We'll cover the signal change for the Dollar in the usual section below. Otherwise, today the Health Care Sector (XLV) 20-day EMA crossed down through the 50-day EMA (Dark Cross), above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. Price is moving within a symmetrical triangle so the range continues to shrink. These are continuation patterns so we are supposed to look for an upside breakout. We don't see that on tap yet given we have a PMO Crossover SELL Signal and it has moved into negative territory. Participation isn't terrible, but the Silver Cross Index is looking very toppy already.
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
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: The rally continued today and it was able to push the PMO into a Crossover BUY Signal. The RSI is now overbought and typically that does happen before a pullback. We note that RSP is gaining strength against the SPY. A broader rally could be sustained longer.
The VIX reading remains low and in the complacent range but beneath the upper Bollinger Band on our inverted scale. An upside puncture would be a problem. Stochastics are rising strongly so the market is seeing internal strength.
Here is the latest recording from 7/10:
S&P 500 New 52-Week Highs/Lows: New Highs pared back on today's rally creating a negative divergence.
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 OVERBOUGHT.
Swenlin Trading Oscillators (STOs) rising, but they have hit overbought territory in our minds. Participation was already getting overbought. We didn't see an expansion in %PMOs Rising on the rally, nor did we see much expansion in %Stocks above their 20-day EMA. Somewhat surprising given today's strong rally.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
IT indicators are essentially overbought right now. Certainly we could see more %PMO BUY Signals, but given we only have 77% with rising PMOs, it can't move much higher. We do note negative divergences on all of these indicators.
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.
Yesterday's comments still apply:
"The bias is BULLISH in all timeframes.
Our concern is overbought conditions on %Stocks > 20/50-day EMAs. There is room for expansion, but these indicators have tended to move lower when they reach these levels.
Based on percentages, the bias is bullish in all three timeframes. We have healthy readings on participation of stocks above their 20/50-day EMAs. Those percentages are high enough to keep the Silver Cross Index rising. The Golden Cross Index is rising and we do have a higher percentage of stocks above their 200-day EMAs in comparison to the GCI, so we should expect it to move higher. If we had one thing to complain about, it is that %Stocks indicators are overbought or getting overbought."
CONCLUSION: There is no doubt in our minds that this rally is getting overextended. Indicators are overbought in the short and intermediate terms. The bias remains bullish in all three timeframes, but participation indicators are nearly all overbought. Today's PMO BUY Signal tells us this short-term rally may have more legs, but overall we don't like the negative divergences on IT indicators. Caution should be applied as declines happen far faster than rallies.
Erin is 50% long, 0% short.
VACATION for Erin: Erin will be in Europe July 14 - July 28. Carl will be picking up the DP Alert during that time. Comments will be abbreviated.
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BITCOIN
In spite of the topping PMO, Bitcoin broke out. This turned the PMO higher. Stochastics are rising and have hit positive territory. The RSI remains positive. While we see higher prices for Bitcoin, look a 'melt up' rather than spike higher given overhead resistance in the long term is very strong at this level.
INTEREST RATES
Yields were sharply down again today. Rising trends have been broken for the most part suggesting tests of April/May lows ahead.
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
$TNX dropped heavily again today. It took out the intermediate-term rising trend. We were looking for support to hold at 3.6%, but given this deep decline, we would look for a test at 3.4% instead. The RSI just moved into negative territory, the PMO is pointed downward and should see a Crossover SELL Signal tomorrow, and Stochastics are tumbling and are now below net neutral (50).
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We have been thinking that TLT will get stuck beneath resistance at June highs, but given the very bearish look of all yields, we think there is a good chance for a breakout. The PMO is rising, the RSI just hit positive territory and Stochastics look very bullish.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 7/13/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar continued its decline, pulling the 20-day EMA down through the 50-day EMA (Dark Cross), above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. Erin isn't surprised given she is off to Europe. It never fails, you could pretty much short the Dollar before she leaves on international vacations every time. Support has been met, but given the destruction of the indicators, we believe the Dollar has much further to fall. It isn't likely to hold support at 27.20.
GOLD
IT Trend Model: NEUTRAL as of 6/8/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: GLD continues to rally, setting up bullish indicators. With the Dollar sliding so heavily, we would've expected more out of Gold today, but sentiment is still bearish given the level of discounts. We like Gold right now as the indicators have really firmed up.
GOLD Daily Chart: Yesterday's comments still apply:
"$GOLD has finally broken out significantly from the bullish falling wedge suggesting we will see follow-through. Gold is gaining strength against the Dollar. The correlation of Gold to the Dollar is moving back toward its normal inverse correlation. Currently they have decoupled, but we want to see that inverse correlation again since the Dollar looks so bearish."
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are off to the races and based on participation, we expect more follow-through. 100% have price above their 20-day EMA with 82% above their 50-day EMAs. That's a huge improvement over just a few days. Those readings are clearly overbought, but when this group gets going it can hold overbought conditions. The Silver Cross Index will likely begin rising soon.
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 is on its way to test resistance at 73.00. That has proved to be a difficult level to overcome, but this rally looks strong enough to take it out. We do need to see a pullback here as the RSI is getting overbought. We also see that $OVX has punctured the upper Bollinger Band. Typically that leads to a pullback. Look for this rally to cool, but continue.
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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