In today's DecisionPoint Trading Room Carl mentioned a YouTube video he found that had a helpful discussion on the safety of bank and brokerage accounts. For example, if Schwab bank went bankrupt, how would that affect the Schwab brokerage? If you need more clarity about this, it is well worth your time. Here's the link: https://www.youtube.com/watch?v=wz64z1YuL0A&list=LL&index=1
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Today the Dow Jones Industrial Average ETF (DIA) and Crude Oil ETF (USO) 20-day EMAs crossed up through the 50-day EMAs (Silver Cross), generating IT Trend Model BUY Signals. For the DJIA this is the sixth 20/50-day EMA crossover in a year, and it has occurred near the top of the one-year trading range. We do not have great confidence that this BUY Signal will deliver.
For USO this is the fifth 20/50-day EMA crossover in a year. We also have some misgivings about this BUY Signal, which we will discuss in the Crude Oil section 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.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
MAJOR MARKET INDEXES
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.
CLICK HERE for Carl's annotated Sector charts.
THE MARKET (S&P 500)
IT Trend Model: BUY as of 3/30/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: Soon we expect to make the rising bottom trendlines the same. That would mean another lower low being set. Today's candlestick is a bullish engulfing. It follows a prior bullish engulfing candlestick which is quite positive. Support at 405 is holding for now.
Price does have a flag-like appearance which would mean higher prices to follow. The indicators are all positive. The RSI is sitting in the middle of positive territory above net neutral (50). The PMO is rising. Stochastics are above 80 and tipped upward. The VIX is safely above its moving average on the inverted scale; it is well below the upper Bollinger Band.
Here is the latest recording:
S&P 500 New 52-Week Highs/Lows: One complaint on indicators would be New Highs continuing to contract, particularly on two rally days. However, the 10-DMA of the High-Low Differential is rising steadily above the zero line which is bullish.
Climax* Analysis: There were no climax readings today.
*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.
STOs are continuing their decline. It hasn't resulted in tremendous price damage so while they are declining, they are also leaving overbought territory. Participation expanded as both %Stocks > 20-day EMAs and %PMOs Rising moved higher. Those indicators are above our bullish 50% threshold and aren't yet overbought (they are getting close though).
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT.
We've listed the ITBM and ITVM as somewhat overbought. While there have been much higher readings, this has been an area of failure for them the past three years. They are still rising in spite of declining STOs. We did lose some PMO BUY Signals, but that was inevitable given we have fewer PMOs Rising versus 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 market bias is BULLISH in all three timeframes:
We have over 50% of stocks above their 20/50/200-day EMAs. Those percentages are all greater than the Silver Cross Index and Golden Cross Index percentages which implies they will likely continue moving higher.
CONCLUSION: We honestly don't want to be bullish in all three timeframes due to outside influences like Banks on our bearish radar, however, the evidence is clearly on the bulls side. We only have STOs and New Highs declining. Every other indicator is reading above 50% bullish thresholds and in the case of the Silver Cross Index and Gold Cross Index which are below 50%, they are rising and have the internal support to continue upward. Expanding exposure should be done carefully with the knowledge that if IT indicators turn down and confirm declining STOs, you will need to adjust.
Erin is 26% long, 2% short.
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BITCOIN
Bitcoin is finally breaking out above long-term overhead resistance at 29,000. Indicators suggest this rally could get legs. The RSI is positive, rising and not overbought. The PMO has turned up and is close to moving back into a BUY Signal. Stochastics are rising after bottoming above net neutral (50). Technicals favor Bitcoin.
INTEREST RATES
After declining last week, yields reversed on Thursday and continue higher. Most have reached support zones and with the rallies, we expect more upside.
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 rallied back above support and the 200-day EMA. The RSI is still negative, but it rose on today's big move. The PMO is quickly reversed higher as well. Stochastics while bottoming are still in very negative territory which tells us to be "cautiously" bullish. We saw a similar rally last time 3.4 was broken so cautiously bullish sounds about right.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 3/28/2023
LT Trend Model: BUY as of 2/24/2023
UUP Daily Chart: The Dollar is looking more healthy suggesting to us this rally will likely get legs. There is one small problem and that would be a "Death Cross" of the 50/200-day EMAs that is on tap for tomorrow (unless price rallies above both moving averages). Given EMAs have been 'braiding' due to sideways price action, we don't put that much weight on EMA crossovers. The RSI is nearing positive territory and the PMO is rising toward a crossover BUY signal. Stochastics are rising strongly. It's time for the Dollar to break its declining trend.
We do have to temper expectations for tomorrow given the close at the bottom of today's intraday trading range.
GOLD
IT Trend Model: BUY as of 3/7/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Gold has been slowing its rising trend. In the process, we now have a bearish rising wedge. The pattern suggests a breakdown here. Indicators are softening as all are now declining, but sitting in positive territory.
GOLD Daily Chart: Gold also showed weakness today. The Dollar was up +0.58%, but Gold was down -1.12% which is lower. Given their nearly perfect inverse correlation, they should travel in equal and opposite directions. This is why the relative strength of Gold to the Dollar dropped today. We do see support nearing quickly at the February high, but ultimately we believe it will move lower.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are pulling back, likely on Gold's decline. They are overdue for a pullback and Gold's bearish bias will likely provide that. Internals are still incredibly strong. If they remain so, a pullback would be cause for an entry rather than an exit.
CRUDE OIL (USO)
IT Trend Model: BUY as of 4/10/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: In this morning's trading room, we cautioned against Crude Oil right now. Rather than a breakaway gap, it looks like an exhaustion gap given price has yet to see upside continuation. It looks like a reverse island formation, meaning a likely gap down from here.
We had seen the rally off the March low as likely to reach the price levels we are currently at and then retreat, keeping the trading range intact. The gap up may have been a red herring so we would make sure you have stops set on Energy positions.
BONDS (TLT)
IT Trend Model: BUY as of 3/17/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We are bullish yields right now so we are conversely bearish on Bonds. We expected a move lower after price tapped overhead resistance on Thursday. It was due for a pullback after so many days of higher prices. We did not expect the jump in interest rates today. That thrust in rates today has us expecting the rising bottoms trendline to be tested and breached.
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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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