Before we discuss the signals, we wanted to reprint Carl's free article, "Major Indexes Have Reached Bull Market Participation Levels".
A Silver Cross is when a stock's 20-day EMA crosses above the 50-day EMA, and that event rates the stock to be bullish in the intermediate term. DecisionPoint's Silver Cross Index (SCI) expresses the percentage of stocks in the index that have a Silver Cross. We currently consider a Silver Cross Index reading of 50 percent or higher to be bullish for that price index. We normally report these readings on Friday, but as of today all the major indexes we track have SCI readings above 50 percent.
It would be too cumbersome to show all their charts, so for the purpose of illustration, here is the chart of the S&P 500 Index SPDR (SPY) with Silver Cross Index. There is still a considerable negative divergence versus price, but we think that is well on the way to being erased. And, conversely, there is plenty of room for improvement before overbought levels are reached.
Here is a truncated version of the weekly SCI table showing the major indexes in the top group, miscellaneous Industry Groups in the middle, and the 11 S&P 500 Sectors at the bottom. Note that all but Gold Miners have shown improvement this week, and all the major indexes have reached bull market participation levels of 50 percent or more. The QQQ reading of 70 percent reflects the problem with the rally, which is that the mega-cap tech stocks are primarily leading the charge.
On the negative side, six of the 11 S&P 500 Sectors have not reached the SCI 50 percent reading yet, and half the Industry Groups are recalcitrant.
Conclusion: While mega-cap tech stocks are weighting the market indexes higher, we can see that other stocks are beginning to join the parade, and all the major indexes we track are at bull market participation levels.
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Today the Materials Sector (XLB) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. This follows yesterday's Golden Cross BUY Signal. The EMAs as we mentioned yesterday, are braiding, but whipsaws aren't likely given price is so far above all primary moving averages.
Also today the Real Estate Sector (XLRE) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. This is the seventh 20/50-day EMA crossover in a year, so the new signal has low credibility as being the start of a big rally. Nevertheless, price is advancing off a bullish double bottom, and the PMO is rising above the zero line.
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 Market Index, Sector, and Industry Group 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: So much for a pause or pullback. The rally continues to rise in parabolic fashion. It is clearly overbought as evidenced by the rising RSI which is well above 70. It could certainly see higher readings. Remember that overbought conditions can persist in a bull market.
Other than the RSI, other primary indicators are all very positive. The PMO is getting slightly overbought. The range tends to run between +2 and -2 for the PMO on the SPY. Stochastics are strong above 80 and the VIX is above its moving average on the inverted scale so the market has plenty of internal strength.
Here is the latest recording (6/12):
S&P 500 New 52-Week Highs/Lows: We saw even more New Highs. They are now at the highest reading we've seen in a full year. Spikes in 52-Week New Highs tend to signal an exhaustion point of a price advance, but in this case it appears to have been more of an initiation. We still advise caution. The 10-DMA of the High-Low Differential is now in overbought territory.
Looking at NYSE New Highs, they saw a decline on a 1.17% rally. Not good. The negative divergence is still in force for the NYSE.
Climax* Analysis: In addition to SPX New Highs, today there were strong, unanimous climax readings on all relevant indicators, giving us another upside exhaustion climax. The bull market was too strong the last time out, we'll see if it sticks this time around.
*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 Swenlin Trading Oscillators (STOs) reversed higher today but negative divergences are visible on both indicators. Participation is robust but now is at overbought levels. This can persist, particularly during a strong advance.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM/ITVM continue to rise and confirm this rally in the intermediate term. %PMO BUY Signals rose as the number of rising PMOs improved. Given there are 88% of stocks with rising momentum, we should continue to see %PMO BUY Signals rise. All of these indicators are overbought, but most can accommodate more upside.
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 bias is BULLISH in all three timeframes.
We would note that Stocks above their 20-day EMA are overbought but we continue to see higher readings. The long-term bias is now fully BULLISH. We have more than 50% of stocks above their 50/200-day EMAs and yesterday the Golden Cross Index saw a Bullish "Shift" as it crossed above its signal line. All other indicators are above their 50% bullish threshold and the Silver Cross Index continues to rise strongly.
CONCLUSION: We had another upside exhaustion climax today, but the last one turned out to be nothing. Maybe that will occur again. We'll certainly know the voracity of this rally tomorrow if it overcomes another exhaustion climax. At this point, the problems are overbought conditions on the majority of our indicators. Those conditions will need to be relieved soon. The rally is getting parabolic as well. The market is cruising, but in need of a pullback. We believe this time around we'll see it. Loose stops should serve you well in case the rally does more than pull back. Tomorrow should see low volatility and very high SPX Total Volume due to end-of-quarter options expiration.
Erin is 40% long, 0% short.
Editor's Note: Erin is slotted to be on Making Money with Charles Payne on Friday of next week.
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BITCOIN
Bitcoin rallied today but the bearish rounded top is clearly still in effect. The rally didn't improve the chart much, but we do see a bullish falling wedge in the short term. Indicators need to improve if it is going to breakout. The RSI is negative and the PMO is still declining. Stochastics turned up but are still deeply negative. We won't get excited about a Bitcoin rally until the short-term declining trend is broken.
INTEREST RATES
Yields were lower on the day, but most rising trends are intact.
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 fell today but remains above the 20-day EMA. This is yet another time that $TNX failed to confirm the bullish falling wedge. This decline hurt the PMO which is now pointed lower and it prevented Stochastics from moving above 80. We are still looking for an upside breakout, it just appears it will be delayed.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT gapped up as yields fell. This is starting to look like a bullish double-bottom. Indicators are finally revealing themselves with the RSI moving positive and the PMO lengthening the margin between it and its signal line. Stochastics aren't impressive but they are holding in positive territory.
Price did move back into the prior trading range from March/April. This is a good sign.
DOLLAR (UUP)
IT Trend Model: BUY as of 5/18/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: The bearish double-top was confirmed in our opinion with today's decline. As we've noted previously, the long tail on the candlestick is technically the confirmation line, but we've opted to use the close for that day. The indicators are very bearish so we would expect the Dollar to continue to lose ground.
GOLD
IT Trend Model: NEUTRAL as of 6/8/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: GLD formed a bearish filled black candlestick yesterday, but followed up with a bullish engulfing candlestick. The rounded top is bearish, but seeing such a negative Dollar chart, we expect to see this rally in Gold hold up. The PMO is now rising, although the RSI and Stochastics remain negative.
GOLD Daily Chart: $GOLD was not up nearly as much as GLD, but we have the same conclusion despite the break in the rising trend. The unfortunate piece of information is that the correlation shows the Dollar and Gold decoupling. This means that it is less important what the Dollar does and Gold needs to do this on its own. We think it can.
GOLD MINERS Golden and Silver Cross Indexes: No real improvements to this chart. The short-term declining trend is in force. The RSI is negative and the PMO avoiding a Crossover BUY Signal. What is most important is breadth. Right now it is terrible and it isn't seeing that much improvement. If Gold gets going, maybe this group will reemerge as a leader, right now it is a laggard.
CRUDE OIL (USO)
IT Trend Model: SELL as of 5/3/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil made back all of yesterday's losses. What appeared to be a breakaway gap to the downside, turned into a reverse island formation. We still expect Crude to stay in this short-term trading range. Given Stochastics are rising again, we are likely looking at a rally to test the top of the range again.
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.
Helpful DecisionPoint Links:
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DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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