We had already noted that the Silver Cross Index on the SPX was rising, but we thought we should check the Nasdaq and NYSE. The Nasdaq Composite is very close to a Bullish Shift across its signal line (10-day EMA), as is the SPX. We can see that the rally has broadened given the NYSE is also seeing a rising Silver Cross Index. Bullish Shifts across the signal lines typically arrive at major market bottoms.
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 short-term declining tops trendline is now being challenged, as is the 50-day EMA. The PMO is now on a Crossover BUY Signal and the RSI has now moved into positive territory above net neutral (50).
The VIX is coming close to puncturing the upper Bollinger Band on the inverted scale, but we expect it to move well above it should the rally continue as we expect it to. Stochastics have now risen above net neutral (50) and are rising strongly suggesting more follow through to come.
Here is the latest recording from 10/30:
S&P 500 New 52-Week Highs/Lows: New Highs expanded and New Lows contracted as we would expect on a strong rally. Most important, the 10-DMA of the High-Low Differential turned back up.
Climax* Analysis: There were strong, unanimous climax readings on all four relevant indicators today, giving us another upside exhaustion climax. SPX Total Volume was solid, but still not at blowoff levels. Exhaustion means we should expect some churn, possibly a reversal (not likely, we think), but take final guidance from tomorrow's open. A parting note: The NYSE UP/DOWN Volume Ratio reading of 9.2 is extremely bullish.
*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 DOWN and the condition is OVERBOUGHT.
Swenlin Trading Oscillators (STOs) are now overbought, but they can certainly accommodate much more upside. The same goes for %Stocks > 20EMA. %PMOs Rising is more overbought than we like, but given the voracity of this rally it makes sense. We need to see rising PMOs so this rally can be properly supported and we have that.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
IT indicators continue to rise, confirming rising short-term indicators. Most notable are the positive divergences. We will continue to point these out as they tend to arrive before lengthy rallies.
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 BEARISH but improving in intermediate and long terms.
We saw %Stocks > 20EMA move above our bullish 50% threshold. While %Stocks > 50EMA aren't above 50%, given the strong improvement, we consider the short term as holding a bullish bias. The SCI is rising and nearing a Bullish Shift across the signal line so that is improving and could read 'bullish' any day now. The GCI is stagnant 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 items with highlighted borders indicate that the BIAS changed today.
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CONCLUSION: Bullish indications are all over our charts. Most notable are the new PMO Crossover BUY Signal, the thrust in the NYSE Volume Ratio and the newly rising 10-DMA of the High-Low Differential. We've already seen positive divergences line up before this rally bottom. Our primary concern would be that short-term indicators are getting overbought. They can still accommodate more upside, but it is a condition that needs to be watched. We highly doubt that we will see lower prices on today's upside exhaustion climax. We would still avoid overnight orders in favor of seeing how the market opens on this climax. Expanding exposure should be safe, but set stops to insure against an untimely decline.
Erin is 30% long, 5% short.
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BITCOIN
Bitcoin pulled back after yesterday's strong breakout, but saw a higher low and higher high. The RSI is extremely overbought so we may not get an immediate rally higher, but given the strength of the PMO and Stochastics, upside is more likely than downside.
INTEREST RATES
Yields tumbled lower, but most are still holding rising trends. It was time for them to cool, but we expect this is very temporary.
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 10-Year Bond Yield has moved substantially above the rising trend line drawn from the May low. It is currently correcting back toward the line, and we look for support at about 44, if not sooner. The 50-day EMA could catch it.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT has formed a double bottom with a confirmation line at the October high. Yields are cooling which gives TLT an excellent chance to break above that confirmation line. Stochastics are rising and the RSI has moved into positive territory. The PMO is rising on a Crossover BUY Signal. We would look for a possible test of 91.
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's PMO has accelerated lower. We've been looking for a breakout from this consolidation area, but indicators are deteriorating suggesting we will see a test of the 50-day EMA or 29.50.
This is starting to look like a rising flag on a flagpole. Those types of bull flags don't always resolve upward. With the failure of the breakout and a rising flag, we are short-term bearish on the Dollar. We aren't looking for a collapse yet, just more weakness.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold managed to rally slightly today. Resistance is still holding. The RSI is positive and the PMO is still technically rising. The correlation between Gold and the Dollar is now positive so we should expect them to travel more in concert than they normally do. Both are currently consolidating and both look short-term weak.
GOLD Daily Chart: What could work against Gold is the bullish sentiment that is marked by the decline in discounts on PHYS. Sentiment is contrarian and discounts are getting very low. We rarely see premiums. Stochastics also turned down and are below 80. We're intermediate-term bullish on Gold, but short-term we may see more pullback after resistance was unsuccessfully tested at 2000.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"Gold Miners saw a small rally today. It didn't improve the participation picture. In fact, the Silver Cross Index has topped. Support is arriving so you could consider holding to see if we will get a reversal at this level or tighten your stops in case it doesn't hold. The slippage in participation does suggest stops should at the very least be tightened on your Gold Mining positions."
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: USO rallied strongly, but we aren't seeing enough bullish behavior out of the PMO and Stochastics. The PMO is flattening, but is still in decline. Stochastics did tick higher. Crude Oil is on the right track to rally, the indicators just aren't ripe enough to say price won't test the October low.
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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