Energy (XLE) has been rallying strongly and we don't think it is done. We apologize for the eye test below, but it shows you all the sectors at a glance. We want you to get a sense of where PMOs are and where they appear to be going. Nearly every PMO is in decline, including defensive Consumer Staples (XLP). Utilities (XLU) have a rising PMO, but they are topping out.
All of the sectors look rather toppy. But just like in Sesame Street, "one of these things is not like the other...". Energy (XLE) is the clear winner, but it goes farther than just a rising PMO.
The participation under the hood is fantastic. We have readings above 90%! The Silver Cross Index is rising strongly and the Golden Cross Index is back above its signal line giving us a BULLISH LT Bias. The only problem is the overbought RSI. However, we believe it is going to get even more overbought as money rotates out of the other sectors and into this winning sector.
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.
Watch the latest episode of DecisionPoint on our YouTube channel here!
MARKET/SPX SECTOR/INDUSTRY GROUP INDEXES
Change Today: 
Change for the Week:
CLICK HERE for Carl's annotated Market Index, Sector, and Industry Group charts.
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 was the last trading day before options expiration which would account for the huge amount of Total Volume on the day. This decline doesn't look particularly dangerous, but we think this time will be different. Read on.
Price is now hugging the bottom of a bearish rising wedge and is very close to dropping beneath. The PMO is still in decline. Today the VIX penetrated the lower Bollinger Band on the inverted scale and this will typically lead to a snapback. However, we wouldn't get too excited, Stochastics are now falling vertically. It's their lowest reading since January.
Here is the latest recording from 3/11:
SPY Weekly Chart: The rising trend on the weekly chart is intact still, but it is very steep and begs for a pullback to soften the rise. Price is very overbought in the intermediate term based on the weekly RSI. The weekly PMO is still rising, but we are beginning to detect a slight deceleration. It will take a more concerted decline to get it to top.
New 52-Week Highs/Lows: Surprisingly we didn't see any New Lows, but we did see New Highs pare back. The negative divergence on New Highs hasn't cleared. The 10-DMA of the High-Low Differential is picking up speed to the downside. Another bearish sign.
Climax Analysis: There were no climax readings today. The SPX Total Volume spike had to do with options expiration. Yesterday's downside initiation climax told us to look for more downside today, but we were skeptical because six of the prior seven downside initiation climaxes failed to deliver on that expectation. Today it delivered, suggesting more downside could be ahead.
*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.
The Swenlin Trading Oscillators (STOs) dropped precipitously yesterday and continued their fall with the STO-V actually hitting negative territory. We've lost a significant amount of stocks above their 20-day EMA this week and a large amount of rising PMOs. One thing that could be looked at somewhat positively is that STOs are in oversold territory, at least in the near term.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Yesterday the ITBM and ITVM both moved lower for the first time in weeks. This underscored the deep decline in the STOs. We are seeing more PMO BUY Signals fall by the wayside as rising PMOs disappear. The indicator has dropped beneath its signal line. The negative divergences have all been sealed in on their tops. This is also different from prior declines where we had a foundation of PMO BUY Signals; we don't have that now.
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PARTICIPATION: The following tables summarize participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation. There are three groups: Major Market Indexes, Miscellaneous Industry Groups, and the 11 S&P 500 Sectors.
Energy (XLE) has been rallying strongly as we noted in the opening and this resurgence has caused it to have the highest IT Bias.
On the low end of the scale is Regional Banks (KRE) which discussed the past two days. We know the internals are terrible for this group and participation is clearly reflecting this.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
The biggest gainer was Gold Miners (GDX) which saw the greatest increase to its SCI value. The group has been on fire so it is no surprise it is reflected here.
Biotechs (IBB) lost the most Silver Crosses this week, but it did manage to expand the GCI. The group could be showing signs of weakness in the near term.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
Financials (XLF) and Semiconductors (SMH) hold the top spots on the GCI table and they aren't showing signs of strain. XLF managed to expand its SCI.
Regional Banks (KRE) lost the most GCI points this week and it is no surprise given the weakness in the group.
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.
Participation is still strong enough to look at the market as bullish in all three timeframes. We will say that the short-term bias is deteriorating given the drop on %Stocks > 20/50EMAs. The IT Bias is BULLISH as the SCI is above its signal line. Note that it is looking toppy and given lower percentages of %Stocks > 20/50EMAs, it will likely top again soon. The LT Bias is BULLISH as 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: We sense that this decline will be different than the previous stumbles. Negative divergences set the stage and declining indicators make them dangerous. Internal momentum has been breaking down this week. Now we have a large loss of stocks above their 20EMAs. Yesterday's downside initiation climax fulfilled with a decline today. We have numerous bearish indications that suggest to us that we will see follow through on this decline. We can't speak to the severity at this point given prior declines have been so mild, but we can say that caution is warranted. It may be a good time to tighten up stops and shore up any weak positions.
Calendar: The Fed makes their interest rate announcement on Wednesday. The expectation is that there will be no change.
Erin is 70% long, 0% short.
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BITCOIN
Bitcoin Daily Chart: Bitcoin is cooling off and the past two declines have moved the RSI out of overbought territory. The PMO has now topped and Stochastics are falling. This is a bearish set up that suggests this pullback isn't quite over.
Bitcoin Weekly Chart: Bitcoin continues to make new all-time highs and we don't think it is done. This rally is vertical and begs for a big breakdown. However, we aren't so sure we'll see a giant decline due to "halving" which will add to the scarcity of Bitcoin which would lead to higher prices still. The weekly PMO could accommodate far more upside before getting overbought.
BITCOIN ETFs
Today:
This Week:
INTEREST RATES
We are in a rising rate environment again and we suspect they will continue to keep on rising. The ceiling would arrive when the prior highs are challenged.
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 had a strong week. Overhead resistance is arriving soon, but the indicators look very bullish and suggest they will break out here. The RSI is positive and not overbought. The PMO is nearing a Crossover BUY Signal and Stochastics are almost above 80.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount, which shuts many buyers out of the market, and potential sellers will experience pressure to lower prices (to no effect so far).
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This week the 30-Year Fixed Rate changed from 6.88 to 6.74.
Here is a 50-year chart for better perspective.
BONDS (TLT)
IT Trend Model: BUY as of 3/6/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Now that the 20-year yield is on the rise, TLT is feeling the gravity as it moves lower toward support. We have a new PMO Crossover SELL Signal and Stochastics look terrible. We don't think this support level will hold. Look for a possible move toward 90.00.
TLT Weekly Chart: TLT is in a declining trend after breaking out of the bullish falling wedge. It's hard to see, but the weekly PMO has topped beneath the zero line which is especially bearish.
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 is back on the move. It did form a bearish filled black candlestick today but this rising trend looks pretty good. The PMO isn't reacting much to the rally though. We'd like to see a Crossover BUY Signal soon if the rally is going to continue. Stochastics do suggest there is more upside to go for the Dollar.
UUP Weekly Chart: The daily chart may have bullish implications, but the weekly chart suggests there may be problems in the intermediate term. The weekly PMO crossed below its signal line for a SELL Signal and we have what could be a bearish double top setting up.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: We are going to include the article that Carl wrote on Gold today in this section.
This month, the SPDR Gold Shares (GLD) broke out to new, all-time highs. That was a significant long-term move, which we will discuss when we get to the monthly chart.
Of more immediate interest is the fact that sentiment is still bearish, which bodes well for a continued advance. We gauge sentiment based upon whether closed-end fund Sprott Physical Gold Trust (PHYS) is selling at a premium (bullish sentiment) or discount (bearish sentiment). Currently, PHYS is selling at a discount to NAV.
The weekly chart gives a better perspective of the significance of the breakout, which was decisive. The overhead resistance has held GLD back for more than three years, and has now become support.
But the monthly chart shows that it has been a much longer wait than three years. Gold made all-time highs back in 2011, following which it declined nearly fifty percent. It finally recovered to new, all-time highs in 2020, but it has been stalled until this month. Practically speaking, gold investors have been waiting about 13 years for this encouraging move. The positive side is that gold has established a solid high-level base at around 2,000 to provide future support. Also note how bullish sentiment got (a premium of about +14%) during the parabolic advance on the left side of the chart.
Investing in gold presents some difficulties that must be considered. (Disclaimer: This is information, not a recommendation.) If you buy physical gold, you have to have a safe place to store it. A safe deposit box can be accessed/frozen by the government, and an adequate safe is expensive, difficult to move, and entails some vulnerability. Some ETFs, like GLD, do not actually own physical gold. An alternative is iShares Gold Trust (IAU), which is a closed-end fund that owns physical gold. Sprott Physical Gold Trust (PHYS) is similar to IAU, but it is a foreign entity based in Canada. Consider the implications of all options available.
Conclusion: Gold's recent breakout was a long time coming and appears to have positive long-term implications. Also, the long period of consolidation has created an impressive base of long-term support.
GOLD MINERS Golden and Silver Cross Indexes: Miners are starting to round off as Gold is in the midst of a pullback. That condition will likely be temporary as we see potential in the longer term for Gold to continue to rally. We also have very strong participation which tells us this may just be a decompression period. We would be prepared for consolidation.
CRUDE OIL (USO)
IT Trend Model: BUY as of 2/12/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: After forming a cup with handle bullish formation, Crude is now rallying as the pattern suggests. We see this is one of the few bright spots in the market right now. We think that rotation will continue to favor Crude.
The PMO is back on the rise and Stochastics look very strong. The RSI tells us that Crude is not overbought yet.
USO/$WTIC Weekly Chart: It may finally be time for an upside breakout. There is a large symmetrical triangle on the chart. That is a continuation pattern that tells us to look for a breakout or breakdown based on the prior trend. The prior trend was clearly up so an upside breakout is expected. The weekly PMO confirms this outlook on its Crossover BUY Signal.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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