In spite of an earnings miss, META sparked a big tech rally by announcing a $40 billion stock buyback plan that boosted shares up well over +25% today and infused similar enthusiasm in other big tech shares that translated into a huge rally for the tech-heavy Nasdaq. We could certainly see META move much higher, but we should be aware this has set up a possible reverse island situation. It is overbought by a mile.
Conversely, the Dow Jones Industrial Average had a loss for the day. Because it is not cap-weighted, the tech rally could not offset losses in other sectors. Here is a DJIA component summary for today. Healthcare certainly weighed heavy as Merck (MRK) and United Health Care (UNH) fell over 3% and 5% respectively.
The loss for UNH translated into an IT Trend Model NEUTRAL Signal for the Health Care Sector (XLV) as the 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA. Had the "Dark Cross" occurred below the 200-day EMA, it would've been a SELL signal.
The Crude Oil (USO) 20-day EMA crossed down through the 50-day EMA below the 200-day EMA, generating an IT Trend Model SELL Signal. The rising trend is still intact, but we don't like the look of this recent decline and the very bearish indicators.
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: BUY as of 1/12/2023
LT Trend Model: SELL as of 5/5/2022
SPY Daily Chart: The SPY advance from October's intraday low to today's intraday high was just over +20%, so we consider that the S&P 500 has entered a new bull market. In fact, all the major indexes we track have advanced to bull market level.
Indicators are confirming the rally. The RSI is in positive territory and not quite overbought. The PMO is rising. While it is getting overbought, there is still headroom. Stochastics are oscillating above 80 and the VIX is oscillating above its moving average on the inverted scale. Both suggest internal strength.
Here is the latest recording (1/30):
S&P 500 New 52-Week Highs/Lows: New Highs are now above prior readings which negates a future negative divergence. The 10-DMA of the High-Low Differential is accelerating higher.
Climax* Analysis: There were two out of four climax readings today. It is telling that SPX Net A-D fell far short of a climax, telling us that participation was relatively thin because big Tech was carrying the load. SPX Total Volume was 141% of the one-year daily average, which looks a bit like a blowoff. At any rate, today was 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 UP and the condition is NEUTRAL.
Both STOs rose today, but the STO-B barely managed to do so. Troubling would be the contraction of %Stocks > 20-day and %PMOs Rising.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
IT indicators were in sync as all of them rose today. This definitely keeps the bullish bias in the intermediate term alive.
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 BULLISH.
The long-term bias is BULLISH.
The Silver Cross Index now holds a higher percentage versus %Stocks > 20/50-day EMAs. This means it is vulnerable to a top. The IT is bullish as the Silver Cross Index is at a healthy reading and is rising. The Golden Cross Index turned back up and we have more stocks above their 50/200-day EMAs than Golden Crosses.
CONCLUSION: The off-balance situation between the Dow and the S&P 500 today, causes some concern, but the bull market is official nonetheless. We believe that the rally is the product of short-covering, and we'll have to wait and see if it will endure and become more broad. We believe that this is a cyclical bull market within a larger secular bear market. We can profit from it, and it may last awhile, but we need to be ready for the next downturn. Indicators are overbought, so a test could come soon.
Erin is 18% exposed. Erin will be expanding exposure to 25% in the coming trading days should indicators remain positive overall.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact email@example.com for more information!
Bitcoin fell slightly on the day but did manage to poke above 24,000. The RSI is overbought, but not exceedingly so. The PMO is flat and not revealing direction. The OBV is confirming the current rally and Stochastics are now oscillating above 80 again. Bitcoin is overbought, but it is determined to move higher right now. It still needs a stronger pullback in our minds.
Rates were mostly stagnant today.
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 is clinging to support at 3.3%. It really looks ready to break down. Today it traded below the rising bottoms trendline suggesting the rising trend is about to be halted. The PMO has turned lower on a new whipsaw SELL signal. The RSI is negative and Stochastics are diving lower. We expect to see this level of support broken.
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: SELL as of 1/31/2023
UUP Daily Chart: The Dollar rallied today, but didn't gain much ground. It didn't set a higher high. The PMO is turning up above the signal line which is bullish, but we don't have true confirmation from Stochastics. The RSI is negative and has been for weeks. We'd like to see it get closer to 50 before getting bullish or at least see Stochastics rising strongly.
Given price never came close to testing the top of the declining trend channel before turning lower tells us that a breakdown or possible acceleration of the decline might occur.
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold was hit hard today. The Dollar was up +0.66%. In a perfect world Gold would be down -0.66% due to their near perfect reverse correlation. However, that didn't happen. It fell over 2% suggesting far more sellers today than in the past. The decline confirms the bearish rising wedge. Gold could fall apart here, but we do see multiple support levels available should it continue lower.
GOLD Daily Chart: The indicators do not inspire confidence. The PMO has triggered a crossover SELL signal and Stochastics are falling again. We believe the rising trend channel will hold up. We should still be prepared for a trip to test the bottom of the channel. That will clear overbought conditions. The RSI is already out of overbought territory.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners took it on the chin today given the decline in Gold and the rise of Tech. The rising bottoms trendline was nearly breached today. That would be our expectation given the bearish rising wedge. We see a big breakdown in %Stocks above their 20-day EMAs. We get the sense that this is a group entering pullback mode. $30 seems a good area of support for now.
CRUDE OIL (USO)
IT Trend Model: SELL as of 2/2/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: We discussed the "Dark Cross" that triggered the IT Trend Model SELL signal. This bearish signal is accompanied by a negative RSI and diving Stochastics. Worst is the new PMO SELL signal that triggered this week. If USO is going to rally, this is the area it needs to. Given the indicators, we doubt it will.
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We technically saw a breakout from the gently sloping declining tops trendline. It didn't put price above overhead resistance at the December top. Additionally this is a bearish filled black candlestick. However, indicators are looking very good. The RSI is positive and the PMO is on a crossover BUY signal. Stochastics are oscillating above net neutral (50) which is also encouraging. Bond funds made their way into Erin's Diamond scans yesterday so we are looking for a breakout.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
(c) Copyright 2023 DecisionPoint.com
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.
Helpful DecisionPoint Links:
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.