Today the Energy Sector (XLE) 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. This looks like a sturdy level of support so this signal could be lagging. We did see slight expansion in participation, but ultimately it is weak enough that this support could give way. While this looks like an excellent spot for a reversal, the PMO is declining below zero. Be careful with your Energy positions.
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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MARKET/INDUSTRY GROUP/SECTOR INDEXES
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THE MARKET (S&P 500)
IT Trend Model: NEUTRAL as of 9/22/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: The PMO decelerated on this rally, but it is still in decline. There is resistance to deal with at 420.
The VIX looks strong as it has now moved above its moving average on the inverted scale. Stochastics are rising again, but are reading below 20 suggesting internal weakness has not subsided yet.
Here is the latest recording from 10/30:
S&P 500 New 52-Week Highs/Lows: New Highs saw a reading today and New Lows pared back as we would expect. The 10-DMA of the High-Low Differential is now in oversold territory but has not reversed higher yet.
Climax* Analysis: Today there were three climax readings on the four relevant indicators, and SPX Total Volume was solid, which gives us an upside exhaustion climax.
*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 DOWN and the condition is NEUTRAL.
Short-term indicators have now left oversold territory. We did see a nice expansion in stocks above their 20-day EMAs and we saw an excellent increase in rising momentum within the index. Positive divergences on STOs set up this current rally.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The ITBM and ITVM both turned up today. We aren't surprised to see a rise in %PMO BUY Signals given 56% of stocks are seeing rising PMOs. Positive divergences are visible on all three indicators.
PARTICIPATION: 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 BEARISH in all three timeframes.
We don't have enough expansion in %Stocks > 20/50EMAs to consider the short term as bullish, but they are getting close to neutral. The Silver Cross Index is below its signal line and declining and the Golden Cross Index is below its signal line and declining. This gives us a bearish bias in the intermediate and long terms.
Take a close look at our Bias table below the chart. The market is internally weak.
BIAS Assessment: The following table expresses the current BIAS of various price indexes based upon the relationship of the Silver Cross Index to its 10-day EMA (intermediate-term), and of the Golden Cross Index to its 20-day EMA (long-term). When the Index is above the EMA it is bullish, and it is bearish when the Index is below the EMA. The BIAS does not imply that any particular action should be taken. It is information to be used in the decision process.
The items with highlighted borders indicate that the BIAS changed today.
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CONCLUSION: There is now evidence that this rally could get legs based on reversing IT indicators and numerous positive divergences. However, we aren't convinced this rally will see that much more followthrough. Today saw an upside exhaustion climax and that suggests we will see lower prices tomorrow. If we get a positive reaction to this climax, we will reevaluate. Of late, bullish climaxes haven't resulted in much upside. For now, expect more rally but be prepared for it to wrap up quickly. We would keep your stops in play. Hedges could be released as we take our cue from Swenlin Trading Oscillators which are rising.
Erin is 20% long, 10% short.
Calendar: Tomorrow the Fed makes their interest rate announcement. Also, the 6-month period of favorable seasonality begins.
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BITCOIN
Yesterday's comments still apply:
"Bitcoin continues to digest its strong rally. It is forming a pennant on a large flagpole which is bullish. The expectation of the pattern is a breakout and a rally the length of the flagpole. That seems overly bullish, but with Bitcoin it isn't out of the realm of possibility. The PMO is still rising and Stochastics are rising again above 80. While we aren't certain about the length of a breakout rally, we do see one on the horizon after this period of digestion is finished."
INTEREST RATES
Yields mostly ticked higher. Short-term yields have seemed to have found their equilibrium, but longer-term rates continue in rising trends.
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
Given $TNX was unchanged today, yesterday's comments still apply:
"$TNX did break the second parabolic pattern, but it didn't crash lower as we would usually see out of a parabolic breakdown. Given Stochastics topped on a day when the yield was higher, we suspect that the falling PMO will confirm a short-term decline ahead. This will likely be temporary if it happens at all."
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The PMO is attempting to rise and put margin between it and its signal line, but Stochastics have topped in deeply negative territory and the RSI is negative and falling. We expect a breakdown when this consolidation is over.
DOLLAR (UUP)
IT Trend Model: BUY as of 8/3/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar rallied today and appears ready to free itself from this consolidation zone. Stochastics did turn back up and the RSI remains positive. The PMO is not yet confirming, but it did decelerate in preparation for a continuation rally.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold likely fell prey to the Dollar's strength today. You'll note that the relative strength line turned down. We are still quite bullish on Gold, but suspect that if the market rallies a bit longer, it will pull back toward the 20-day EMA.
GOLD Daily Chart: 2000 seems to be the sticking point for $GOLD and with the Dollar looking bullish again we could see some more consolidation. The PMO is still rising and Stochastics are above 80 so if we see a pullback, it isn't likely to be damaging. We notice that discounts pulled back so investors are starting to warm up to Gold.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners crashed today and took nearly all of the participation out. The market's rally did nothing for them. The PMO did top. We see support is very near, but we don't like how this chart is breaking down. Miners are not taking advantage of the market rally and with Gold consolidating or ready to pull back, they will have difficulty moving forward. Tighten stops at a minimum.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: The Energy sector is at strong support and USO is nearing a similar level. We expect that level to be tested. We do see a large double top formation which is bearish. Demand has been lowered and that seems to be what is keeping Crude prices from breaking out. We will be watching Stochastics closely. Right now they do suggest that support at the 200-day EMA will be tested. We just can't get that bearish given production and the uncertainty in the Middle East.
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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