Today the Price Momentum Oscillator (PMO) crossed above its signal line to generate a PMO BUY signal on XLC. The group has been showing internal improvement based on participation. Note the Silver Cross Index (SCI) has crossed up through its signal line and we have major improvement on %Stocks > 20/50-day EMAs. The RSI just hit positive territory and Stochastics are rising nicely. We're not sure how long this rally in XLC will last, but if we have that much improvement under the surface, it should continue to outperform the market.
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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: We may be looking at an upside breakout from the pennant that is attached to a flagpole. If we see this rally get legs, that would mean a bullish conclusion to a bearish chart pattern which we usually find especially bullish.
The PMO is still technically falling and the RSI is in negative territory below net neutral (50). Stochastics are beginning to rise as is the VIX on its inverted scale. That suggests that internal strength may be returning to the market.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential is now making a more concerted effort to rise above the zero line. That would be an excellent sign that an upside breakout is more likely than a downside one.
Climax* Analysis: There were solid and unanimous climax readings, giving us an upside exhaustion 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 DOWN and the condition is NEUTRAL.
Both STOs are rising, but the STO-B still looks a bit unsure of itself. Participation is expanding with more than half of the index holding rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL to OVERSOLD.
The ITBM/ITVM are rising more definitively and we now have 20% of the index holding PMO crossover BUY signals. We would consider that a confirmation of the rising STOs.
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 NEUTRAL.
The intermediate-term bias is NEUTRAL.
The long-term bias is BULLISH.
The biases have been shaken up based on improved participation of stocks being above their 20/50/200-day EMAs. Additionally, the SCI and GCI have turned up which makes the longer term look less bearish.
CONCLUSION: Today's rally nudged all but our PMO higher, but the PMO was only down today by 0.01. With participation beginning to expand and nearly all indicators moving higher, we aren't going to get too worked up by today's upside exhaustion climax. However, it does warn that the market may disappoint and continue its sideways consolidation. The ground is certainly fertile for a breakout but with so much chop and churn, we aren't ready to 'bank' on it with expanded exposure.
Erin is 12% exposed with a 2% hedge.
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Bitcoin rallied unexpectedly (at least to us) today. It put price above the 20-day EMA and we are seeing a slight rising trend. The RSI is nearing positive territory now and the PMO is attempting to put distance between it and its signal. Stochastics are looking more bullish now, so we have to admit that Bitcoin could see a continuation and test of overhead resistance above the 50-day EMA around $17,500.
Interest rates are beginning to pullback more than we had expected. We do believe they will resume their rise, but first some downside.
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
$TNX topped along its intermediate-term declining trendline. Now it sits on support at about 3.65%. All is not lost, but it sure looks ugly enough to at least test the rising bottoms trendline given the RSI is now negative and Stochastics have dipped quickly below 80. If the PMO tops, we will expect more than just a test of the longer-term rising trendline.
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The strong breakout from the bullish falling wedge basically failed to produce. Price is still above the wedge so all is not lost. The RSI isn't hopeful, but Stochastics (an early detection indicator) are rising in positive territory and the PMO is rising.
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: SELL as of 6/30/2022
GLD Daily Chart: Another bearish filled black candlestick for Gold, but yesterday's didn't turn out too bad. It does appear that Gold is going to have an upside breakout from a bearish rising wedge. That would be especially bullish. Volume was high on GLD. The RSI is positive and not overbought yet. The PMO is rising again and the margin is expanding between it and its signal line. Stochastics just moved above 80.
GOLD Daily Chart: The Gold Volatility Index ($GVZ) dropped is still beneath its lower Bollinger Band. Typically when a volatility index, on the inverted scale, drops beneath the lower Bollinger Band, it leads to an upside reversal or rally continuation. There may be a bearish pall on the chart based on the wedge, but the indicators just don't look that bad. Discounts pulled back in a big way today so bullish sentiment is beginning to be detected.
GOLD MINERS Golden and Silver Cross Indexes: With Gold rallying with the market, GDX flourished with a giant 4.25% rally. This puts it in territory we haven't seen since May and that could be left behind soon based on strong participation. 100% of Miners have price above both their 20/50-day EMAs. The SCI is rising strongly. This looks good, but there is a high likelihood we will see a bit of a pullback toward the breakout point.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/21/2022
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil failed miserably today, falling nearly 5%. This took out the majority of gains out of the December low. Support was also broken at the November low. The indicators are terrible, but if we do see a reversal, it would set up a bullish reverse head and shoulders. We wouldn't count on it. Given the RSI is negative, the PMO topped beneath the zero line and Stochastics are tumbling, we would look for support at the December low to be tested.
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Today saw a second bearish filled black candlestick. As with Gold, yesterday's bearish candlestick did not result in lower prices. In fact, TLT has pushed past both the 20/50-day EMAs, basically preventing a "Dark Cross" of the 20/50-day EMAs. The PMO is still declining, but the RSI and Stochastics seem to think this will amount to something. Given the ugly look of yields, we could see a bit more upside. If the PMO bottoms, we will definitely be looking for another rally for TLT.
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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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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