-D Volume had a climax reading today. Given we didn't see confirmation from volume ratios, we don't consider today a climax day.
*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.
STOs moved higher again today which confirms the short-term rally. Unfortunately, we still see negative divergences on all of these indicators. We saw another expansion in rising momentum. Now we have 3/4ths of the index showing rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The IT indicators all rose today confirming short-term bullish indicators above. Given there are 66% with PMO BUY signals and 76% with rising PMOs, we should see that indicator continue to rise. We do spy two negative divergences on this chart.
PARTICIPATION and BIAS Assessment: 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 short-term bias is BULLISH.
The intermediate-term bias is BULLISH.
The long-term bias is BULLISH.
With the expansion of stocks above their 20/50-day EMAs to bullish levels, we have to look at the short term as being bullish again. The IT turned bullish as the Silver Cross Index began to rise again. The Golden Cross Index turned back up and we have more stocks above their 50/200-day EMAs than Golden Crosses.
CONCLUSION: The indicators shifted positive this week and are confirming this new rally. Bullish short-term indicators are being confirmed by rising intermediate-term indicators. Unfortunately, we do have some problems given the negative divergences that can be spotted on most of our charts. Assimilating this information in the context of a bullish bias tells us to expect the rally to continue. Negative divergences tell us to be cautious as the end of this rally could come more quickly than anticipated. We are cautiously bullish.
Erin is 18% exposed.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact support@decisionpoint.com for more information!
BITCOIN
Bitcoin needs a pullback. The RSI is back to being overbought. The PMO has been overbought. However, we do note the PMO is trying to bottom above the signal line. Stochastics are below 80 but moving mostly sideways. This is looking more like a pause before another rally, but until we get the breakout above 24,000, we believe it is vulnerable to a pullback below the current support level.
INTEREST RATES
Rates dove lower today and in most cases took out new short-term rising trends.
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 again tested the rising bottoms trendline. It is now headed to test support at 3.3%. It looked like we were going to see a double-bottom and new breakout, but the PMO has turned south and triggered a crossover SELL signal. Stochastics moved vertically downward. Erin informed Diamonds subscribers today that Bonds are beginning to show up in her ETF scans, so we could be looking at a breakdown in yields ahead.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: SELL as of 1/31/2023
UUP Daily Chart: It appeared the Dollar was about to rally given the short-term rounded bottom. Indicators have been soft so it isn't a total surprise. They now look very negative. The PMO is no longer rising and Stochastics have topped. The RSI was already flashing weakness as it was moving lower in negative territory below net neutral (50).
Given price never came close to testing the top of the declining trend channel before turning lower tells us that a breakdown or possible acceleration of the decline might occur.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: A weak Dollar will be good for Gold. It will be especially good given the reverse correlation is so strong right now. The short-term rising wedge could still be a problem. We've been looking for Gold to pull back and test 175.
GOLD Daily Chart: Gold continues to avert a PMO crossover SELL signal, but really any price decline will likely trigger the signal given how close the PMO is to its signal line. The RSI is now in overbought territory. Stochastics are oscillating strongly above 80 though. Internal strength is still available. We would be prepared for sideways consolidation with a trickle higher. That would likely relieve overbought conditions without much price damage.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners rallied strongly today, but they continue to travel within a bearish rising wedge which suggests caution should be exercised. The PMO is on a new crossover SELL signal, but it seems likely it will whipsaw back to a BUY. Participation couldn't be much better. Look for a move that will touch the top of the bearish rising wedge.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/23/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Even after a bullish engulfing candlestick, USO could not put a rally together; in fact, it simply fell apart today. The short-term rising trend hasn't been compromised yet, but we expect it to. The RSI has moved into negative territory and the PMO is about to generate a crossover SELL signal. Stochastics have been warning us of this as they crash into negative territory. Erin's ETF scans today also revealed many inverse Crude Oil ETFs.
BONDS (TLT)
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With yields diving lower today, TLT put together a nice rally that is putting price back up to the top of the symmetrical triangle. Really when we look closely, we could make a case for a bullish ascending triangle (flat top, rising bottoms). The RSI and Stochastics have turned up in positive territory and so far, TLT is avoiding a PMO crossover SELL signal. Price also did not have to test the rising bottoms trendline before rising again. That is very bullish.
A symmetrical triangle has formed. These are continuation patterns, meaning they continue the prior trend they were in before the triangle emerged. However, we note that price is already pushing above that declining tops trendline. As noted above, this might be more of a bullish ascending triangle v. a bearish symmetrical triangle. Bearish triangle because the prior trend was down before the triangle was formed.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
(c) Copyright 2023 DecisionPoint.com
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.