Today the S&P 600 Small-Cap Index ETF (IJR) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model "Silver Cross" BUY Signal. It's not on the chart below, but the Silver Cross Index (SCI) has a positive crossover its signal line which does bolster the bullish bias. We're not sure this resolves or clarifies anything because this is the fifth signal change in six months. Nevertheless, we must view it as a positive development.
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: We finally saw a strong rally day. Price managed to close above the 200-day EMA by about $0.40--not huge, but certainly positive. The RSI continues to rise in positive territory above net neutral (50). The PMO was able to reach positive territory on its new crossover BUY signal.
Stochastics are above 80. As noted yesterday, they need to stay there. The VIX is staying above its moving average on the inverted scale which also implies internal strength. The Bollinger Bands are very close together so we can't read much more into it.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: We now have a clear negative divergence between price tops and New Highs. It is not good that internal strength isn't being confirmed by this indicator.
Climax* Analysis: There were climax readings on all but the NYSE UP/DOWN Volume Ratio, giving us a weak 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 UP and the condition is OVERBOUGHT.
The STOs are rising but getting quite overbought. The STO-V is nearing the top of the range. There are plenty of stocks out there with positive momentum so it is interesting we are getting so few New Highs. More than likely this is a function of beatdown technology and others taking the lead on this rally. They aren't at all close to new 52-week highs. No matter, the overbought STOs could be a problem very soon.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
All indicators are rising which is bullish. They are only in neutral territory and therefore could accommodate much more upside price movement. Well over half of the index have PMO BUY signals.
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 has moved to 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 turned up noticeably today.
CONCLUSION: There are two problems. First, is the negative divergence on New Highs. As noted earlier, this could be a function of beatdown stocks leading the rally, but it is still troublesome. Second, STOs are getting very overbought. Today's upside exhaustion climax could also be a problem, but given it was weak, we aren't overly concerned about that. Short-term indicators while overbought, are still rising and IT indicators look very favorable. We still expect the rally to continue, but we may be in for more chop on the way up. If you're expanding exposure in this market, hard stops are still warranted.
Erin is 15% exposed and may expand a bit more tomorrow. Today's "Diamonds in the Rough" ETFs look especially promising.
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Overhead resistance was met and did move slightly above it. We've marked $17,500 as overhead resistance. The next level of resistance is at $18,500. It isn't out of the question that Bitcoin will reach that level. The PMO is now in positive territory along with the RSI and Stochastics are oscillating bullishly above 80. It may be attempting to recapture the trading range it was in before the FTX debacle.
Another correction may be in the works for yields as their slide continues. Bonds are benefiting greatly, particularly long-term bonds.
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
Yesterday's comments still apply:
"We noted yesterday that all was not lost for $TNX as it had reached multiple support levels including a test of the rising trend. The PMO is already beginning to flatten but remains on a SELL signal. The RSI is negative. This is the perfect place for the 10-year yield to bottom and continue higher, but indicators haven't firmed up yet."
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 a trading range. The declining trend was broken, but price has done nothing."
We were able to draw a bullish falling wedge, but given indicators, we aren't looking for it to resolve to the upside anytime soon.
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Price is holding above June highs. Indicators remain very favorable with a positive RSI, rising PMO on a BUY signal and Stochastics oscillating above 80. The only negative would be $GVZ which is still beneath its moving average on the inverted scale. However it is rising strongly.
GOLD Daily Chart: The ground is fertile for Gold, but don't forget about the bearish rising wedge. At this point we are bullish on Gold and expect the rally to continue in spite of the rising wedge.
GOLD MINERS Golden and Silver Cross Indexes: GDX was down today but still looks solid. The RSI is positive and the PMO is rising confidently. The SCI is still at 100% and the GCI is improving everyday. Participation remains robust. Note also that we have a new "golden cross" on GDX as the 50-day EMA crossed above the 200-day EMA. That gives us an IT Trend Model "Golden Cross" BUY signal. Overhead resistance is nearing so it may be time for a pause.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/21/2022
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: The bearish filled black candlestick from yesterday didn't pose a problem for Crude which jumped 3.26% today. This has really firmed up the indicators. The RSI is now in positive territory and the PMO is on a whipsaw crossover BUY signal. Stochastics are rising. $OVX is above its moving average on the inverted scale and hasn't penetrated the upper Bollinger Band. All of that is good. A puncture of the upper Bollinger Band generally leads to a short-term decline.
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT climbed again on a lower 20-year yield. The declining trend may end just as it was identified. Indicators look much healthier with the RSI bottoming on net neutral (50) and the PMO nearing a crossover BUY signal. Stochastics are also above 80. All of this suggests TLT has upside potential.
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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