Today the ITBM and ITVM both turned lower. Given this is the first time they have done so since October, we felt it deserved a headline. We'll talk more about the implications of this downturn in the IT indicator section, but notice that the Swenlin Trading Oscillators (STOs) also turned down today. STOs still hold a negative divergence with price as well.
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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: Price hasn't lost support yet, but it has clearly decelerated since the beginning of the rally. The PMO also topped today. The RSI is no longer overbought, but it is at the top of the range and could use more relief.
The VIX remains overbought. The Bollinger Bands have narrowed. The PMO is still rising and this digestion phase has offered the RSI an opportunity to leave overbought conditions. Continued consolidation could relieve overbought conditions further, but a decline would really get those conditions to clear.
Here is the latest recording from 12/4:
S&P 500 New 52-Week Highs/Lows: New Highs pared back quite a bit on today's decline. However, we still don't see any New Lows yet. The 10-DMA of the High-Low Differential topped today along with the STOs and ITBM/ITVM.
Climax* Analysis: There were two climax readings on the four relevant indicators, and SPX Total Volume was solid, so this will be a downside initiation climax.
*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.
As noted in the opening, both STOs turned lower today. They have been rather twitchy and unhelpful as price has consolidated sideways, but we are taking their downturn more seriously today given the downside initiation climax and lower ITBM/ITVM. Participation thinned, particularly %PMOs Rising which took a big hit today.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is EXTREMELY OVERBOUGHT.
These indicators usually top at significant market tops. They have needed some relief to leave extremely overbought conditions. This suggests to us that the market is ready to turn over. %PMO Xover BUY Signals didn't lose as much ground as we expected it to given only 64% have rising PMOs. We would look for this indicator to take a dive soon.
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 indicators are reading at or above our bullish 50% threshold. This is bullish for the short term. However, we do expect to see more deterioration moving forward given market weakness in the near term. The Silver Cross Index (SCI) and GCI are both above their signal line so we must read the intermediate and long terms as bullish also. Readings for both the GCI and SCI are quite a bit below the readings at the July top which we've overcome. That is a negative divergence.
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 bias table above is about as green as it can get. There is no real room for improvement so we have to start looking for some deterioration in the near term. Participation readings are still quite good, but we saw primary indicators turn down today: PMO, STOs, ITBM/ITVM and 10-DMA of the High-Low Differential. In addition, there is a new downside initiation climax. We have to look for a market decline to continue with a likely loss of support ahead. Erin is evaluating the positions in her portfolio with an eye toward booking profits and turning a few positions 'off' while the market declines.
Erin is 70% long, 0% short.
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BITCOIN
Yesterday's comments still apply:
"We had been monitoring a bearish rising wedge on Bitcoin, but instead of the expected decline we saw a breakout. A bullish conclusion to a bearish chart pattern is especially bullish. We believe speculation is occurring as investors wait for the emergence of Bitcoin ETFs. The PMO looks the most bullish it has in weeks. The RSI is now overbought, but those conditions rarely bother Bitcoin. While we see higher prices ahead, we would be prepared for a likely pullback given this rally is becoming parabolic."
INTEREST RATES
Interest rates reignited their declines today. At this point we see rates headed toward 'equilibrium' near 3.5%.
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 bullish falling wedge on the chart implies that $TNX will eventually breakout. A breakout wouldn't amount to much in our opinion. We are looking for a rebound off 4.1% support level.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT has now rallied to the 200-day EMA. This has posed problems for TLT in the past, but given the bearish look of the 20-year yield, we favor a breakout. The RSI is positive, the PMO is rising and Stochastics are rising above 80.
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 broken away from its bearish declining trend channel. It appears to be at a pivot point. The RSI just moved into positive territory and the PMO is rising again. Stochastics look especially bullish as they rise in positive territory. We think the Dollar will continue to rally from here.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: We are now using just the GLD chart. You'll find $GOLD in the bottom indicator window. With the Dollar rallying it wasn't a surprise to see a decline in Gold. The inverse correlation held true with the Dollar up +0.38% and Gold down -0.38%. Price has now landed on support, but we believe it will likely be broken given the bullish look of the Dollar and the return of the inverse correlation.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners also hit support. They backed off before reaching the upside target of the reverse head and shoulders pattern. Participation is bleeding off, but hasn't tanked yet so there is a chance it will hold this support level. We just think that bearish Gold will be a problem and could pull price below this support level. Evaluate your gold mining positions carefully. It may not be worth enduring more decline or you could adjust stop levels.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/7/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: Yesterday's comments still apply:
"Crude Oil continues to chop around, but it is still holding above support. We liked what was going on with momentum last week, but the PMO has since topped beneath the signal line. Crude also lost the short-term rising trend on Friday. At this point we expect more sideways chop with a bearish bias based on Stochastics."
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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