Today the Down Jones Transportation Average (IYT) 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating an LT Trend Model BUY Signal. Price is overcoming resistance and based on the improvement in participation percentages today, we favor a breakout. We still need the Golden Cross Index to cross its signal line, but given we have much higher percentages of stocks above their 50/200-day EMAs, it should get there.
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: The market was up again today, but is still in digestion mode. Overhead resistance is holding tight. The RSI is overbought so we need either more consolidation or a pullback to correct it. The PMO is starting to reach overbought territory as well. A decline would do wonders.
The VIX remains overbought but hasn't hit the upper Bollinger Band yet on our inverted scale. The Band is now moving lower so we could see a puncture soon. Those nearly always lead to pivot points in the market. Still, indicators remain strong like Stochastics which are comfortably above 80. Internal strength is visible.
Here is the latest recording from 11/27:
S&P 500 New 52-Week Highs/Lows: New Highs expanded as we would expect on a rally. The 10-DMA of the High-Low Differential topped yesterday but does look like it is flattening already in anticipation of a reverse higher. We still think that top is significant and does imply a market pullback ahead.
Climax* Analysis: There were two climax readings on the four relevant indicators today. SPX Total Volume was 145% of the one-year daily average, which is a huge slug of volume for no particular reason. That is sufficient reason to call this an upside exhaustion climax. It is also reasonable to consider the high volume to be evidence of a blowoff.
*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) are both rising now, but barely. They are twitchy due to the consolidation. We saw quite a few PMOs reverse direction. Yesterday 33% were in downturns, today PMOs reversed leaving us with only 20% declining. %Stocks > 20EMA remained steady.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM and ITVM accelerated their rise moving them into extremely overbought territory. %PMO Crossover BUY Signals nearly dropped beneath their signal line. Given the amount of PMOs that are still declining, we should see a negative crossover tomorrow.
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.
%Stocks > 20/50EMAs improved on today's rally. 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 stage has been set for a decline. We saw blow off volume on an upside exhaustion climax. The SPY is overbought, as is the PMO. We have overbought readings on IT indicators as well. Still, there is internal strength visible given the amount of rising PMOs (80%) and the bullish bias in all three timeframes. We may only see sideways movement, but today's climax suggests to us that we will begin to see the market decline very soon. We aren't looking for a correction yet (internals are too strong), just a pullback. In any case, be sure your stops are set to protect against a correction. We don't see evidence that selling is necessary yet.
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
Yields popped higher, but we think they will move much higher. The declining trends are intact as Bonds find favor.
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 recovered today, but remain in a steep declining trend in the intermediate term. The indicators are very negative with the RSI below 50 and Stochastics below 20. The PMO is declining quickly. The large head and shoulders pattern tells us to expect 4% to be tested at a minimum.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT pulled back today on rising yields. Price remains above support so we aren't particularly worried about TLT right now. The indicators are favorable and suggest the rising trend will continue.
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 rallied today. The PMO is about ready to turn up. The RSI is negative but rising and Stochastics are below 20 but also rising. The declining trend is still intact so we aren't ready to call this a significant bottom yet.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold dropped on the rising Dollar, but it did nothing to make the chart look bearish. The RSI was afforded the opportunity to leave overbought territory which is good. The PMO is still rising and Stochastics are comfortably above 80 so we see today as a hiccup. We could see a test of support on a mechanical pullback after a breakout, but we think it will ultimately continue higher.
GOLD Daily Chart: We think that all-time highs will be broken, but we may see some consolidation below that resistance level when we get there. The all-time high is a psychological level of resistance and may take more time to overcome.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners weren't bothered by Gold's decline today. They took advantage of a rising market. The internals are incredibly strong so we are looking for price to make it to the next resistance level at the July top.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/7/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: Ha! We finally began to get optimistic on Crude Oil and bang. Today's giant decline formed a bearish engulfing candlestick that implies more downside ahead for tomorrow. The rising trend is still intact, but the PMO top beneath the signal line is especially bearish. We still like this area for an upside reversal. With holiday travel beginning we expect demand will pick up. It is just taking its time. We're less optimistic than yesterday given the PMO, but until support is broken at the November low, we are still looking for some upside.
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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