Yesterday we pointed out bullish signs (sentiment, internals) we weren't really expecting much upside. Nevertheless, after a choppy start, the market moved higher for most of the day. The reason? Short-covering for sure. Now the question is whether or not there is more upside to come. We'll look more deeply into that below.
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
For Today:
For the Week:
SECTORS
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.
For Today: 
For the Week:
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: While we do have an upside breakout from a bearish pennant formation, price didn't overcome significant resistance. It is significant as a breakout here would've implied this was a new thrust upward. We could still get that, but the jury is out right now.
The PMO finally turned up and the RSI did manage to climb into positive territory above net neutral (50). Both could easily change course on a decline. Stochastics are certainly encouraging and the VIX moving above its moving average is also suggesting internal strength is in there somewhere.
SPY Weekly Chart: The weekly PMO turned up this week. A bottom above the signal line is generally considered extra bullish, but given the negative RSI we won't give this too much weight. The time it bottomed above its signal line, it was the end of a rally, not the beginning. It can be a sluggish indicator in the longer terms.
New 52-Week Highs/Lows: New Highs we noticeable today. The 10-DMA of the High-Low Differential has now moved into positive territory.
Climax Analysis: Today there were unanimous climax readings, and this was the third in a series of upside climaxes. Because today's climax was not in a different direction than the one preceding it, we'll have to call it an upside exhaustion climax. This does not preclude more upside price movement, but SPX Total Volume was solid just not at climax levels.
*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.
We like the short-term indicators. Both the STO-B and STO-V are rising and are not yet overbought. Participation is clearly broadening and trending higher. We now have over 3/4ths of the index holding rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
IT indicators are rising and do confirm the positive STOs. We are seeing even more PMO BUY signals within the index. Rising momentum and buy signals can sustain higher prices.
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PARTICIPATION and BIAS Assessment: The following table 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 following table summarizes participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation.
Based on the IT Bias readings (= SCI - GCI), the strongest is Gold Miners and +45. Not only is that a solid reading, we can see that both the SCI and GCI are improving further. The most negative bias belongs to Energy (XLE). The sector has deteriorating internals, suggesting it will begin to fail again.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
Not surprising to see Gold Miners at the top. Utilities (XLU) had their day in the sun, but internally are beginning to fade somewhat with the SCI down by 3. Materials look interesting sitting at 79 for the SCI and seeing the percentage improve by 7.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
Energy (XLE) still tops the leaderboard for the GCI. It takes time for the GCI to deteriorate. It is working on that now. XLI is solid in second place, but in the nearer term it is beginning to lose a bit as the SCI moves lower. XLP is next, but note the serious drop in the SCI reading. This is a sector losing internal strength.
The following chart objectively shows the depth and trend of participation in three time frames.
The market bias is NEUTRAL.
The short-term bias is BULLISH.
The intermediate-term bias is NEUTRAL.
The long-term bias is NEUTRAL.
We hate using the "neutral" term, but sometimes it is warranted. We like the solid participation of stocks above their 20/50-day EMAs which is why we have a bullish short-term bias. The IT has been bearish for some time, but the SCI has now bottomed and that is a good sign. It happened before this past week so we don't want to read the IT as bullish, but it isn't really bearish either...hence the "neutral" stance. The long-term is definitely improving based on %Stocks above their 200-day EMAs expanding, but the GCI itself is near 50% and flat.
CONCLUSION: The market did finish higher by +1.48% this week, but no ground was gained as far as overhead resistance goes. Indicators have been looking up this week, but it didn't really result in big gains until today. That is why we aren't fully bullish. Today's rally was more than likely caused by short covering, not bullish jubilation. Consequently, we have to err on the side of caution. Erin would like to expand exposure next week, but only if we see follow-through on today's rally.
Erin is 10% exposed.
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BITCOIN
Bitcoin trickled up this week setting up a gently rising trend. Indicators sway to the bullish side. The RSI is positive and rising, the PMO is rising on a buy signal and Stochastics are now above 80. We expect to see some more upside, but not a breakout above $17,500.
This chart is to show where some of the support/resistance lines come from.
INTEREST RATES
Yields never quite hit prior highs before pulling back in a big way. If they continue lower, the market will likely benefit and of course Bonds will too.
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
It was a deep pullback today on $TNX. It is already about to test the long-term rising bottoms trendline and 3.4% support level. We expect it to reverse there, but we can't ignore the indicators which certainly suggest a breakdown ahead. The RSI is negative and falling and the PMO has topped. Stochastics are tumbling lower. Prepare for them to break lower.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount. As buying power has been shrinking, home prices have come under pressure.
--
This week the 30-Year Fixed Rate rose from 6.42 to 6.48.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: BUY as of 8/19/2021
UUP Daily Chart: The Dollar is all over the place and getting quite unpredictable. After a solid breakout move this week, UUP dropped like a rock. This might be the best we get out of the bullish falling wedge. The RSI is negative and the PMO has topped well-below the zero line. Stochastics have quickly tipped over. We have to consider UUP to have a bearish bias.
UUP Weekly Chart: The weekly chart is also weak. The weekly RSI is negative and the weekly PMO looks terrible as it dives out of overbought territory. Support needs to hold as we don't see the next stop until $26.75.
GOLD
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GOLD Daily Chart: The Dollar spurred Gold on to a strong rally. Note that while the Dollar was down -1.31%, Gold was up a whopping +1.87%, that is almost a half a percent that is not attributed to the fall in the Dollar. This means there were plenty of buyers of Gold. We now have an accelerated rising bottoms trendline.
Other strong signs are the positive RSI, Stochastics above 80 and a PMO that is finally putting a little bit of distance between it and its signal line. This is all happening with a backdrop of a bearish rising wedge pattern and $GVZ being below its moving average. It isn't all roses, but we like the look of Gold right now.
GOLD Weekly Chart: The weekly PMO has just entered positive territory. The weekly RSI is already in positive territory. The next level of serious resistance based on the weekly chart is the mid-2021 top. Discounts are paring back which tells us that investors are less bearish on Gold.
GOLD MINERS Golden and Silver Cross Indexes: With Gold starting to look capable of overcoming its bearish rising wedge, we believe Gold Miners will benefit. Participation is excellent. We noted that it held leadership with the best IT bias and improvements in both the SCI and GCI still occurring. GDX is getting close to overhead resistance again, this time at $33. However, the RSI is positive, the PMO is on a new crossover BUY signal while Stochastics rise above 80. We see this one as moving even higher.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/21/2022
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil had a rough week and today it looked to remedy things with a rally. Unfortunately bears managed to pull all of the gains off the table by the close to form a bearish filled black candlestick. We felt pretty good about USO, but all that changed on the gap down. This could be a reverse island formation setting up, but given the new PMO SELL signal below the zero line, more than likely it will test September/December lows.
USO/$WTIC Weekly Chart: The weekly chart tells us that this is an important price level. The long-term rising bottoms trendline is in jeopardy and $60 looks very realistic as the next stopping point. The weekly RSI is negative and the weekly PMO could be beneath the zero line next week.
BONDS (TLT)
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds have surged as interest rates begin correcting again. We haven't seen this as a rally that will have staying power, but we are questioning that with today's big drop in the 20-year yield and the very bullish indicators. The RSI is positive and the PMO is rising again. Stochastics are favorable. We'll have a really good idea if this rally will be as extended as the prior one when it tests overhead resistance.
TLT Weekly Chart: Interestingly, this rebound occurred right after price hit the prior declining trend. The weekly RSI is negative, but rising strongly. The weekly PMO is accelerating higher. This chart tells us that the current rally could get legs.
Good Luck & Good Trading!
Erin Swenlin And Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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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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