Today the NYSE Composite ($NYA) 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating an LT Trend Model BUY Signal. We have a reverse head and shoulders on the chart, but so far price is below resistance. The upside target of the reverse head and shoulders would be 16,600. That would take it above the July high. Participation is still robust, but it has leveled off suggesting a likely pause or possibly a small decline ahead.
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: BUY as of 11/14/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: We got a fat red candlestick, but ultimately the market was barely down. The RSI is no longer overbought so this pause is doing its job. The PMO is looking a bit toppy. We would expect it to turn down should the digestion phase continue as we believe it will.
The VIX is overbought suggesting we have very complacent investors right now. No one seems to worried and that could mark a pivot point for the market if it continues much longer. Stochastics are finally declining but remain well above 80 so internal strength is still visible.
Here is the latest recording from 11/27:
S&P 500 New 52-Week Highs/Lows: New Highs expanded on a down day which is a positive divergence. However, these are the max readings for the day and we suspect some of those New Highs fell by the wayside by the end of the day. The big news on this chart is the topping of the 10-DMA of the High-Low Differential. This usually occurs before a decline.
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) were mixed with the STO-B continuing lower with the STO-V reversing higher. We wouldn't read too much into this given the negative divergences are still in play. Notice the deep decline in %PMOs Rising. The drop in this reading suggests we have stocks that are topping, 33% of them.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Both the ITBM and ITVM continued higher which is healthy for the intermediate term. They are getting very overbought and could use a decline. They are decelerating in preparation. %PMO BUY Signals are curling over and should see a rapid decline tomorrow given we have only 67% with rising PMOs.
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 more 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 market is now digesting the October/November rally, but so far it hasn't seen any real declines. We think a decline is ahead given the deterioration of the PMOs on component stocks. Also, the 10-DMA of the High-Low Differential topped today also implying an upcoming decline. IT indicators are strong, but they are beginning to decelerate. Prepare for a short decline to get overbought indicators to unwind. Be careful adding to your portfolio as the market overall is due for a pullback of some sort. Stops are a must to keep profits intact should the market see a prolonged decline.
Erin is 70% long, 0% short.
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BITCOIN
Yesterday's comments still apply:
"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
Yesterday's comments still apply:
"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
$TNX declined heavily as yields fall in earnest. We don't think it is over. 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: TLT finally broke above overhead resistance. Yields look especially bearish right now so we see more upside ahead for Bond funds in general. The PMO is rising strongly and based on the downside reading, it isn't overbought as it could reach up to +3. The RSI is positive and Stochastics are traveling above 80 so we have internal price strength.
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 didn't do much today, but it did form a bearish filled black candlestick that implies it will be down tomorrow. The indicators are still very weak so we are expecting a test of support just below 28.75.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Yesterday's comments still apply:
"The market is looking toppy and Gold may be the shining star while the market 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: Yesterday's comments still apply:
"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 digested yesterday's spectacular rally. They are running hot as the RSI is overbought now. We still see plenty of upside potential for Gold Miners. Participation is very strong and the Silver Cross Index is accelerating higher.
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 rallied strongly today giving credence to this being a bottom. The RSI is moving toward positive territory and the PMO is nearing a Crossover BUY Signal. Stochastics look positive as they rise. We are cautiously optimistic on Crude.
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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