Today the Nasdaq Composite ETF (ONEQ) and Nasdaq 100 ETF (QQQ) 20-day EMAs crossed up through the 50-day EMAs (Silver Cross), generating IT Trend Model BUY Signals. Both show breakouts from bullish falling wedges with bounces off key moving averages (20/50-day EMAs). Price Momentum Oscillators (PMOs) are both rising and have made their way above the zero line. This looks quite bullish.
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 12/28/2022
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: Price is now fighting with overhead resistance at 400. This breakout from the symmetrical triangle is good, but a breakout above 400 would have us more confidently bullish.
Price is so far staying above the long-term declining tops trendline (basically the bear market declining trend). Stochastics are positive above net neutral (50). The PMO is still rising and isn't overbought. The VIX is oscillating above its moving average on the inverted scale and that does imply internal strength. Total Volume was relatively low on the decline and we think that is a positive.
Here is the latest recording from Monday (1/23):
S&P 500 New 52-Week Highs/Lows: New Highs expanded substantially today, even though yesterday's highs were not exceeded, which is a bearish reverse divergence. We would've expected price to rise on such a bullish reading for New Highs.
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 in spite of today's decline. We did see a few stocks lose rising momentum, but a 61% reading is good.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT.
The ITBM/ITVM are rising in concert with the STOs which is bullish. We also like seeing more PMO BUY signals on a decline.
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.
The intermediate-term bias is BULLISH.
The long-term bias is BULLISH.
Yesterday's comments still apply:
"This second day of rally has pushed all timeframes into bullish biases. We have a solid amount of stocks above both their 20/50-day EMAs and the SCI has bottomed above the signal line. There are more stocks above their 50/200-day EMAs than those with Golden Crosses (50-day EMA > 200-day EMA). This means the already rising Golden Cross Index will likely continue higher."
CONCLUSION: Growth areas of the market lost some ground today, but the ONEQ and QQQ look good based on our opening charts. Although the market was down, it was on low Total Volume so the selling was not intense. We are bullish, but cautiously so. We don't like the reverse divergence we detected on New Highs today. However, if we trust our STOs and Silver Cross Index, the rally should continue after some digestion. Exposure expansion should be done carefully, if at all. Hard stops are a must in this market.
Calendar: There is an FOMC meeting next week with the announcement on Wednesday. The Fed is expected to raise rates again, but by only 25 basis points this time.
Erin is 15% exposed.
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Yesterday's comments still apply:
"Bitcoin has managed to overcome long-term overhead resistance at 22,500. Next up is 25,000. Bitcoin is extraordinarily overbought. Our thought was that price would recapture the September/October trading range. We didn't expect it to overcome it. The RSI is terribly overbought, as is the PMO. Stochastics are flashing internal strength as they oscillate comfortably above 80. We could be looking at a pennant with flagpole developing. One thing we know for sure, is this is a parabolic rise. Don't forget that when a parabolic rally fails, it fails spectacularly. Knowing the history of Bitcoin, that is not at all out of the question. The pattern would call for a decline down to the prior basing pattern, that would be the November/December price range."
Yields are about to break declining trends, suggesting we could see another test of 2022 highs.
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 fell today but remains comfortably above support and the intermediate-term rising bottoms trendline. We consider this a symmetrical triangle. These are continuation patterns which implies an upside breakout given the prior trend was up. The PMO is trying to turn up, but the RSI is still very weak. Stochastics are rising, but have quite a bit of ground to cover before we would consider them bullish. We believe this support level will hold and an upside breakout will occur.
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: Yesterday's comments still apply:
"The Dollar is in consolidation mode, basically doing nothing. This has caused the PMO to flatten. We don't see any internal strength building given Stochastics are moving lower below 20 and the RSI is well within negative territory below net neutral (50). We expect a breakdown out of this consolidation zone."
We'd been watching the fate of the bullish falling wedge, but with the low on this consolidation zone, we now have a solid declining trend channel.
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Yesterday's comments still apply:
"The Dollar's weakness is Gold's strength simply based on their near-perfect reverse correlation. However, you'll note that Gold is exhibiting strength against the Dollar as well. Now we are able to see a rising trend channel. We are bullish on Gold, but it could see a test of the bottom of the rising trend channel on its way higher. The RSI and PMO both tell us that Gold is overbought so a small decline would help."
GOLD Daily Chart: $GVZ is back below its moving average on the inverted scale. This implies internal weakness, but all of the other indicators don't agree, so we will go with the indicator majority and look for the rising trend to continue. It is due for a pullback as the RSI is very overbought. Notice that currently the negative correlation is very strong, so a Dollar rally will weigh heavy. Fortunately the Dollar looks very weak.
GOLD MINERS Golden and Silver Cross Indexes: Miners resumed their ascent and nearly broke above strong overhead resistance. We see absolutely no weakness on this chart, except for the overbought flat PMO. It is still on a BUY signal so for now we aren't worried--not with 96.5% of stocks holding above their 20/50/200-day EMAs.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/23/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: USO broke its short-term rising bottoms trendline today. It was a somewhat steep rally so we aren't completely surprised. However, this top at resistance is worrisome. Price did hold above the 200-day EMA and yesterday's IT Trend Model "Silver Cross" BUY signal does suggest price will breakout, it may just need a test of the 20/50-day EMAs first.
Today's decline put price back beneath the long-term declining tops trendline. $OVX remains above its moving average on the inverted scale, implying internal strength.
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Today's drop in the 20-year yield pushed TLT back up. This bounce occurred on two levels of support--mid-December low and 20-day EMA. The PMO bottomed above its signal line. The RSI is positive. Unfortunately Stochastics are still flashing internal weakness as they decline. Ultimately we expect a breakdown for TLT, but it is currently holding its own.
Currently there is a symmetrical triangle. These are continuation patterns. Unfortunately the prior trend was down when this triangle formed so the expectation is a breakdown. Maybe it will limp along above the 20-day EMA, but eventually we see it breaking down before it breaks out here.
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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