We discuss Gold every day in the DP Alert, but we thought we should look at Silver (SLV) today on its incredible breakout. Gold certainly looks bullish right now. Both Gold and Silver are getting a boost from a falling Dollar. You'll notice that Silver primarily has a positive correlation with Gold, meaning they travel together. Today's breakout took price out of a declining trend and pushed price above all three key moving averages. Notice that sentiment was extremely bearish yesterday. Sentiment is contrarian and seeing these very high discounts is bullish. Look for Gold and Silver to continue their rallies.
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: Today saw a breakout to new 52-week highs. Two unfortunate circumstances are the bearish filled black candlestick and gap up that could signal a reverse island. However, this does look like a cup with handle and the PMO is nearing a Crossover BUY Signal.
The VIX reading is very low, suggesting investors are too bullish or at the very least, complacent. That is dangerous, but we don't have a puncture of the upper Bollinger Band on our inverted scale yet. Stochastics moved above 80. Currently we see internal strength, we just aren't happy with the low VIX reading.
Here is the latest recording from 7/10:
S&P 500 New 52-Week Highs/Lows: New Highs shot up. We should note that when they reached this level last time it was the beginning of a pullback.
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.
Swenlin Trading Oscillators (STOs) both rose today before hitting negative territory which is bullish in the short term. Our concern now is the overbought reading on %Stocks > 20-day EMA. %PMOs Rising is also getting overbought. Considering the strong rally, we would've expected to see readings on these indicators to shoot upward...not so.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
IT indicators are rising, but we expect %PMO BUY Signals will be stopped soon given only 76% have rising PMOs. There is a longer-term negative divergence on the ITBM and short-term negative divergences on the ITVM and %PMO BUY Signals. The rally is vulnerable.
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 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: Yesterday's upside initiation climax played out as expected, but today's rally has a few earmarks of exhaustion already. We have a bearish filled black candlestick and New Highs hit a level that generally leads to lower prices. Negative divergences in the intermediate term could have repercussions on the next pullback. For now, STOs are both rising alongside rising IT indicators and we have a bullish bias in all three timeframes. We see higher prices, but given excessive bullishness, the market is vulnerable. Stops should be placed for protection.
Erin is 50% long, 0% short. Erin's exposure may lighten as she begins her European vacation on Friday given she can't watch her positions closely. IT exposure will remain.
VACATION for Erin: Erin will be in Europe July 14 - July 28. Carl will be picking up the DP Alert during that time.
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BITCOIN
Bitcoin continues to consolidate beneath strong long-term resistance. The PMO is still declining so we wouldn't look for a breakout yet.
INTEREST RATES
Yields dropped precipitously today, breaking many rising trends. They got extended so a pullback makes sense.
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 tumbled along with other yields. The indicators have turned south in a hurry. The original declining trend is about to be tested, along with the shorter-term rising trend. Given the vertical move by the PMO and Stochastics falling fast, we don't expect the rising trend to hold up. More likely we will see a move to test support at 3.6%.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds are not down for the count. Given the strong reversal, we would have expected more out of the PMO. This does look like a good reversal, but until indicators firm up, we believe the top of the range will hold as resistance.
DOLLAR (UUP)
IT Trend Model: BUY as of 5/18/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: The Dollar tanked today, just in time for Erin's vacation. This is a very strong downward move and we don't think it's over yet. The RSI is well below net neutral (50), the PMO should hit negative territory tomorrow and Stochastics are falling and are very weak. Support will be tested at 27.60 very soon and we expect it to fail there.
GOLD
IT Trend Model: NEUTRAL as of 6/8/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: GLD gapped up today after breaking out of the declining trend yesterday. Sentiment is still rather bearish based on discounts, but that is likely to change soon. This is the best Gold has looked in some time with a positive RSI and new PMO Crossover BUY Signal. Stochastics just moved above 80. We're very bullish on Gold right now.
GOLD Daily Chart: $GOLD has finally broken out significantly from the bullish falling wedge suggesting we will see follow-through. The Dollar 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: We got bullish on Gold Miners just in time. Participation shot straight up and that should get the Silver Cross Index rising again (it was flat today). Indicators are very bullish and are not at all overbought. With Gold looking bullish, GDX will likely continue to rise.
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 likely to test overhead resistance at 73.00. Indicators are very bullish and none are overbought. Stochastics are above 90, telling us there is plenty of internal strength. The rally should 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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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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