I'll cover today's upside climax in the section on Climax Indicators. Gold triggered an IT Trend Model "Silver Cross" BUY signal today as the 20-EMA crossed above the 50-EMA. Gold is still holding onto a short-term rising trend. Since breaking above the 200-EMA last week, price has managed to close above it each day. The PMO has now reached above the zero line and is still rising. The RSI is positive. Stochastics could be an issue given they have turned down before reaching above a reading of 80. Overall I remain bullish on Gold.
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MAJOR MARKET INDEXES
Each S&P 500 Index component stock is assigned to one, and only one, of 11 major sectors. This is a snapshot of the Intermediate-Term (Silver Cross) and Long-Term (Golden Cross) Trend Model signal status for those sectors.
RRG® Chart: XLY is the strongest sector as it continues traveling with a bullish northeast heading. XLRE and XLK are in Leading, but not moving much. XLU made a negative turn and is now headed toward Lagging where it will have company with XLC and XLP. XLF looks very interesting as it begins to swing back around toward Leading.
CLICK HERE for an animated version of the RRG chart.
CLICK HERE for Carl's annotated Sector charts.
THE MARKET (S&P 500)
IT Trend Model: BUY as of 10/18/2021
LT Trend Model: BUY as of 6/8/2020
SPY Daily Chart: Yesterday's downside initiation climax didn't resolve as expected today. Instead we have an upside climax day. Total Volume was elevated. The VIX saw a lower reading. Although the VIX is rounding, it remains above its EMA on the inverted scale and that generally means the market has internal strength.
Stochastics were moving lower yesterday but have now reversed. The RSI is positive and not overbought.
Participation: The following chart uses different methodologies for objectively showing the depth and trend of participation for intermediate- and long-term time frames.
- The Silver Cross Index (SCI) shows the percentage of SPX stocks on IT Trend Model BUY signals (20-EMA > 50-EMA).
- The Golden Cross Index (GCI) shows the percentage of SPX stocks on LT Trend Model BUY signals (50-EMA > 200-EMA).
- The Bullish Percent Index (BPI) shows the percentage of SPX stocks on Point & Figure BUY signals.
The SCI paused today and the GCI ticked slightly higher. The SCI is far from being overbought and it is still trending higher which is bullish.
Participation has been in decline despite rising prices. Today we saw an upside reversal which confirms today's upside initiation climax.
Climax Analysis: Let's talk about this climax. NYSE Up/Down Volume Ratio didn't actually reach above 3.0, but the SPX Up/Down Ration did. Combine that with elevated Net A-D and Net A-D Volume and you have a climax day. We are reading this as an upside initiation climax suggesting we will see the market continue to rise and set new all-time highs.
Short-Term Market Indicators: The short-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT.
The STOs are continuing lower which does give me pause, but seeing the improvement in stocks with rising momentum and participation of stocks > 20-EMA, I still look at today as an upside initiation.
Intermediate-Term Market Indicators: The intermediate-term rising market trend is UP and the condition is OVERBOUGHT.
Yesterday the ITBM/ITVM ticked lower, today they have resumed their move higher. %Crossover BUY signals is still moving lower. This is at least taking the indicator out of overbought territory.
Bias Assessment: It occurred to us that one of the ways we can measure market bias is to compare the SCI to the percent of stocks above their 20/50-EMAs. When the percentages are lower than the SCI, the market bias is bearish and if they are higher, it is bullish. Any "mechanical" signal requires additional analysis to confirm the numbers.
Participation readings are higher than the SCI right now which is short-term bullish. Intermediate term, the SCI is trending higher and is not overbought so there is a bullish bias. Long-term is mixed. A reading of 82% for the GCI is bullish, but we do note that %Stocks > 200-EMA is less.
CONCLUSION: Yesterday's downside initiation climax didn't result in a decline. Now we have an upside initiation climax. The fact that the downside climax didn't resolve as expected and it was followed by today's bullish upside initiation climax, we expect the market to continue higher. Bulls are firmly in control. New all-time highs should continue to be printed barring any unsettling news from the Fed or earnings next week. So far over 85% of SPX stocks reporting earnings have beat expectations. That should continue to fuel this market rally.
I'm 85% exposed to the market.
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Yesterday's comments still apply:
"Bitcoin has now executed a bearish head and shoulders pattern. Interestingly, the minimum downside target of the pattern would take price down to support at $52,500. Just remember these are "minimum" downside targets. The PMO triggered a SELL signal today and Stochastics have dropped below net neutral (50). My expectation is a test of that support level."
Long-term rates are beginning to break support and it now appears we have double-tops on the 20/30-year yields.
10-YEAR T-BOND YIELD
The 10-year yield rose today keeping it within the rising trend channel. Longer-term rates are breaking down but $TNX has many levels of support that could prevent it from falling too far too fast. The RSI turned back up but Stochastics are still very bearish.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar dropped today, breaking below horizontal support and the 50-EMA. It did hold onto the rising trendline, but that forms the bottom of a bearish rising wedge and that suggests a breakdown ahead. All of the indicators are in bearish agreement.
IT Trend Model: NEUTRAL as of 6/24/2021
LT Trend Model: SELL as of 8/9/2021
GLD Daily Chart: I discussed $GOLD in the opening. GLD is also looking bullish. The RSI is positive and the PMO is gently rising. Stochastics are bearish, but given the contraction of discounts since October 11th, we know that investors are getting more bullish on Gold. As noted in the opening, I am bullish on Gold.
(Full disclosure: I own GLD as a long-term buy and hold position.)
GOLD Daily Chart: The Silver Cross will hold up unless price breaks below the 50-EMA. Given the rising trend, I believe its going to hold onto that IT BUY signal.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners lost ground as the 200-EMA proved to be too strong as resistance. We do have both the 20/50-EMAs nearby as support. Participation pulled back, but readings are still higher than the SCI reading so there is still a bullish bias. Given Gold is bullish and the market is ready to move higher again, I would expect Gold Miners to reverse back up soon.
CRUDE OIL (USO)
IT Trend Model: BUY as of 9/7/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO technically close higher, but lower highs and lows do put a slight bearish spin on it. Stochastics are falling and the PMO just triggered a crossover SELL signal. I am still expecting the rising trend channel to remain intact, but admittedly I don't like seeing a bearish PMO and Stochastics.
IT Trend Model: NEUTRAL as of 10/1/2021
LT Trend Model: SELL as of 10/21/2021
TLT Daily Chart: Yields rose slightly today which put a damper on the TLT rally. However, in contrast to USO above, TLT set a higher high and higher low despite the decline. The RSI is still positive and the PMO is rising out of an oversold BUY signal. Stochastics are still rising. It does appear the rally will continue in Bonds. As I mentioned yesterday, Bond funds have dominated my Diamond Scans which is bullish.
Long-term overhead resistance is being tested at the January low and February top. Once that resistance level was hit, TLT moved lower. If the PMO and Stochastics are correct, we should see a breakout.
Technical Analysis is a windsock, not a crystal ball.
-- Erin 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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