Today the S&P 400 Mid-Cap Index (MDY) 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating an LT Trend Model BUY Signal. The Golden Cross Index (GCI) which calculates how many within the index itself have Golden Crosses is nearing a "Bull Shift" or crossover its signal line. The Silver Cross Index (SCI) already signaled a change in character at the beginning of June on the breakaway rally. This looks like a short-term bull flag so we would expect price to continue higher.
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The Semiconductor industry group took a pause and formed a bull flag. Price is now confirming that flag. Today there was a PMO Surge. We call PMO bottoms above the signal line a "Surge" as it shows you a stock/ETF/index has pulled back or paused when the PMO tops, but is strong enough to pull out of that gravity before generating a Crossover SELL Signal.
Participation is incredibly strong in this group and we don't see any short-term negative divergences. Stochastics just pushed above 80. One problem would be the overbought RSI, but that condition will likely persist given constructive participation and this PMO Surge.
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 Market Index, Sector, and Industry Group 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 market had a healthy rally, particularly given the uncertainty of a Fed announcement this week. The grapevine is telling us that we could see a pause and likely that added to today's rally. Interestingly the VIX expanded on today's action suggesting that uncertainty does exist.
The indicators are very positive as is the bullish conclusion to the bearish rising wedge. The RSI has moved into overbought territory for the first time since last August. That was not favorable for the market so we need to monitor it closely.
Here is the latest recording (6/12):
S&P 500 New 52-Week Highs/Lows: We keep waiting to see if the negative divergence between New Highs and price will be canceled out, but New Highs continue to come in lower than in May. We do like the rise in the 10-DMA of the High-Low Differential.
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.
The STOs both turned up on today's rally, but we do have new negative divergences. Participation is holding steady, but we would've expected we'd see more expansion than we had. Still, these are favorable above 50% readings and the readings are only somewhat overbought. More upside can be accommodated.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
All of our IT indicators rose today, but we note that the ITVM is now overbought. %PMO Crossover BUY Signals is not quite overbought and can see more upside.
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 bias is BULLISH in all three timeframes.
We may be jumping the gun slightly on moving the long-term bias to BULLISH, but we have more than 50% of stocks above their 50/200-day EMAs so while the GCI is not above 50% it is very close to a "Shift" above the signal line. We are concerned about the negative divergences with price tops and participation readings are getting close to overbought, but current conditions have us bullish in all three timeframes.
CONCLUSION: The market was up further than we expected today, but whisperings that the Fed may pause this week is having some jump the gun. We believe portfolio expansion can be done carefully, but we are seeing signs the market is getting overbought and negative divergences are still in play so stops are a must. Primary indicators are all rising. Broader participation has meant higher prices. Participation is still at healthy levels with both the Golden Cross and Silver Cross Indexes rising, we should see more upside.
Erin is 40% long, 0% short.
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BITCOIN
Bitcoin has essentially spent the month of June in decline, further reinforcing the right side of a bearish rounded top. Indicators have a bearish bias with Stochastics falling below 20 and the RSI camped out in negative territory. The PMO is on a SELL signal but hasn't put much distance between it and its signal line. More than likely we will see more of the same with Bitcoin trickling lower.
INTEREST RATES
Yields finished lower for the most part across the board.
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 is traveling within a large bullish falling wedge which implies an upside breakout. $TNX hasn't been able to confirm this pattern as it taps on the top. It is in jeopardy of forming a double-top in the very short term. Indicators are mixed. The RSI is positive and the PMO on a Crossover BUY Signal, but flat. Stochastics are above net neutral (50), but are falling. We expect a breakout, but indicators aren't signaling one ahead. At this point look for support at the 50-day EMA to hold.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Indicators are improving on TLT. The RSI is nearly above net neutral (50) and the PMO is rising on a BUY signal. Stochastics have turned up in positive territory. We would look for TLT to inch a bit higher from here.
DOLLAR (UUP)
IT Trend Model: BUY as of 5/18/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: The Dollar has formed a bearish double-top. The very long tail on the red candlestick is technically where the confirmation line would be, but we would look at the close as the actual confirmation line. There is a new PMO Crossover SELL Signal on tap and Stochastics just dipped below 80. Price may be rallying right now, but the indicators and chart pattern suggest problems.
GOLD
IT Trend Model: NEUTRAL as of 6/8/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: GLD saw a "Dark Cross" of the 20/50-day EMAs last week and it sports a rounded top that looks eerily similar to Bitcoin's. The RSI is negative, the PMO is flat, but Stochastics are rising again. Support looks fairly sturdy and indicators aren't that negative.
GOLD Daily Chart: Stochastics are positive on $GOLD. Discounts have expanded to oversold levels. This means that investors are getting more bearish on Gold. Sentiment is contrarian so bearish traders are bullish for Gold. We expect to see support hold up and Gold to consolidate while the Dollar decides if it is going to breakdown.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners aren't healthy enough to expect a solid rebound here. Participation is lacking as far as the Stocks above their 20/50/200-day EMAs. All percentages are well below our 50% bullish threshold. The Silver Cross Index has topped beneath its signal line again. We would look for a test of support at 30.00.
CRUDE OIL (USO)
IT Trend Model: SELL as of 5/3/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil dropped precipitously today on news that global supply is increasing, particularly within sanctioned countries, Russia and Iran. The RSI is very negative, falling and not oversold. The PMO just triggered a Crossover SELL Signal and Stochastics have a rainbow arch. Price is already testing support at 60.00, but it looks far more likely that it will drop not only to the March low but move further down.
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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