Today the Technology Sector (XLK) generated a PMO Crossover BUY Signal. This sector showed the most weakness on the way down and now it is recovering. In addition to the new PMO Crossover BUY Signal, the Silver Cross Index saw a "Bullish Shift" as it crossed back above its 10-day EMA. This moves the intermediate-term bias to "BULLISH". XLK narrowly avoided a Dark Cross of the 20/50-day EMAs. Participation has expanded in a big way. The RSI is positive and not overbought and Stochastics are rising above 80. This appears to be a credible rally supported broadly.
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 bullish double bottom was confirmed with yesterday's rally and we are now seeing followthrough. The SPY is nearing a PMO Crossover BUY Signal.
The VIX punctured the upper Bollinger Band on the inverted scale and while it is bullish that it is above its moving average, punctures can lead to downside reversals over the next day or two. Stochastics are rising strongly so ultimately we see good internal strength.
Here is the latest recording from 8/28:
S&P 500 New 52-Week Highs/Lows: New Highs are continuing to confirm the rally as they expand. The indicator is not yet overbought.
Climax* Analysis: There were no climax readings today. SPX Total Volume contracted and is still underwhelming.
*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.
We are listing our short-term indicators as "overbought". They have certainly seen much higher readings, but they are somewhat overbought right now. %Stocks > 20EMA and %PMOs Rising are not quite overbought. They are displaying the broad support the rally is currently experiencing.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERSOLD.
Rising IT indicators continue to confirm rising short-term indicators. This suggests that the rally should push past current areas of overhead resistance. Almost 1/3rd of the index have PMO Crossover BUY Signals.
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 have decided to continue to list the intermediate-term as "Neutral". The SCI has turned back up, but we don't have it above its 10-day EMA yet. We do have readings in %Stocks > 20/50EMAs that are above 50% bullish thresholds. 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 long-term BIAS for the S&P 100 Index ETF (OEF) to BEARISH as the Golden Cross Index moved below its 20-day EMA.
Additionally, as noted in the opening, the intermediate-term BIAS for Technology (XLK) switched to BULLISH as the Silver Cross Index moved below its 10-day EMA.
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CONCLUSION: Indicators in the short and intermediate terms are rising out of oversold territory. Short-term indicators are looking a bit overbought, but they can easily accommodate more upside. We are still unimpressed with Total Volume and the VIX punctures of the upper Bollinger Band suggest we could see a pause in the action. We have a feeling that the rally will continue and volume will increase as traders get more confident that the rising trend will stick. Erin was out of town and unable to trade. Her exposure is still reading at 8% because she wasn't able to trade. She will be expanding her exposure tomorrow.
Erin is 8% long, 0% short.
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BITCOIN
After yesterday's favorable ruling for Grayscale Bitcoin Trust (GBTC) Bitcoin spiked higher. Today we saw some profit taking and some digestion. More than likely this will continue, but the PMO is giving us an attention flag as it nears a Crossover BUY Signal. Stochastics are also rising. We still aren't expecting much more upside; this seems a better area to reestablish another trading range between 26,500 and 29,000.
INTEREST RATES
Yields paused the decline but made no real headway to the upside.
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 now hit support, but given the now negative RSI, diving Stochastics and recent PMO Crossover SELL Signal, we would look for this level to be broken.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT paused as the 20-year yield ticked slightly higher. This is beginning to look like a reverse head and shoulders. It's a little wonky but this looks like a bottoming formation nonetheless. With yields testing support, we could see the rally in Bonds continue. TLT's indicators certainly suggest a rally will continue.
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 saw followthrough on the decline and we now see a break in the short-term rising trend. Support is strong here as it coincides with the 20-day EMA. Hollow red candlesticks are bullish as well. The PMO and Stochastics do suggest that this support level won't hold, but the Dollar has been so strong, we could see a pause rather than a continued decline.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold showed more internal strength again today as it was up higher than the Dollar was down. Gold and metals are finally finding favor in this market. We see a nice bullish double bottom on GLD now.
The declining trend is about to be tested. Given the positive RSI, PMO Crossover BUY Signal and Stochastics moving above 80, we believe price should reach the confirmation line of the bullish double bottom pattern annotated above.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners paused today after coming up against overhead resistance. Participation was not hampered by this development and with Gold looking strong, we are expecting a breakout above the 200-day EMA.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: Yesterday's comments still apply:
"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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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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