Yesterday the SPY formed a short-term double bottom, and today price moved above the confirmation line drawn across the high between the bottoms, causing the formation to execute. This, of course, is bullish, and without dragging out a micrometer, we can say that the minimum upside target will be somewhere around the July top, which is not far from the all-time high. Similar double bottoms can be found on many other market indexes.
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Yesterday the Materials Sector (XLB) 20-day EMA crossed down through the 50-day EMA (Dark Cross), generating an IT Trend Model NEUTRAL Signal. Today price jumped back above those moving averages causing the 20-day EMA to cross back above the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. This appears to be a meaningful rally based on the expansion of %Stock > 20EMA. Stochastics are rising strongly and the RSI has moved back into positive territory.
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:
A rally in the big-cap tech stocks led the market higher. However, it wasn't just the mega-caps, we saw broad participation with further expansion in participation. This was a strong upside breakout. The PMO is now rising again and the RSI is in positive territory.
Internal strength is now visible with Stochastics rising above net neutral (50) and the VIX resident above its moving average on the inverted scale. There is a small problem with the VIX puncturing the upper Bollinger Band. Typically these punctures occur right before a decline, a one- to two-day pattern.
Here is the latest recording from 8/28:
S&P 500 New 52-Week Highs/Lows: New Highs confirmed the rally
Climax* Analysis: {{{ For the second day in a row there were unanimous climax readings on the four relevant indicators, giving us an upside exhaustion climax; however, SPX Total Volume was still light and not showing commitment to the rally. To clarify, rallies can advance on less than ideal volume, but it is better when volume and price are together. }}}
*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 NEUTRAL and the condition is NEUTRAL.
Swenlin Trading Oscillators expanded nearly into overbought territory in just a day. They are strongly positive right now. We know the rally was broad given the substantial improvement to %Stocks > 20EMA and %PMOs Rising. Both readings are now above our 50% bullish threshold.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERSOLD.
IT indicators are confirming bullish short-term indicators. They are rising from oversold depths.
PARTICIPATION: 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 the short term.
The market bias is NEUTRAL in the intermediate term.
The market bias is BEARISH in the long term.
We now have readings in %Stocks > 20/50EMAs that are above 50% bullish thresholds. Given these percentages are higher than the Silver Cross Index, it will now have the opportunity to turn back up. This moves us neutral in the intermediate term. The long-term is still being read as bearish given %Stocks > 50/200EMAs are still less than the Golden Cross Index percentage.
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.
Today the intermediate-term BIAS for the S&P 400 Index ETF (MDY) and the Gold Miners Index (GDX) changed to BULLISH as their Silver Cross Indexes moved back above their 20-day EMAs.
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CONCLUSION: We noted yesterday that the market was going to reveal its intentions today and it did with a strong broad rally spurred on by mega-caps. Indicators are rising out of oversold conditions suggesting we will see a continuation. In the very short-term we have an upside exhaustion climax and a VIX that has punctured the upper Bollinger Band, meaning we may see a day or two of pause or decline. However, this rally looks fairly convincing suggesting portfolio expansion in the short term can be managed carefully. Short positions could be released for now.
Erin is 8% long, 0% short.
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BITCOIN
Today a favorable ruling for Grayscale Bitcoin Trust (GBTC) made it likely that they could start a Bitcoin ETF. This switched bearish indicators immediately positive and has rendered the bearish reverse flag meaningless. Like the selling event, this will likely require some digestion.
INTEREST RATES
Yields dove lower today with some rising trends looking 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 pulled back heavily and is getting ready to test support. Given the new PMO Crossover SELL Signal and diving Stochastics, we don't think this level will hold. This is good for the market and of course Bonds.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The drop in the 20-year yield did wonders for TLT. It formed a bullish engulfing candlestick and it has pushed the RSI back into positive territory. The PMO was already on a BUY Signal and Stochastics are rising again. Yields appear ready to correct so we expect more upside for Bonds in general.
DOLLAR (UUP)
IT Trend Model: BUY as of 8/3/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar declined heavily and formed a bearish engulfing candlestick. It is in the process of compromising the rising trend. Support is near at the May top and 20-day EMA. Indicators haven't fallen apart yet so we will assume the Dollar will hold up at support.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold benefitted from the Dollar's demise today. For the second day in a row it has outperformed given it was up higher than the Dollar was down. Price closed above the 50-day EMA. Indicators are bullish so we would expect Gold will rally even higher.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are enjoying the new found strength in Gold and had the added benefit of a market rally. Today the Silver Cross Index saw a "Bullish Shift" on the signal line. We now have over 70% of stocks above their 20-day EMA. We expect this rally to continue.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: Crude Oil confirmed the bullish falling wedge with a breakout. This looks like a bull flag breakout and would suggest even higher prices ahead. Indicators seem to be on board with that.
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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