We'll discuss the rally in Crude Oil in its regular section, but given the voracity of the rally, we felt it deserved space in the title. We've had a number of positive crossovers signal lines on the Silver Cross Index (SCI) for several indexes. We still have one left to trigger this attention flag and that is the SP600 (IJR). Quick review:
The Silver Cross Index measures how many stocks within the target index have a 20-day EMA above their 50-day EMA. This is a better measure of participation than just using %Stocks > 20/50/200-day EMAs. As you can see below, the SPX, Nasdaq and NYSE have already had their positive crossovers on the SCI. In fact, the Nasdaq just got its crossover today.
The SP400 (IJH) also saw a new positive crossover on the SCI.
Small-caps are still waiting for their crossover, but it is nearing.
The Dow has already generated an SCI crossover the signal line. We haven't included the charts for the NDX and OEX (both can viewed in the DecisionPoint Golden Cross/Silver Cross Index ChartList on the lefthand side of our Blogs and Links page or click HERE). Both indexes have also seen positive crossovers on their SCIs.
Conclusion: The rally the market is experiencing is broad and therefore likely to see follow-through. However, the market is also getting overbought so a pullback or pause in the shorter term is highly likely.
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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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 3/30/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: The SPY has accelerated is rising trend. Steeper trendlines are more difficult to maintain and the market is overdue for a pause at the very least.
Primary indicators continue to flash bullish. In fact, the PMO is accelerating higher since reaching positive territory. The RSI is positive and not yet overbought. Stochastics are well above 80 and the VIX is hovering above its moving average on the inverted scale which signifies internal strength.
Here is the latest recording 4/3:
S&P 500 New 52-Week Highs/Lows: New Highs have expanded as expected, but we do note that they aren't as high as the prior price top's. This sets up a negative divergence. We'd say it's mild as another expansion would likely clear the divergence. Good news is the 10-DMA of the High-Low Differential has entered positive territory.
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 UP and the condition is OVERBOUGHT.
STOs managed to move higher again, pushing them into extremely overbought territory. %Stocks > 20-day EMA and particularly %PMOs Rising are very overbought. We would point you back to July/August. Note that price rose steeply during that time and STOs did oscillate throughout. Overbought conditions can persist in a bull market and it appears the rally is on. If they do top, it would likely signal a pause or digestion period ahead. So far they keep rising.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL to OVERBOUGHT.
The ITBM and ITVM are now both rising in positive territory. This does suggest the rally isn't finished yet. However, we do note that %PMO BUY Signals is overbought and this indicator doesn't tend to stay overbought long. There is still room for that indicator to rise.
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 market bias is BULLISH in all three timeframes.
We have more than 50% of stocks above all three key moving averages which gives us a bullish short-term bias. The SCI had a positive crossover and is rising, so although it isn't above 50% yet, it is moving in the right direction on a positive crossover its signal line. The GCI isn't over the 50% bullish threshold yet either, but it has turned back up and given there are far more stocks above both their 50/200-day EMAs than those with Golden Crosses, we would expect the GCI to continue rising bullishly.
CONCLUSION: We are technically back in a bull market and the indicators are acting like it. Last week's upside exhaustion climax didn't resolve with lower prices and despite many indicators getting overbought, price just keeps rising. We do have a slight negative divergence with New Highs, but that will likely clear on the next rally. The bias is bullish. Our main concern is this rally is getting overheated. There's no denying the market is clicking right now. Careful expansion of portfolios should be safe, but it might be better to wait for the market to digest the current rally. In any case, don't forget your stops.
Erin is 28% long, 2% short.
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BITCOIN
Bitcoin is forming a double-top now. It won't be confirmed until price drops below the last March low. The chart looks very negative with the exception of the RSI which is still comfortably within positive territory. However, the very ugly PMO and diving Stochastics suggest the double-top will execute. A decline to 24,000 would likely follow which is about where the minimum downside target of the double-top would be.
INTEREST RATES
After promising bounces of support, long-term rates are falling again. Horizontal support at 3.4 is nearing for long-term rates. Given the bearish 10-year yield chart in the following section, that level is highly vulnerable.
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 has been a mess as it bounces around a range between 3.35 and 3.6. The indicators look very negative and do suggest a breakdown is ahead. A drop in the 10-year yield will be elixir for a bull market to continue. We especially don't like the PMO topping below its signal line, that is considered especially bearish.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 3/28/2023
LT Trend Model: BUY as of 2/24/2023
UUP Daily Chart: The Dollar continues to be a snoozer as it is in a tight trading range between the 200-day EMA and horizontal support at 27.70. We do see that price is tapering off in a very short-term declining trend. It has the appearance of a bearish descending triangle (flat bottoms, declining tops) which would imply a breakdown ahead. Indicators currently are behind that conclusion.
GOLD
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold has been digesting is steep rally. Indicators are neutral to bullish. The RSI is positive, but Stochastics are just below 80 and the PMO is flat. We expect both Gold and the Dollar will stay within their current trading ranges.
GOLD Daily Chart: Relative strength to the Dollar is flat and the correlation is almost a perfect inverse. If the Dollar is going to continue to consolidate sideways, Gold likely will too.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are showing incredible strength and it is no wonder when you look under the hood. 100% have price above 20/50-day EMAs with 93% above their 200-day EMAs. Price is starting to breakout above the January top. This has been a popular failure point and price really needs to digest this rally. A decline would do wonders and likely entice more to the table. Entry here might be late, but as noted, a decline is likely which would offer a better price. Given the underlying strength, we don't think they are finished.
CRUDE OIL (USO)
IT Trend Model: SELL as of 2/2/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil saw a giant breakaway gap on news that OPEC+ will be cutting production. Basic economics tell us that a pinch in supply will ratchet demand and bring prices higher. The technicals were already solid before this news, we think today's news simply goosed an already internally strong Crude. This pop has us reevaluating whether the trading range will continue. Given the positive RSI which isn't quite overbought, the rising PMO out of oversold territory and Stochastics above 80, we think 72.00 will be overcome quite easily.
72.50 is the strongest level of resistance ahead, but given today's strong breakaway gap and technicals we pointed out above, we would expect it to be broken and a test of 77.50 to follow.
BONDS (TLT)
IT Trend Model: BUY as of 3/17/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The short-term declining trend on TLT has been broken to the upside. We'd been fairly negative on Bonds, but a review of the yield charts suggest they could break out here. Indicators are beginning to firm up with a very bullish PMO bottom above the signal line and Stochastics rising into positive territory.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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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.
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