$GOLD saw a "golden cross" of the 50/200-EMAs yesterday and today GLD (which we use for our signals) triggered the same LT Trend Model "Golden Cross" BUY signal. I'll fill you in on the implications in the section on Gold.
Today it was all about Cyclicals (XLY) which had the best day among the sectors, far outpacing them as XLY was up +1.58% and the next best performer, Technology (XLK) was up +1.05%. The PMO isn't optimal, but the clear bull flag sets this sector up well as retailers begin to report earnings. The RSI is positive and the SCI has turned back up. Participation numbers are still strong with %Stocks > 20/50-EMAs holding a slight lead on the SCI giving us a somewhat bullish bias moving forward.
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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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 may look great on the RRG, but if it begins to hook back toward Leading that will be a sign of more upside to come. XLK hasn't been up to much, but it is still firmly planted in Leading. XLV and XLRE have the worst configuration with all others starting to travel north to northeast which is bullish.
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: The SPY continues to trickle higher and will be testing all-time highs yet again. It's shocking to note that since the mid-October bottom, we've only seen FOUR down days. Total Volume was higher but still well-below the annual average.
The RSI has just entered overbought territory above 70 which can be dangerous. However, the PMO is turning back up forming a bottom above the signal line that is especially bullish. Stochastics are positive and rising. I talked about a possible bull flag last Friday in the DecisionPoint Diamond Mine trading room (Diamond subscriber-only), but have hesitated to annotate it. It's time. This pattern could indicate that not only will we see new all-time highs, but we could see this rally move the SPY up another $30.
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 SCI is still rising and is far from being overbought. However, the GCI is beginning to pick up speed as it declines suggesting the long-term foundation may be cracking ever so slightly.
S&P 500 New 52-Week Highs/Lows: New Highs expanded again today but are in near-term overbought territory. I do like seeing the 10-DMA of the High-Low Differential rising again as that generally means higher prices.
Climax* Analysis: Today was not a climax day. The VIX closed above its EMA on the inverted scale which is positive. The Bollinger Bands are tightly squeezed together. Typically an expansion is due to high volatility while price moves lower, but in an unusual move, in late October the Bands expanded on the beginning of this current rally. Still, a penetration of the Upper Bollinger Band usually leads to lower prices. I don't like the higher Down/Up Volume Ratios on a strong rally, but overall the market still looks healthy.
*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 either initiation or exhaustion.
Short-Term Market Indicators: The short-term market trend is UP and the condition is NEUTRAL.
Today STO-V reversed and is now moving higher alongside the STO-B. We've had mixed signals from these indicators, so I'm happy to see they are now rising in concert. I would've liked to have seen an expansion in stocks with rising momentum rather than a decline.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Unfortunately, the ITBM and ITVM are still traveling in different directions. I'm not too concerned given we did see an increase in PMO BUY signals within the SPX.
Bias Assessment: Yesterday's comments still apply:
"We now have a short-term neutral to bearish bias given there are fewer stocks above their 20-EMA than the SCI (bearish) and about the same amount above the 50-EMA (neutral). The SCI reading is at a 72% reading giving us a bullish bias in the intermediate term and the GCI is sitting at a bullish 82% giving us a bullish bias in the long term as well."
CONCLUSION: I had expected to see consolidation this week but with strong earnings continuing, momentum is picking back up. The STOs are rising together suggesting we could continue to see higher prices. We also have a bull flag that has been confirmed which suggests higher prices ahead. However, the elevated Down/Up Volume Ratios and falling %PMOs Rising do tell us weakness is still there. I am still looking for price to consolidate sideways which would mean a down day or two, but overall the short-term rising trend should remain intact.
I am 75% exposed to the market with 25% being in cash and readily available to trade.
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Yesterday I noted the negative indicators on Bitcoin and while it was still holding a rising trend, it was poised to move lower which it has. I had figured we'd see a test of $60,000 but currently is trading lower. Now we are at support at the $57,500 level (October low) and the 50-EMA. While this could be an excellent pivot point, the indicators remain very negative. I favor support holding, but price moving sideways in choppy Bitcoin fashion.
Yields have broken their declining trends and are beginning to rise again leaving Bonds with a bearish bias.
10-YEAR T-BOND YIELD
The 10-year yield continues to rally higher. With indicators so favorable, I don't believe it will struggle breaking above resistance at the October high.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: UUP continued to rally strongly after breaking out above the bearish rising wedge. The RSI is now overbought and typically that is a sticking point. However, the PMO and Stochastics are still quite positive so I expect UUP to continue a bit higher before breaking down.
IT Trend Model: BUY as of 10/28/2021
LT Trend Model: BUY as of 11/16/2021
GLD Daily Chart: Today GLD saw a LT Trend Model "Golden Cross" BUY signal. The long-term bias for Gold is now bullish. Despite a deep decline today, the PMO is still rising and Stochastics remain steady. The RSI is no longer overbought. We could see a test of the July-September tops soon with the Dollar looking so bullish.
(Full Disclosure: I own GLD as a "buy and hold" position.)
GOLD Daily Chart: $GOLD has a flag formation, but it is a rising flag and those generally don't pan out as expected so I haven't annotated it. Ultimately I'm looking for a test of $1920, but we may need to test support first.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners may see some downward pressure if Gold decides to test support. This will likely lead to GDX testing a similar support level. Participation remains strong and the PMO is still rising. This consolidation has relieved overbought conditions on the RSI which is positive.
CRUDE OIL (USO)
IT Trend Model: BUY as of 9/3/2021
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: I was considering a bearish double-top on Crude Oil, but Carl is in favor of a possible bull flag. I had annotated one last week, but when the breakout failed I began to look at more bearish conclusions. Seeing Stochastics slowing and the RSI back in positive territory, I think the flag should be considered.
It's most visible on the 1-year daily chart. If support is lost at the 50-EMA in a meaningful way, then the pattern will bust. USO still has some leeway given its distance from the 50-EMA.
IT Trend Model: BUY as of 11/8/2021
LT Trend Model: BUY as of 11/4/2021
TLT Daily Chart: Yesterday's comments still apply:
"It's no surprise to see TLT dropping like a rock given the rally in yields. That rally doesn't look like it is over so TLT will likely continue its decline. It is on short-term support, but after closing below all three key moving averages, I expect it to continue lower. The RSI, PMO and Stochastics are confirming the decline." Next support level is $141.
Technical Analysis is a windsock, not a crystal ball.
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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.
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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