Today the Bonds (TLT), Russell 2000 (IWM), and Consumer Staples (XLP), 20-day EMAs crossed up through their 50-day EMAs (Silver Cross), generating new IT Trend Model BUY Signals. We'll discuss this signal in the section on Bonds.
IWM is stuck beneath resistance at the 200-day EMA but we note what looks like a reverse head and shoulders pattern that would suggest an upside breakout ahead. The markets in general are pausing and possibly rounding over so it may take more time to see the breakout.
XLP has enjoyed a rally out of the October lows but it is only now that it has started to outperform. We expect this area of the market will see some love should the market continue to pause or roll over. Participation is strong so we believe price will remain elevated. The Golden Cross Index looks especially bullish after its recent "Bullish Shift" across its signal line. Stochastics are above 80 and the PMO is rising. The 200-day EMA and 71.00 are arriving as resistance, but the outlook is good.
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
CLICK HERE for Carl's annotated Market Index, Sector, and Industry Group charts.
THE MARKET (S&P 500)
IT Trend Model: BUY as of 11/14/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: The market pause continues, but we suspect price will pullback before all is said and done. The PMO has decelerated and it is getting overbought. This is a perfect place for consolidation or decline as overhead resistance at the July top has been reached.
The VIX remains overbought and interestingly spiked before closing at the top of the range on our inverted scale. Some fear or concern must have filtered in during the day. Stochastics remain at the top of the range. We see internal strength
Here is the latest recording from 11/27:
S&P 500 New 52-Week Highs/Lows: New Highs expanded on today's decline which also suggests internal strength. There were no New Lows so we do have broad participation.
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.
Swenlin Trading Oscillators (STOs) accelerated lower on today's mild rally, but most concerning is the big decline in %PMOs Rising. Lots of stocks lost rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM and ITVM are rising but remain very overbought. They haven't hit overbought extremes so there is some headroom left for them. %PMO BUY Signals topped today and should move much lower tomorrow given the loss of rising PMOs on the prior chart.
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 all three timeframes.
We saw slight deterioration on %Stocks > 20/50EMAs but overall readings are robust. We have every indicator reading above our 50% bullish threshold. Both the Silver Cross Index and Golden Cross Indexes are above their signal lines which gives us a bullish bias in both the intermediate and long terms. Our concern right now are the overbought conditions of %Stocks > 20/50EMAs.
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 items with highlighted borders indicate that the BIAS changed today.
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CONCLUSION: The bias table above has moved to mostly green "Bull" signals, but we are beginning to see the market as "toppy". The pause is occurring just beneath resistance at the 2023 prior high and with the deterioration of PMO BUY Signals within the index, we would expect price to turn over and pull back. IT indicators are still very bullish and we have robust number of stocks above key moving averages so we aren't looking for a strong correction at this point. If you don't have them already, consider setting stops in case current short-term price weakness seeps into the intermediate term.
Erin is 70% long, 0% short.
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BITCOIN
We've been trying to take our cue from Stochastics as to what will happen with Bitcoin, but they are far too twitchy to count on right now. We are now taking our cue from the price pattern which is a bearish rising wedge. There is still internal price strength based on the RSI, but the PMO is trending lower. We see price rising further within the wedge, but ultimately we think the pattern will win out and we'll see a decline.
INTEREST RATES
Yields are in declining trends and we expect the decline to continue. Consensus is the FOMC may cut rates in early 2024. While we are not in the consensus, the market as whole appears to be pricing this in.
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
Gap support finally broke down as we have been expecting. The large head and shoulders pattern has a minimum downside target around 4%. This seems reasonable.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The drop in yields is offering Bond funds in general the opportunity to rally. So far TLT has been stuck beneath resistance, but given the bearish yield charts, we expect that to be broken. Today's Silver Cross looks like a good signal. The PMO is rising, the RSI is positive and Stochastics are oscillating above 80. All of this points to higher prices for TLT.
We see upside potential to 97.00 for TLT, but the 200-day EMA could pose a problem on the way.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/27/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar lost support today at the August top. The 200-day EMA is available as support, but given the very bearish indicators, we expect it to fall past that.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold rallied strongly today on a weak Dollar, but also on renewed interest. The market is looking toppy and Gold may be the shining star while it digests the big rally out of the October lows. The PMO looks excellent, but we do see that the RSI is overbought now. However, we don't see a damper for this rally. Stochastics are very strong. $GVZ has hit the lower Bollinger Band on our inverted scale and typically those punctures lead to more upside.
GOLD Daily Chart: All-time highs are on the way for Gold. A weak Dollar is helping, but Gold is showing relative strength as well. Thankfully the reverse correlation is returning. Given the Dollar is so weak, we want Gold to travel in the opposite direction.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners took advantage of the rally in Gold with its own spectacular rally. With Gold looking so bullish and participation being so strong, we expect Gold Miners will continue to outperform. We see a test of 33.50 in GDX's future.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/7/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: Crude Oil continues to chop around. This has caused the PMO to flatten. We continue to see this as a good reversal area for Crude, but all of the indicators aren't on board. The RSI is negative and while Stochastics did turn back up, they are below 50. We favor an upside breakout here, but if the rising trend out of this month's low breaks, we will reconsider.
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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