In his speech today, Fed Chairman Powell indicated that the next rate increase should be smaller than what we have had. It was not clear if it would be smaller than the 50 basis point increase market has been anticipating for this month, or smaller than 75 basis points, which would be 50 basis points. At any rate the market celebrated with a strong rally -- SPY up over 3.5% from today's low.
The Dow Jones Industrial Average stood out today as it has rallied over +20% from its bear market low, making it a new bull market for that index. The S&P 500/400/600 and NYSE Composite Indexes are up about +17%. The Nasdaq 100 is up +13%.
The Nasdaq 100 (QQQ) and the Real Estate Sector (XLRE) 20-day EMAs crossed up through the 50-day EMAs (Silver Cross), generating IT Trend Model BUY Signals. In both cases the PMO is accelerating higher.
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 StockCharts TV's YouTube channel here!
MAJOR MARKET INDEXES
SECTORS
Each S&P 500 Index component stock is assigned to 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.
CLICK HERE for Carl's annotated Sector charts.
THE MARKET (S&P 500)
IT Trend Model: BUY as of 11/15/2022
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: The small double-top formation within the bearish rising wedge was obliterated by today's strong rally. But as noted, price is still in a bearish chart pattern.
The VIX spiked today but remained beneath the upper Bollinger Band on our inverted scale. A puncture would've suggested a down day ahead. Stochastics are oscillating above 80 implying internal strength as well.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: As we would expect, we have an expansion in New Highs. New Lows continue to be negligible. The negative divergence is still in force with New Highs. We will need to get a higher reading than the October high in order to clear that divergence.
Climax* Analysis: Today there were strong and unanimous climax readings, and SPX Total Volume was at blowoff levels. But was today a blowoff? We think not. The market has been consolidating for three weeks, and today was a breakout. That doesn't mean the market can't suddenly reverse downward, but a blowoff top would be a day like today happening at the end of a steady advance. That is so not what we have here. This was clearly an upside initiation climax.
*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 STO-B was unimpressed with today's strong rally as it continued lower. Definitely not what we want to see right now. The STO-V did inch a bit higher. We saw a remarkable improvement in rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
IT indicators reversed direction today but remain highly overbought. We did lose 1% of PMO BUY signals in spite of the improvement in rising momentum among components.
PARTICIPATION and BIAS Assessment: 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 short-term bias is BULLISH but overbought.
The intermediate-term bias switched back to BULLISH as the SCI accelerated higher and there are still more stocks above their 20/50-day EMAs than those with silver crosses.
The long-term bias is BULLISH. Based on the rising GCI and higher percentages of stocks above their 50/200-day EMAs, we have to label the bias as bullish long term.
CONCLUSION: We expected consolidation at best yesterday and were definitely surprised by the voracity of today's rally. The rally was punctuated by an upside initiation climax. That suggests we should see a day or two of higher prices. Indicators are a bit mixed as short-term indicators are sluggish while IT indicators are rising strongly. The market isn't immune to a big decline based on the bearish rising wedge, but overall, we would expect to see some follow-through the rest of the week. Be sure to read Carl's article on StockCharts.com here. He suggests a context for the Dow's bull market.
Erin is exposed 10%.
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
Bitcoin enjoyed a strong rally and broke from its declining trend. It had been forming a bearish descending triangle (flat bottom, declining tops) but this breakout took that pattern out. We see Bitcoin likely staying within this new trading range, but we cannot discount the new PMO crossover BUY signal today sitting alongside strongly rising Stochastics. More than likely this rally will fail, but we think it may eke out some more upside before that happens.
INTEREST RATES
Yields dropped on the day overall.
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 declined heavily, but support is holding easily. It is holding above a strong support zone between 3.6 and 3.7%. Stochastics did turn up, but the PMO has now declined below the zero line. We expect to see more consolidation above the support zone.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar's rally failed today, but support held easily. Indicators are very flat and the RSI is negative and falling. This suggests to us that the Dollar should hold support above the 200-day EMA, but it is more vulnerable than usual for a breakdown, at least until we see indicators rising again.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: It appeared that GLD had broken its short-term rising trend yesterday. However, Monday's decline set up a new price bottom and that has established a slightly less steep rising trendline. The PMO is beginning to bottom above its signal line which is especially bullish. While the PMO appears overbought, it actually isn't. The range is typically between -2 and +2. The current reading is 1.32.
GOLD Daily Chart: $GOLD looks like it is beginning to break from a bullish flag formation, but given today's decline on the continuous contract, the PMO is topping. Stochastics are falling as well. Discounts are paring back a bit, but traders overall are bearish on Gold. With the Dollar stalling, this is Gold's chance to really break out. The problem is indicators aren't confirming this.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners rallied strongly with the rest of the market. Today's rally was a breakout move, pushing GDX to price levels not seen since last summer. Indicators remain strong, but the SCI is getting ready to see a negative crossover. Enjoy the ride, but be prepared to make your way to the exits should the SCI fail. Based on participation of stocks > 20/50-day EMAs being higher than the SCI, it should be able to move higher.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/21/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Crude Oil joined in on today's rally. We now have what could be a short-term double-bottom pattern. It's a small pattern so the upside target would be at overhead resistance at the October top. More than likely Oil will continue to move within the trading range established this summer between $67 and $78.
BONDS (TLT)
IT Trend Model: SELL as of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT formed a bullish engulfing candlestick as the 20-year yield pulled back today. Support is holding above $100, but an FOMC rate hike will likely rain on the Bonds parade. For now indicators are very positive so for now we'd look for a rally continuation.
Notice that this top has kept the long-term declining trend alive. We'd be careful with Bonds.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
(c) Copyright 2022 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.
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)
Swenlin Trading Oscillators (STO-B and STO-V)
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. 27