Today the Crude Oil ETF (USO) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL Signal. More comments will be found in the Crude Oil section below.
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 moved higher despite Friday's downside initiation climax. The market is too strong to be bothered by a bearish climax. The RSI is very overbought so price is definitely due for a pullback.
The VIX is very overbought. The Bollinger Bands have contracted so much that it should have a downside or even upside puncture soon. We won't read too much into it because those Bands are so close to each other. Stochastics are oscillating above 80 implying internal strength.
Here is the latest recording from 12/18 (no trading room 12/25 or 1/1):
S&P 500 New 52-Week Highs/Lows: New Highs pared back considerably on today's rally. Friday the 10-DMA of the High-Low Differential topped. It continues lower.
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) continued to fall after topping on Friday. We have a healthy percentage of stocks showing rising momentum and getting above the 20-day EMA. These numbers could prop the market up longer.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is EXTREMELY OVERBOUGHT.
Big news on the IT indicators. Both IT Breadth Momentum (ITBM) and IT Volume Momentum (ITVM) topped today in extremely overbought territory. We don't believe this spells doom, but it does suggest we will see a digestion period at minimum.
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.
All participation indicators carry readings above out 50% bullish threshold which gives us a bullish bias in the short term. The Silver Cross Index is above its signal line so we have an IT Bullish Bias. It is now overbought, but given there is a slightly higher amount of stocks above their 20/50-day EMAs, it should continue rising just a bit longer. The Golden Cross Index is also above its signal line giving us a LT Bullish Bias. The Golden Cross Index currently has a negative divergence with price.
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: So much for Friday's downside initiation climax. The market continues to demonstrate and flex its internal strength. However, now we have STOs and the ITBM/ITVM in decline. We favor a pullback. It would move indicators like the RSI out of overbought territory in a hurry. With market strength still visible, we may only experience a digestion phase as we did after the strong rally out of the October low. Given favorable seasonality, we aren't looking for a correction, but we are looking for the market to stumble. It may be too bearish to hedge right now. Stops should provide the protection you need in case we see a decline.
Erin is 80% long, 0% short.
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BITCOIN
Bitcoin continues to consolidate following its sharp rally to the upside at the beginning of the month. A declining trend has been established but we don't have a lower low yet. This sets up a symmetrical triangle for now. Those are continuation patterns so we currently will look for an upside breakout given the prior trend was up.
INTEREST RATES
Yields paused the decline for the most part but don't look ready to rally yet. Strong support hasn't been reached yet.
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
A new declining trend channel has developed on $TNX which suggests to us rates are still vulnerable to more downside even after the deep decline. The RSI is very weak, as are Stochastics. The PMO continues to tumble so look for the 10-year yield to continue lower. We could see a slight rally that would bring it to the top of the trend channel, but we expect the channel to hold strong with $TNX ultimately succumbing to the downside.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds are rallying on falling yields and we see that continuing. Today's small decline nearly took the RSI out of overbought territory. The PMO is very overbought, but is showing pure strength as it rises steadily. With yields looking so bearish, we remain very bearish on Bonds moving forward.
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 has now formed a bullish falling wedge. Indicators are not looking very bullish yet so we aren't expecting a breakout just yet. This bullish spin however, tells us to be leery of a rallies in metals.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold hit all-time highs and has since been consolidating sideways. The PMO is not enlightening as it is flat. It is above the zero line so there is some strength. We just don't like topping Stochastics right near net neutral (50). We expect price to drift sideways. We need to be watchful given the Dollar has revealed a bullish falling wedge.
GOLD MINERS Golden and Silver Cross Indexes: GDX is trying to top for a second time. It may've rallied today, but we are starting to see some problems under the hood. The Silver Cross Index is above its signal line which gives GDX an IT Bullish Bias, but its reading is higher than %Stocks > 20/50EMAs. This means it is vulnerable to turning back down. We also see tops on those %Stocks indicators. There is still strength that can be taken advantage of, but we would hesitate to add Gold Mining positions given the status of the Silver Cross Index reading above %Stocks > 20/50EMAs.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/7/2023
LT Trend Model: SELL as of 12/18/2023
USO Daily Chart: As noted in the opening, Crude Oil saw a Death Cross of the 50/200-day EMAs. It arrives when price looks ready to reverse higher and bottom. We have a small double bottom that has been confirmed with today's rally. The RSI is still negative, but the PMO is nearing a Crossover BUY Signal and Stochastics are rising. We see diminishing weakness on this PMO bottom. There is a black filled candlestick so we should expect a decline tomorrow. Overall we are cautiously optimistic on Crude Oil and the Energy sector.
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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