Erin wrote an article on Friday that suggested the Industrial Sector (XLI) was worth watching this week. The Dow Jones Industrials (DIA) doesn't look altogether healthy yet. Today, the Silver Cross Index (SCI) crossed above its signal line to give us a Bullish IT Bias. We would note that with only 30 stocks within, the SCI can jockey around so this signal could disappear quickly. In fact, you'll note that only 70% of stocks are holding above their 20/50-day EMAs. Since that is lower than the SCI, the SCI isn't likely to hold this Bullish Bias for very long unless participation improves. Still, this is an interesting turn of events as all of the other major indexes hold Bearish IT Biases.
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: Today's positive close kept the PMO rising. It is very flat because the rising trend has been mostly steady out of the January low. The RSI suggests price isn't really overbought yet. We saw another day of churn after the big two-day rally.
The VIX is back above its moving average and Stochastics are rising above 80. This suggests there is internal strength.
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S&P 500 New 52-Week Highs/Lows: New Highs contracted on today's rally and New Lows were logged again. The 10-DMA of the High-Low Differential topped yesterday and is still headed lower. It is very overbought and typically these declines come at market tops.
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 NEUTRAL.
Swenlin Trading Oscillators (STOs) are in negative territory and are declining. Both carry strong negative divergences with price tops. Even more concerning is the lack of participation. Price is much higher than it was at the late December top so we should see readings on %Stocks > 20EMA and %PMOs Rising at least as high as they were then. They aren't and that is what has set up the negative divergence.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
We have very few stocks holding PMO Crossover BUY Signals. We should have much more on this rally to all-time highs. %PMO Xover BUY Signals is about to cross below its signal line. Both the ITBM and ITVM continue lower.
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 short-term market bias is BULLISH, but deteriorating.
The intermediate-term market bias is BEARISH.
The long-term market bias is BULLISH.
We have more than 50% of stocks holding above their 20/50-day EMAs so we are still listing the short-term bias as bullish. However, they are in decline and hold negative divergences with price. The Silver Cross Index has accelerated its decline and is below its signal line so the IT Bias is Bearish. The Golden Cross Index turned back up, but given we have only 71.4% above their 200-day EMA, it will likely turn back down again. It is above its signal line so the LT Bias is listed as BULLISH.
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: One piece of good news is that yesterday's downside initiation climax did not lead to lower prices today. The prior upside initiation climax did result in higher prices as expected. When bearish signals don't work out and bullish signals do, that is a good sign. However, we don't want to make any sweeping conclusions based simply on climax signals. The rest of the technicals are showing strain with STOs, ITBM/ITVM and other indicators all in decline. The broad market PMOs are not as strong as they should be at this time. We worry that when mega-cap leadership begins to fail, the market will fail. Certainly your chances of picking a winner are limited when only 38% hold rising momentum. The market is acting toppy so additions to your portfolio could be pulled quickly to the downside. Be very selective or consider staying on the sidelines. Current positions should hold stops. We aren't bearish enough to short.
Erin is 20% long, 0% short.
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BITCOIN
The PMO is rising on a Crossover BUY Signal and the RSI is positive. Stochastics are not above 80 anymore so we do see vulnerability to the downside. So far price holding above key moving averages. A breakout here is possible, but we expect price will continue to meander sideways.
BITCOIN ETFs
INTEREST RATES
Yields took a breather today after moving up strongly yesterday. Support is holding easily. We expect them to reverse higher shortly.
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 recaptured the prior rising trend and despite a big loss today, it held above the rising bottoms trendline. The RSI is positive and the PMO is surging above the signal line. Stochastics are moving straight up even on a decline today. We expect the yield will continue higher which will put downside pressure on Bonds and stocks in general.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT caught a break today with the 20-year yield tipping over. It was a nice rally, but we expect it will not catch on primarily based on tumbling Stochastics.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar didn't follow up yesterday's rally with higher prices, instead we saw a bearish engulfing candlestick that implies another day of lower prices tomorrow. The indicators look very strong right now so we do expect the rising trend channel to hold up.
Overhead resistance will arrive at the 2023 high around 28.40.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: The inverse correlation held up today as the falling Dollar led to rising Gold prices. Gold is stuck in a sideways trading range below all-time highs. It has really struggled to get it going, but support is holding. Stochastics are not looking good so we aren't expecting much here. The PMO has yet to push past its signal line.
The correlation between Gold and the Dollar has lessened considerably and does suggest that they could travel in tandem moving forward. We see this as an opportunity for Gold to continue to hold support in spite of a bullish Dollar.
GOLD MINERS Golden and Silver Cross Indexes: GDX managed a nice rally today off support at 27.00. This didn't really improve the internals and the PMO has topped beneath the signal line. Stochastics look terrible. Gold's near-term weakness isn't going to help here. The market may start to turn down and that will also be a problem. Until the PMO turns back up, we think this is a very risky group to be involved in.
CRUDE OIL (USO)
IT Trend Model: SELL as of 2/1/2024
LT Trend Model: SELL as of 12/18/2023
USO Daily Chart: Yesterday's comments still apply:
"Crude Oil rallied after a deep decline to end last week. The rally hasn't improved the indicators. The RSI is negative, the PMO declining toward a Crossover SELL Signal and Stochastics falling in negative territory. We see a possibility for a snapback toward the breakdown point, but with the PMO pointed lower, we don't want to get too bullish."
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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