Today the Technology Sector ETF (XLK) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. While this seems a good rally, we aren't seeing it supported by broad participation. Granted %Stocks > 20/50EMAs are above our bullish 50% threshold, but they are just barely above it. We need to see broader participation in order to fuel the current rally further.
The weekly PMO is decelerating, but ultimately it is declining on a Crossover SELL Signal.
Also today, the Retail Industry Group ETF (XRT) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. This group saw a huge rally today. Participation looks different than on Technology. We can see a steady infusion of stocks moving above key moving averages. While this is an aggressive area of the market, we do admit that this looks quite bullish on today's big gain.
The weekly PMO is still declining on a Crossover SELL Signal and very strong overhead resistance is arriving. A breakout is possible given the daily chart above, but given the weakness we sense in the market, it may not get that far before pulling back.
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/INDUSTRY GROUP/SECTOR INDEXES
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: The market eked out a positive close, but just barely. We have the formation of another bearish filled black candlestick that implies downside tomorrow. Friday's didn't turn out so bad, but we could have easily finished lower today. Total Volume remains very low.
The VIX saw an increase today that was very visible on our inverted scale. This is bringing readings out of overbought territory and suggests investors may finally be getting concerned about the market's ability to get to all-time highs. We do admit that Stochastics look very bullish above 80 and the PMO is rising, but this lack of volume on the rally still has us looking for some decline.
Here is the latest recording from Monday, May 13th:
S&P 500 New 52-Week Highs/Lows: New Highs pulled back but remain fairly elevated. The High-Low Differential is still rising strongly.
Climax* Analysis: There were no climax readings today. We're still operating off the last upside exhaustion climax based on two days of bearish candlesticks.
*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.
The Swenlin Trading Oscillators (STOs) are falling out of overbought territory and suggest a decline is on the way. Participation readings we mostly unchanged as price was unchanged. We have 3/4ths of the index with rising momentum so that could keep the rally going a bit longer, but the decline in indicators overrides this.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
It takes longer for the IT indicators to reverse. They continue higher even as STOs move lower. PMO BUY Signals are expanding greatly, but they are reading at near-term overbought levels. Today %PMO Xover BUY Signals did tip downward.
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.
Both the Silver and Golden Cross Indexes have moved above their signal lines so we now have a Bullish Bias in the intermediate and long terms. We have a large number of stocks above key moving averages (we'd still like to see more), above our 50% bullish threshold so we are keeping the short-term bias 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.
**************************************************************************************
CONCLUSION: The market was essentially unchanged today. Last week's upside exhaustion climaxes led into two bearish filled black candlesticks. Total Volume is well below the annual average on this rally. The VIX saw an increase as investors worry about inflation gauges released this week. STOs turned down last week and continue lower. This doesn't feel like a market clicking its way to new all-time highs. It comes across as a market beginning to exhale. Proceed with caution and stops.
Erin is 40% long, 0% short.
**************************************************************************************
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact support@decisionpoint.com for more information!
BITCOIN
We have a declining trend channel, but price is already tapping at the top of the channel again. The overall pattern implies more downside, but the RSI is now positive and the PMO is again rising toward a Crossover BUY Signal. Stochastics have also tipped upward. We think Bitcoin has a chance of a breakout here.
BITCOIN ETFs
INTEREST RATES
Yields were mixed today. They remain in rising trends, but those trends are vulnerable. With rate cuts being pushed back further, these rising trends could remain intact.
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 10-year yield is at an inflection or decision point. The rising trend channel suggests more upside for yields, but the falling PMO suggests otherwise. The fact that it hasn't broken down yet, leads us to believe there is a good chance it won't break down here. Stochastics are angling upward after all.
BONDS (TLT)
IT Trend Model: SELL as of 3/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The 20-year yield hasn't done much and neither has TLT of late. It does look like a petite bull flag formation that would imply more upside, but that will be dependent on whether the 20-year yield breaks down here. $TNX looks like it could reverse higher, so we have to believe the 20-year yield will do the same. That will bring Bond prices lower.
The declining trend looks sturdy.
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 floating within a rising trend channel. It is due to test the bottom of the channel. It appears that will happen likely with a gradual decline lower. Stochastics look particularly bearish so we aren't looking for a solid rebound yet.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold fulfilled the bearish filled black candlestick with a decline today. We still like Gold on its breakout from the bullish falling wedge. Investors are beginning to get more bullish on Gold as discounts are shrinking again.
Stochastics tell us to look for more rally as they have now moved above 80. On this longer-term daily chart it appears this could be a bull flag setup.
GOLD MINERS (GDX): We're looking for more rally out of Gold and that will help Gold Miners. Gold's decline did not help them today. We still see a nice rising trend and participation of stocks above key moving averages is incredibly strong so for now we do expect Gold Miners to rally again soon.
CRUDE OIL (USO)
IT Trend Model: BUY as of 2/12/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: Crude is beginning to reverse off the 200-day EMA. The rising trend is intact and this does look like it could be setting up a small cup shaped bottom. Indicators aren't on board yet as the PMO has dipped into negative territory and Stochastics are flat. We wouldn't bank on an upside reversal, but it does look very interesting right now.
This is actually a fairly strong level of support when we look back so this is a good place to see a reversal. Indicators just aren't ripe enough to call it yet.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
(c) Copyright 2024 DecisionPoint.com
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.
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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)