Today the Russell 2000 ETF (IWM) 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating an LT Trend Model "Golden Cross" BUY Signal. This appears to be a breakout followed by a textbook pullback toward the breakout area at the November highs. Of course, it did fail at the next level of overhead resistance at the August top. The PMO is rising and isn't quite overbought yet based on the August PMO level, but it is getting there. We are looking for the rally that will once again test the August high.
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: Price decided it wasn't yet time to breakdown. The bearish rising wedge is still in place, but this was a nice bounce off the December tops. The RSI and PMO are both rising. The PMO is getting overbought, but still has some headroom to move higher.
We pointed out yesterday that we have a bearish rising wedge in the intermediate term as well. The VIX remains above its moving average on the inverted scale and Stochastics are above 80. Both imply internal strength.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: Not much improvement on New Highs which is surprising given the voracity of today's rally. The 10-DMA of the High-Low Differential has topped.
Climax* Analysis: Only SPX Net A-D Volume had a climax reading today, so we will not consider it a market climax day.
*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.
Another strange result from today was both STOs moved lower. Additionally we see negative divergences across the board. At least now we have more than half of the SPX with rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM/ITVM were mixed. The ITBM contracted, but we saw a slight expansion on the ITVM. The ITVM has been less bearish and has avoided a negative divergence. Unfortunately it is very overbought. %PMO BUY signals has been mostly static and mildly bullish in the 60% - 65% range. That indicator still holds a negative divergence.
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 BEARISH.
The intermediate-term bias is NEUTRAL.
The long-term bias is BULLISH.
Participation has shrunk in the near term with now a lower percentage of stocks above their 20/50-day EMA than those with Silver Crosses. While the SCI has turned down, it is still at a bullish level. We have a higher percentage of stocks above their 50/200-day EMAs than those with Golden Crosses (as represented by the Golden Cross Index).
CONCLUSION: We discussed last night that this looked very much like a textbook pullback to the breakout point. The FOMC seems to have juiced the market. We believe today's rally will see some follow-through for this reason, but ultimately the short term is looking shaky given the falling STOs and short-term negative divergences. We trust the technicals more than the overall noise, so while we are looking for more rally, that short-term indicator chart has us concerned. Keep a close eye on your portfolio and consider setting stops if you can't look at those charts everyday.
Erin is 15% invested, but interested in expanding carefully.
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 has formed a rounded top that begs a breakdown. The PMO and Stochastics are definitely in agreement. The RSI is positive and did rise on today's rally. We still expect a breakdown below this support level.
Yields are popping higher, Bonds are marching southward. The 1-year yield hit new 52-week highs.
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 continues to rally and is about to test the top of the symmetrical triangle. Given the prior trend was up, we expect an upside breakout. The indicators are in agreement. The RSI is positive, the PMO is on a new BUY signal and Stochastics have popped above 80.
IT Trend Model: NEUTRAL as of 11/14/2022
LT Trend Model: SELL as of 1/31/2023
UUP Daily Chart: The Dollar set a higher high today, but also a lower low. This looks like a bearish engulfing candlestick and that implies a decline again tomorrow. Indicators are still positive though so we could see that candlestick pattern abort. It seems the 200-day EMA is a sticking point right now.
We saw another slight breakout from the declining trend channel, but it closed again within.
IT Trend Model: BUY as of 11/14/2022
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Again the Dollar was up but Gold held its ground and was up too. While the Dollar is showing strength, we believe Gold is in its own way. Mainly because it is defying the Dollar. So far it is holding above the 50-day EMA.
GOLD Daily Chart: In spite of very negative indicators it's managed to stay mostly within its rising trend channel. The expectation still has to be a breakdown based on the negative indicators. The RSI is negative, the PMO falling out of overbought territory and Stochastics are below 20.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are also holding their ground on the 50-day EMA and December tops. While Gold Miners are tied to Gold, they are also heavily tied to the overall market trend. They rallied strongly with the market, but notice participation barely improved. We would expect a breakdown here based on thin participation and a falling PMO.
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 were looking for a breakdown here, but this looks more like a recovery move. (Erin grumbled it was because she was bearish on Oil in yesterday's recording of "Your Daily Five" on StockChartsTV.) Today's strong rally has the PMO decelerating and Stochastics are headed back up. The RSI has almost reached positive territory. More than likely this trading range is here to stay and price is headed back to the top of it.
IT Trend Model: BUYas of 12/2/2022
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday's comments still apply:
"Given the spike in interest rates, we are expecting a price decline on TLT that will test the rising bottoms trendline. TLT will likely lose that rising trend as the PMO just gave us a crossover SELL signal. To make matters worse, Stochastics are diving lower."
"TLT failed to breakout from the symmetrical triangle. These are continuation patterns so it would've been a surprise if that breakout had led to more upside. Why? The prior trend that was in play before the symmetrical triangle developed was down so that trend should be "continued"."
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 Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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.