Today brought another batch of BUY Signals as the S&P 500 (SPY) and Communications Sector (XLC) 20-day EMAs crossed up through their 50-day EMAs (Silver Cross), generating new IT Trend Model BUY Signals. Also, the S&P 400 Mid-Cap (MDY) 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating an LT Trend Model "Golden Cross" BUY Signal.
It has been three weeks since the last signal change for the SPY, and the EMAs are quite close and vulnerable to another whipsaw. That said, SPY only needs to exceed the December price top to establish a new rising trend.
The same comments as we had for SPY above apply to MDY, except that all three EMAs are very close together and vulnerable to whipsaw.
The potential trend change for the Communications Sector (XLC) is being blocked by a persistent level of support and resistance at about 52.90.
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
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: The rally saw continuation. One more day of rally on heavy volume and we will have a follow-through day that would imply the rally would continue. However, today's small filled black candlestick could be a harbinger of a pause or even pullback ahead.
Indicators remain positive with the RSI moving higher in positive territory above net neutral (50), the PMO rising on a BUY signal and in positive territory and Stochastics above 80. However, we have another problem. The VIX extended well-above the upper Bollinger Band on the inverted scale and that typically means a downside reversal ahead.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: The negative divergence between New Highs and price persists.
Climax* Analysis: Only SPX Net A-D Volume and NYSE UP/DOWN Volume Ratio indicators had climax readings today (two out of four), so we won't rate this as a climax day. This was a close call, so thinking of it as another upside exhaustion climax wouldn't be out of line. In any case it goes in the exhaustion column anyway.
*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 EXTREMELY OVERBOUGHT.
The STOs are now what we consider extremely overbought. This puts the market in a precarious position. We still see strong internal strength based on over 3/4ths of the SPY holding rising momentum and 84% are above their 20-day EMAs.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM/ITVM aren't overbought yet and are rising strongly. We have 71% of stocks with PMO crossover BUY signals which could keep the SPY moving higher.
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.
The bias is still bullish in all three timeframes. We have a robust number of stocks above both their 20/50-day EMAs. The SCI had a crossover its signal line which is especially bullish. The GCI rising strongly again.
CONCLUSION: Today's rally appears to be based upon a favorable interpretation of the inflation data, and the belief that the Fed will soon 'downshift" on rate increases. Kind of like the kid who jumped into the manure pile in the belief that there had to be a pony in there somewhere. We are still concerned about overbought extremes on the STOs even though IT indicators still look excellent with no overbought conditions. The VIX suggests a reversal or pause ahead and yesterday's upside exhaustion climax was built upon today. We expect to see a pause or some downside. If we are surprised and get a strong follow-through rally tomorrow, we will adjust. For now, be careful expanding your exposure and keep stops hard.
Erin is 20% exposed.
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As we thought, Bitcoin is trying to recapture its prior trading range before the FTX collapse. Today's strong rally brought it back to life. The PMO is rising strongly and Stochastics look excellent as they stay above 80. The main problem would be a very overbought RSI. This rally is beginning to look parabolic which is another issue.
Another correction for yields is on. Bonds are benefiting greatly, particularly long-term bonds. Rising trends are being broken suggesting they will fall even further.
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
Support may be holding at 3.4%, but the clear break in the intermediate-term rising trend suggests $TNX will head even lower. As noted previously, there are many support levels including 3.4% which hasn't been broken. There is also the long-term rising trend as well as 3.2% and the 200-day EMA. We don't see it plummeting past those levels, but indicators tells us it could happen. The RSI is negative and falling. Stochastics are below 20 and the PMO looks especially ugly as it moves lower in negative territory on a SELL signal.
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar finally collapsed today dropping out of its one month trading range. The PMO not only topped well-below the zero line, it is now on its way to a crossover SELL signal. Stochastics are extra weak as they oscillate below 20. The Dollar is sick and we will likely see it get sicker. It is being said that too many own the Dollar and due to those overbought conditions it will likely continue to fall.
The bullish falling wedge was killed today with the breakdown. A bearish conclusion to a bullish chart pattern is especially bearish.
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: The Dollar's loss is Gold's gain given it is denominated in dollars. The short-term rising trend has accelerated once again give us a parabolic look that we don't like. The RSI is also overbought. However, we don't see the Dollar rallying anytime soon so that overbought condition will likely persist. The PMO looks healthy and Stochastics are oscillating easily above 80.
GOLD Daily Chart: The Dollar had a bearish conclusion to a bullish chart pattern and Gold had a bullish outcome from a bearish rising wedge. This is especially bullish for Gold. We aren't thrilled that $GVZ is oscillating below its moving average because that does imply some internal weakness.
GOLD MINERS Golden and Silver Cross Indexes: GDX continues to rally. It is nearing overhead resistance, but until we see internals break down, we have to remain bullish on Gold Miners.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/21/2022
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: A breakout was visible at one point today, but price closed within the symmetrical triangle. The indicators look very favorable and with China reopening, consumption will likely increase which will lead Crude even higher. The RSI is positive, the PMO is rising strongly and Stochastics look favorable. The only negative on the chart would be the puncture of the upper Bollinger Band by $OVX on the inverted scale. Like we saw on the VIX today, these punctures usually lead to a pause or decline.
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT easily broke the short-term declining trend and is headed toward overhead resistance at $110. The indicators are very favorable. The RSI is positive and the PMO just had a crossover BUY signal generate. Stochastics are above 80. You can see the strong declining trend on the 20-year yield so we would look for Bonds to continue higher and test the 200-day EMA.
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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