Today the Regional Banking ETF (KRE) 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating an LT Trend Model BUY Signal. Price hit resistance at the January lows and turned back down. KRE has been pulling back even prior to today's big decline. The gap hasn't been filled so there is still a chance at a reversal. Certainly participation is very robust, but as can be the problem, these readings are incredibly overbought and could see deterioration moving forward.
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: We finally saw a pullback and this didn't come off any particular news. It is overbought conditions being relieved. The RSI has now left overbought territory which is good, but the PMO has topped which is bad.
One slightly good piece of news is that the VIX punctured the lower Bollinger Band on the inverted scale. Many times these punctures lead to upside reversals. However, we aren't counting on that right now. The Bands have shrunk so much, just about any change in the VIX was going to puncture a Band. Stochastics are still above 80, but have turned down suggesting diminishing 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 were logged intraday. We believe the finish to the day likely took out some of those intraday New Highs. We haven't annotated it, but there is a negative divergence on New Highs that led to this decline.
Climax* Analysis: The relevant indicators had unanimous and strong climax readings today, giving us a downside initiation climax. The two previous climax days were downside, then upside initiation climaxes, neither of which resulted in any follow through. The DOWN/UP Volume Ratios for the NYSE and SPX had readings greatly exceeding 9.0, which is very bearish.
*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) have been displaying negative divergences for some time. We note that %PMOs Rising tumbled today leaving us with less than half of the index holding rising momentum. We also lost some participation of stocks above their 20-day EMA.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is EXTREMELY OVERBOUGHT.
The last time the ITBM/ITVM topped, it was barely visible. Today we saw an accelerated decline which certainly suggests more downside. We do see 75% holding PMO BUY Signals, but given the decimation to rising PMOs in the chart above, this indicator will likely slide quickly.
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.
We may've seen a sharp decline today, but all participation indicators carry readings above our 50% bullish threshold which gives us a bullish bias in the short term. We would now look for the Silver Cross Index to begin declining given %Stocks > 20/50EMAs hold lower percentages than the SCI. The SCI remains above its signal line so we still have a Bullish IT Bias. The LT Bias is bullish as well given the GCI is above 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: While it wasn't great for our portfolios, today's decline was good for the market which had gotten incredibly overbought on the rally out of the October low. The Bias remains bullish in all three timeframes, but STOs and the ITBM/ITVM declined with gusto. Today's downside initiation climax suggests more decline ahead in spite of a VIX puncture of the lower Bollinger Band. We should prepare for more decline. While we don't think a deep correction is likely, it is still possible. We should protect our portfolios with tighter stops.
Erin is 85% long, 0% short.
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BITCOIN
Symmetrical triangles are continuation patterns. In the case of Bitcoin the prior trend was up so an upside breakout was expected. This triangle could also be a pennant on a flagpole which would suggest much higher prices ahead. The indicators are beginning to firm up so we do see Bitcoin moving higher from here.
INTEREST RATES
Yesterday's comments still apply:
"Yields moved lower for the most part. Inversions still remain strong and until short-term rates begin to fail, the inverted yield curve will persist."
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
Yields are back to tumbling lower. $TNX is in a declining trend channel that we believe will continue to hold up. The chart is especially bearish with the deeply declining PMO and Stochastics staying below 20. The RSI is oversold, but until we see better movement on the PMO, we suspect it will stay oversold for some time. Rates should continue lower.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT continues to make its way up toward overhead resistance around 102. The RSI is very overbought, but given the bearishness of yields, that will likely continue.
We do notice that there is closer resistance on the 1-year daily chart around 100, but again, yields are likely to continue lower so we would expect TLT to easily overcome any overhead resistance.
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 chart is not helpful. It is full of mixed messages. The RSI is negative and the PMO and Stochastics are flat. However, we have a large bullish falling wedge on the chart. We aren't sure what to make of it, so we will look for sideways movement for now.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: We see a bullish bias on the Gold chart. The RSI is positive and Stochastics are rising in positive territory. The PMO is less than helpful, but it is well above the zero line so there is still some strength. This tells us that 20-day EMA could hold as support near-term. Expect more tortured sideways movement. Gold is good at that.
Sentiment is spiking lower so investors are more bearish on Gold right now. They aren't exceedingly bearish so we aren't ready to list this as a plus for Gold. Sentiment is contrarian, but it works best when discounts are much higher.
GOLD MINERS Golden and Silver Cross Indexes: We saw a golden cross of the 50/200-day EMAs yesterday. The indicators and participation are healthy despite today's deep decline. It seems that the rally ran hot and needed an opportunity to cool. The market's decline today helped that along. We don't see enough deterioration to look for a deep decline, but this digestion phase could be bumpy given directionless Gold.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/7/2023
LT Trend Model: SELL as of 12/18/2023
USO Daily Chart: Crude was down on the day, but still managed a higher high and higher low. This looks like a credible bottom for USO. Price remains above the 20-day EMA and the PMO is rising on a Crossover BUY Signal. We also like the look of Stochastics which have risen above net neutral (50). Despite a recent death cross of the 50/200-day EMAs, we are bullish on Crude Oil. The next big test will be price's reaction to the 200-day EMA.
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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