Today the Silver Cross Index (SCI) for Energy (XLE) moved below its signal line giving us a new IT Bearish Bias. Considering the strength of the rally out of the October low, participation did see some hiccups and that is what we have now, likely a hiccup.
Right now XLE is showing strength and given %Stocks > 50-day EMA are above 91%, we have a feeling this Bearish Bias is likely to switch back to bullish soon. One thing to keep in mind, when participation is this strong as far as participation indicators, there is nowhere to go but down. We shouldn't ignore today's Bias change, we should be mindful Energy is vulnerable if nothing else.
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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MARKET/INDUSTRY GROUP/SECTOR INDEXES
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THE MARKET (S&P 500)
IT Trend Model: NEUTRAL as of 9/22/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: The market was all over the place today but ultimately finished unchanged. We have been experiencing the churn we expected after the strong rally. The 50-day EMA seems to be the problem right now. Ultimately the RSI and PMO are bullish so we should expect a breakout.
The VIX is below its moving average on the inverted scale and typically that means the market is internally weak. On the opposite side are Stochastics which turned up above 80. Stochastics are flashing internal strength. We'll split the difference and list internal strength as neutral.
Here is the latest recording from 10/16:
S&P 500 New 52-Week Highs/Lows: New Highs did expand while the market was rallying today. The 10-DMA of the High-Low Differential is rising strongly which is bullish for the market.
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 NEUTRAL.
We are unhappy to report that Swenlin Trading Oscillators (STOs) turned down after briefly reversing upward yesterday. Participation did expand and we see a strong 83% reading on %PMOs Rising which could keep prices moving higher.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
IT indicators continue to rise so we believe the rally should resume. Well over half of the index hold PMO BUY Signals and that could also provide fuel.
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.
Short-term market bias is NEUTRAL to BULLISH.
Intermediate-term market bias is BULLISH.
Long-term market bias is BEARISH.
The upside crossover of the SCI above its signal line moved the IT Bias to Bullish. We now have over 50% of stocks above their 20-day EMA, but still need 50%+ stocks above their 50-day EMA before we can list the short-term as fully bullish. The GCI does appear to be pausing the decline but it remains below its signal line.
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.
The S&P 600 ETF (ILR) Silver Cross Index crossed up through its 10-day EMA, shifting the BIAS to bullish. The Energy Sector (XLE) Silver Cross Index crossed down through its 10-day EMA, shifting its BIAS to bearish.
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CONCLUSION: STOs were rising yesterday and have turned back down today. After pushing and pulling, price finished unchanged. Given yesterday's upside initiation climax we would've expected followthrough on the rally. We saw some followthrough to begin the day but it failed. We are less bullish in the short term given these cracks in the foundation. However, participation is improving suggesting we should expect the rally to break above the 50-day EMA. IT indicators show a Bullish Bias. Prepare for more chop and churn based on STOs, but ultimately higher prices based on IT indicators and participation.
Erin is 50% long, 2% short.
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BITCOIN
Yesterday's comments still apply given almost no change in Bitcoin today:
"Sparked by fake news that the SEC had approved iShares Bitcoin ETF, Bitcoin rallied strongly. BlackRock CEO, Larry Fink thinks that this is a flight to "quality". We disagree regarding 'quality', but certainly rising interest rates have had some looking toward unsupervised Bitcoin. Bitcoin came off today's highs but did close higher than it has in months. The RSI and PMO now look more bullish and Stochastics are rising again. The trading range between 25,000 and 29,000 is still viable, but we have to be open to a rally to 31,500 given the rising trend out of the September low."
INTEREST RATES
Interest rates are flying higher again which could've put a damper on today's price action. Bonds are again under pressure.
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
The PMO was declining yesterday on a Crossover SELL Signal. The PMO has switched back to a Crossover BUY Signal. We didn't expect this sharp rise in rates. Stochastics had turned up, but not much more there to clue us in. We now see all of the indicators rising and none are overbought. Expect $TNX to continue to rise.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT broke down from the short-term rising trend and is again ready to test support. The PMO had a Crossover SELL Signal today well below the zero line and Stochastics have topped. We don't think support is going to hold.
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 finished mostly unchanged but formed a bearish filled black candlestick. We have a short-term bearish head and shoulders pattern and a PMO in decline. Stochastics have topped. It's time for the Dollar to lose some strength.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: SELL as of 10/5/2023
GLD Daily Chart: Gold was slightly higher as it digests its strong rally out of the October low. Indicators are very favorable and certainly suggest we will see higher prices.
GOLD Daily Chart: We continue to note that discounts on PHYS are very elevated telling us investors are very bearish on Gold. Sentiment is contrarian so this is a positive condition. Look for Gold to continue higher.
GOLD MINERS Golden and Silver Cross Indexes: GDX broke above its intermediate-term declining tops trendline. With the outlook bullish for Gold and mostly for the market, we expect this industry group to continue to flourish. It is up against overhead resistance right now, but participation is incredible (100% above their 20-day EMAs) and the indicators are rising. We expect a breakout.
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 was up, but it didn't get it back within the rising trend. We believe it will given the positive RSI, still rising PMO and positive Stochastics. The war concerns are still there and that should keep Crude Oil rising longer until production levels are adjusted.
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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