Yesterday, the SPX (SPY), OEX (OEF) and Dow Industrials (DIA) all saw new PMO Crossover BUY Signals. Today they were joined by the remainder of the major indexes. The market is clicking, now we need to determine how long this rally will stick around. Seeing so many oversold PMO BUY Signals is especially bullish. They are all oversold signals as well. Our only caution would be that we did see similar signals early last month and they didn't produce a lengthy rally. The signals came in just in time for the decline.
Finally, we also note that the Silver Cross Indexes on all of these indexes show a BULLISH BIAS in the intermediate term. When the Silver Cross Index moves above its signal line (10-day EMA) it is called a Bullish Shift. Once the crossover occurs, the bias changes to BULLISH.
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/SPX SECTOR/INDUSTRY GROUP INDEXES
Change Today:
Change for the Week:
CLICK HERE for Carl's annotated Market Index, Sector, and Industry Group charts.
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 shorter-term declining tops trendline has now been overcome. Price is now headed to test the declining tops trendline drawn from the July top. Yesterday saw a breakaway gap and there is a chance that today's gap is an exhaustion gap. Unfortunately we won't know what kind of gap it is until we open on Monday. If prices open higher then it is a continuation, if they open lower, it could be an exhaustion gap.
The VIX punctured the upper Bollinger Band today which leaves us open to a decline over the next day or two. It isn't as overbought as it can get so it wouldn't be out of the question to see it move higher along with price. Stochastics are rising strongly in positive territory implying internal strength.
SPY Weekly Chart: After last week's bearish puncture of the rising trend, this week's rally put it back into the rising trend. The weekly PMO did decelerate on this week's strong rally so the brakes are being applied to the decline.
New 52-Week Highs/Lows: No New Lows today alongside an expansion in New Highs. The 10-DMA of the High-Low Differential is moving out of oversold territory. New Highs have reached near-term overbought territory so a cooling off period may arrive.
Climax Analysis: Today there were unanimous climax readings on the four relevant indicators, giving us another upside exhaustion climax. SPX Total Volume was again solid, but not at blowoff levels. Today's candlestick was a shooting star, which indicates a short-term price top, so maybe the advance really is exhausted this time.
*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.
All of these indicators have reached overbought territory suggesting a possible digestion period ahead.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
IT indicators are in neutral territory and rising. Given they can accommodate more upside, we do believe there will be more upside in the intermediate term.
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PARTICIPATION: The following tables summarize participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation. There are three groups: Major Market Indexes, Miscellaneous Industry Groups, and the 11 S&P 500 Sectors.
The highest IT Bias belongs to Gold Miners (GDX). This week they gained points on the SCI. The long-term picture hasn't improved with the GCI yet, but it looks encouraging moving forward based on the SCI expansion.
The lowest bias goes to the Transports (IYT). They held up in the long term based on the GCI staying the same, but the SCI did lose more percentage points. This is a very weak area of the market.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
Energy (XLE) is one of the weakest sectors right now. While it holds the top spot, it lost a whopping 13 percentage points this week. Be careful with your Energy positions.
The biggest gainer was Regional Banks (KRE) which improved by 14 percentage points. They are coming out of the basement and could offer some interesting opportunities on reversal candidates should the market continue its march higher.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
Energy holds the top spot, but as noted above it is losing internal strength.
The biggest gainer was Communication Services (XLC). This is an aggressive area of the market and seeing long-term strength building here speaks well for the market in general.
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 and intermediate terms.
The market bias is BEARISH, but improving in the long term.
We now have %Stocks > 20/50EMAs above our bullish 50% threshold. Today the Silver Cross Index had a Bullish Shift across the signal line moving the IT to Bullish. The GCI did turn up, but ultimately it remains below its signal line which gives us a Bearish long-term bias.
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 running hot. Look at our Bias Table above and note the numerous changes to Bullish Biases. However our indicators suggest it may be time for a digestion phase. Short-term indicators are overbought and today we logged another upside exhaustion climax. There is a risk that today's gap is an exhaustion gap not a continuation gap. IT indicators are still rising and aren't overbought yet so we would look for the rising trend to continue after a possible pause or small decline. Portfolio expansion can be carefully considered. A market pause will likely offer attractive entries. Should IT indicators reverse on consolidation, be ready to pivot back to neutral.
Erin is 55% long, 2% short.
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BITCOIN
There is a bull flag on the daily chart, but the flag is rising. We could still see a breakout or continuation to the upside, but just understand that rising flags aren't as bullish as falling flags. The RSI is very overbought and the PMO has topped. Stochastics are above 80 so we would look for consolidation rather than a swift decline.
This chart is to show where some of the support/resistance lines come from. We see the next level of resistance at around 37,500.
INTEREST RATES
Rates crashed today as investors cheered a weak jobs report that could signal to the FOMC that they should ease rates back. We wouldn't get too optimistic about rate cuts. A pause is likely, but we think rate hikes will occur later.
Here is a long-term view of rates. The decline is taking out some rising trends, but ultimately we expect them to reverse higher fairly quickly.
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 rising trend on the 10-year yield is still intact. We are arriving a gap support as well. The indicators are very bearish as we would expect. The PMO isn't as oversold as it can get and the RSI isn't oversold yet. We think rates could decline even further. Should 4.4% be lost as support, the next line of strong support doesn't arrive until 4.1%.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount, which shuts many buyers out of the market, and potential sellers will experience pressure to lower prices (to no effect so far).
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This week the 30-Year Fixed Rate changed from 7.79 to 7.76.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds are likely in for a nice rally as rates tumble lower. TLT did form a bearish filled black candlestick right on resistance at the confirmation line of the double bottom formation. We aren't bothered by it given the positive and not overbought RSI and PMO that is accelerating higher. TLT has a good chance at a breakout above 91.
Today's failed breakout isn't too concerning at this time given the strength of the indicators.
TLT Weekly Chart: The weekly PMO is decelerating and could indicate a more lengthy rally ahead for TLT. We have seen it stutter previously, but this looks quite encouraging for TLT.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 7/13/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: Also working in the market's favor was a big decline in the Dollar. It is now on support at the 50-day EMA but given the acceleration of the PMO to the downside and Stochastics dropping below net neutral (50), we would look for it to continue to move lower.
Support has been lost at the October low.
UUP Weekly Chart: The Dollar was unable to test prior highs and is now headed lower. The weekly RSI tumbled and the weekly PMO is topping. The Dollar finally looks vulnerable!
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GOLD Daily Chart: Gold enjoyed a slim rally which is keeping the PMO rising. Discounts did move higher so some bearishness is seeping in. We want to see very high discounts as sentiment is contrarian.
If we're right about the Dollar losing ground, Gold should rally. Working against Gold is the non-existent correlation between it and the Dollar. It isn't bearish, but it does tell us that Gold is less reliant on the Dollar's direction right now.
GOLD Weekly Chart: Gold closed just below 2000 this week. That level of psychological resistance is holding tight right now. However, given the nearing weekly PMO Crossover BUY Signal, we would look for all-time highs to once again be tested. We think is is particularly bullish that Gold did not have to test support at 1650 before reversing. It also reversed well above the rising bottoms trendline.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are reversing off support. Well actually just above support which is more bullish. The RSI is back in positive territory and the PMO is surging above the signal line. The Silver Cross Index tipped back up above the signal line. Participation is robust. Look for Gold Miners to break out above 30.
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 Oil is acting fishy and it is putting a damper on the Energy sector. We think that sentiment is working against it. There is a lot of bullish sentiment regarding Oil prices, but it has yet to materialize in a good rally. Remember sentiment is contrarian. If everyone is bullish, that is bearish. We have a double top formation and lightening demand. We would look for support to be tested at 70. We can't get more bearish than that as we too believe Crude will reverse upward again without crashing.
The double top looks ominous on the daily chart. The PMO has dropped below the zero line.
USO/$WTIC Weekly Chart: The weekly PMO has topped and is very close to a Crossover SELL Signal. If the technicals are correct, we should see Crude fall further. It seems counterintuitive to us, but the charts speak bear.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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