Today the Regional Banking ETF (KRE) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. Participation has fallen like a rock when you look at %Stocks > 20/50EMAs. The Silver Cross Index has had a Bearish Shift across the signal line and the Golden Cross Index has been falling for some time. While the Financial sector looks very bullish, this industry group should be avoided.
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: With the exception of GOOGL and AMZN, the Mag7 stocks were down on the day with NVDA down more than 1%. This weighed heavy on the cap-weighted SPY. The PMO remains on a Crossover SELL Signal, but it is flat and strong above the zero line. The RSI is managing to avoid overbought territory.
The bearish rising wedge continues to develop. It suggests the rising trend will be broken. The pattern is getting a bit stale as it is nearing the apex and could 'drift' out of the pattern rather than breaking down from it. The VIX is above its moving average on the inverted scale and Stochastics are camped out above 80. Both suggest internal strength.
Here is the latest recording from 3/11:
S&P 500 New 52-Week Highs/Lows: New Highs did expand on today's decline, but they remain in a negative divergence with price tops. The 10-DMA of the High-Low Differential continues lower out of overbought territory.
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) reversed lower. They continue to twitch back and forth so we can't read too much into them right now. We will say that they have formed quite a negative divergence with price. Participation remains robust at 80.2%. We do need to see more rising PMOs, the lack of them tells us the market may be ready to slow the advance.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT.
While we have a negative divergence with price on both the ITBM and ITVM, they are rising strongly suggesting any decline ahead will likely be reserved for the short term with little bleeding into the intermediate term. We have a lack of PMO BUY Signals that needs to be overcome if we want to see this rally maintain.
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 still have negative divergences, but participation has expanded overall. With such high readings, the short-term bias is BULLISH. The Silver Cross Index is rising strongly and is above its signal line so the intermediate-term bias is also BULLISH. The Golden Cross Index is beginning to pick up speed above its signal line giving us a BULLISH LT 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: It's getting hard to identify problems in this strong rally. Participation is very robust and could hold this rally up. We do see problems as far as the PMO. The SPY's PMO is on a SELL Signal but looks good as it is flat above the zero line. The issue is the lack of rising PMOs and PMO BUY Signals. This will be the first place to show signs of distress. Readings are above 50%, but they should be much higher given this rally. If the rally is confined to mega-caps, the index will suffer when they see weakness. Rising interest rates are not helping. We don't know when the negative divergences will come home to roost and lead to a real decline, but we should be cautious. Stops are our best protection and offer us the opportunity for the market to take us out rather than having to sell.
Erin is 75% long, 0% short.
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BITCOIN
Bitcoin is marching higher and we don't see any issues at all on its chart. Well, the overbought RSI is a problem, or is it? Bitcoin doesn't mind overbought conditions and has been ignoring them since this rally got going. The PMO is accelerating higher and Stochastics are well above 80.
BITCOIN ETFs
INTEREST RATES
Yields are looking bullish again and it suggests we will not see support tested this time around. We will see downside pressure being applied to Bond funds. This could also put a damper on the rally.
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 avoided a Dark Cross of the 20/50-day EMAs as it vaulted over both of them. The RSI has now reentered positive territory and the PMO is bottoming. Stochastics look very bullish. We are likely back in a rising rate environment.
BONDS (TLT)
IT Trend Model: BUY as of 3/6/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday's comments still apply:
"Yields are making the turn and you can see this in the 20-year yield in the last indicator window. We would look for a test at around 92. The PMO is still rising but has decelerated. The RSI is in decline and Stochastics just dropped below 80."
The double bottom hasn't been busted yet, that would take a move below 92. Still this looks like a meaningful top.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: We may be seeing a reverse flag on the Dollar chart that would imply more decline ahead. Even with the rally the past three days prior, indicators haven't really improved. If this is a bear flag, the minimum downside target would take price to 27.30.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold is already resuming its rally and the Dollar could be setting up for a big decline. We thought we'd see Gold make its way down a bit further, but it is too bullish right now. The big problem we see is the overbought RSI. A little consolidation would go a long way in fixing that problem, but given Stochastics just turned up again and the PMO is rising strongly, we may not see much decline.
The inverse correlation is strong with the Dollar so further decline on the Dollar will definitely benefit Gold. Even so, we have rising relative strength against the Dollar that implies more upside on its own.
GOLD MINERS Golden and Silver Cross Indexes: GDX took advantage of the rally in Gold and shot higher. We had hoped we would see a bit more decline to make an entry here interesting, but no such luck. We still believe they have higher to go, it's just unfortunate that we've already seen so much rally. Participation is very strong and the Silver Cross Index looks particularly bullish. We saw a "Silver Cross" on GDX yesterday which sets the stage for even higher prices.
CRUDE OIL (USO)
IT Trend Model: BUY as of 2/12/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: We saw a strong rally in Crude Oil suggesting that we have gotten as much 'handle' as we are going to get on this cup. The PMO is rising and the RSI can accommodate far more upside before getting overbought. Stochastics are rising again. Today saw quite a few Crude Oil and Energy ETFs arrive in Erin's Diamond Scans.
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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