Today the Russell 2000 Index (IWM), the NYSE Composite Index ($NYA), and the Materials Sector (XLB) 20-day EMAs crossed up through their 50-day EMAs (Silver Cross) generating IT Trend Model BUY signals.
The PMO is a bit lethargic on IWM. It is still technically rising, but with the strong pullback from last week it hasn't regained strength. The bounce off the 20/50-day EMAs is good news and the OBV is confirming the short-term rising trend.
In the case of the NYSE, price set a new high unlike IWM. We also have a much more favorable PMO on the NYSE.
Materials were definitely the star performer today, popping and closing above the 200-day EMA. The "silver cross" was already in the works given price stayed so long above both the 20/50-day EMAs. The PMO is rising strongly and participation is steadily improving. Stochastics are above 80 and relative performance has been rising steeply. This was the "Sector to Watch" in the DP Diamonds Recap last Friday.
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 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: SELL as of 9/8/2022
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: Today's follow-through on the November low is excellent. Price not only pushed above the 50-day EMA, it closed above it as well. We still need to keep an eye on the bearish rising wedge that has developed.
The VIX reading rose today which is interesting given the rally today. Clearly investors don't trust the market here. That could work in its favor given sentiment is contrarian. Stochastics turned up and are firmly in positive territory above net neutral (50).
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: New Highs expanded and New Lows contracted as we would expect on a rally day. We still don't like that the 10-DMA of the High-Low Differential is not rising strongly yet.
Climax* Analysis: There were no climax readings today.
*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.
STOs continue to rise and are in neutral territory. There continues to be an expansion in rising momentum among SPX members and the reading is not overbought.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is SOMEWHAT OVERBOUGHT.
The ITBM and ITVM are rising strongly. We saw overbought conditions relieved somewhat on %PMO BUY signals, but overall it's still an overbought reading.
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. Participation is expanding again for stocks above their 20/50-day EMAs.
The intermediate-term bias is BULLISH. We are calling the IT bullish today. The SCI is accelerating upward and we have far more stocks above their 20/50-day EMAs than those with Silver Crosses on their charts (49%).
The long-term bias is NEUTRAL. The GCI had a positive crossover last week and it is still rising. There isn't any hesitation in the GCI as it rises and we have far more stocks above their 50/200-day EMAs than those with golden crosses. The GCI should continue to rise.
CONCLUSION: Nice rally in the market today led by Materials stocks. Participation is expanding and really isn't overbought. All of our indicators are rising and confirming the current rally. Interestingly traders aren't feeling overly bullish based on the VIX seeing higher readings, but that's a positive divergence in our minds. We would look for higher prices to continue. With the election mostly being finished by tomorrow's open, we could see a collective sigh of relief (regardless of the outcome) as investors become less tentative about what the market is going to do with the election. As we noted yesterday, other than tampering with traders' psyches, we don't expect the election will bother the market one way or the other except possibly adding some volatility.
Erin is 50% exposed.
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We noted yesterday that indicators were lukewarm and while they indicated support at the 50-day EMA would hold, we didn't rule out a breakdown. This was not expected. The intraday low was a new 52-week low. Price did manage to close above those lows, but it is now at the bottom of the trading range. Currently it hasn't improved since the close as it is down -0.60% at the time of writing. Remember Bitcoin trades 24/7. Obviously the indicators have taken a nose dive with a new PMO crossover SELL signal. We would expect it to consolidate this deep decline.
Yields took a breather today with nearly all of them topping.
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
We've annotated a symmetrical triangle formation today. A symmetrical triangle is considered a continuation pattern, meaning we should expect the breakout/breakdown to continue the prior trend. That would imply an upside breakout ahead. Indicators are fairly positive, but the PMO is still falling. We expect another trip down to test the bottom of the triangle.
IT Trend Model: BUY as of 6/22/2021
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Yesterday's comments still apply:
"The bearish descending triangle continued to form after last week's failed breakout. The psychology of a descending triangle is bears pulling price lower (declining tops) while bulls keep it together with horizontal support. The expectation is a breakdown below horizontal support as the bears eventually take control. The indicators look terrible so we do expect to see the Dollar to breakdown."
IT Trend Model: NEUTRAL as of 5/3/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Our patience was finally rewarded with a huge breakout move by Gold. Given the Dollar was down only -0.4%, the inverse relationship would state it should only have been up by +0.4%, instead it was up 2.31%! Buyers were scooping it up quickly today.
GOLD Daily Chart: $GOLD broke well above the 50-day EMA and is now about to challenge resistance at the October high. Given the strength of the indicators right now, we believe it will test and overcome that resistance level.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners enjoyed quite a rally today given Gold shot up and the market finished higher. Resistance was overcome at the September/October highs and it is now on to test the August high. The indicators look better than they have in a long time and participation of stocks above their 20/50/200-day EMAs has greatly expanded. The SCI is now above 50% and the PMO is back in positive territory. We would expect a pause now to digest the move, but if Gold continues to shoot skyward, these guys likely will too.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/4/2022
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: USO pulled back and closed the gap from Friday. This tells us to expect more downside. The short-term rising trend is nearing as well as key moving averages. The RSI is positive, the PMO is rising and Stochastics are above 80. There is some deterioration on those indicators, but overall we would look for support to hold at the 50-day EMA.
IT Trend Model: SELLas of 8/19/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds rebounded somewhat as yields fell. It hasn't really improved the chart as the PMO nears a crossover SELL signal well-below the zero line. RSI is negative and Stochastics continue to fall. At this point we would look for the declining tops trendline to hold.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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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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