News of the Israel-Hamas War sent Energy prices soaring as geopolitical worries caused a spike in Crude Oil. The question is whether this is a one-off or the beginning of a resurgence in the Energy sector. Notice that this rally pushed many stocks back above their 20/50-day EMA. It also caused the Silver Cross Index to bottom. The PMO has also decelerated. Stochastics are also rising again. This looks like a solid bottom for the Energy sector and given tensions aren't likely to get better before they get worse, Crude Oil will likely continue on a higher trajectory.
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 rally continued in spite of the news of war. We often talk about the market as being a sociopath..."how does this affect me?" is what it asks. Apparently it has determined that more geopolitical unrest isn't much of a problem. The RSI is still negative, but the PMO has turned up.
The VIX is hovering below its moving average on our inverted scale which implies internal weakness. Stochastics have really improved with the rally and with its acceleration upward, it tells us the market isn't as internally weak as it may appear right now.
Here is the latest recording from 10/9:
S&P 500 New 52-Week Highs/Lows: New Highs increased slightly and as expected, New Lows pared back. The big news is that the 10-DMA of the High-Low Differential has bottomed. This bodes well.
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 DOWN and the condition is NEUTRAL.
The positive divergences on the Swenlin Trading Oscillators (STOs) turned out to be prescient as far as a market bottom. They continue to rise, confirming the developing rising trend. 2/3rds of the index now have rising momentum and that could keep this rally going.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The ITBM/ITVM rose again today, confirming the positive STOs and expanding momentum within the index. We see that over 1/4th of the index now have PMO Crossover BUY Signals.
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 are seeing significant improvement to %Stocks > 20/50EMAs, but readings aren't up to our bullish 50% threshold so we have to keep the bias in the short term as bearish, but improving. The SCI is attempting to turn back up but remains below its 10-EMA so the bias is bearish in the IT. The GCI is decelerating, but given less stocks have price above their 200-day EMA versus the GCI, it could continue lower, keeping the LT Bias as Bearish. The GCI is also below its 20-EMA.
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.
No changes.
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CONCLUSION: The six-month period of negative seasonality ends November 1, so it is possible that the next leg up has begun. STOs were our first indication that a rally was on tap, now we have confirming IT indicators. In particular, the 10-DMA of the High-Low Differential has turned up and that generally occurs at more significant market bottoms. Given that the war didn't ruffle any market feathers, and technicals are improving, we would look for this rally to continue in the short term. We aren't ready to consider the threat over given the bearish bias in the IT and LT, but this is looking more bullish than we originally anticipated. Stops should still be in place, particularly for any new positions you decide to open to take advantage of short-term strength.
Erin is 10% long, 2% short.
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BITCOIN
Bitcoin paused this weekend and ended the day lower. The indicators have not been compromised so we are still looking for a test of overhead resistance at 29,000.
INTEREST RATES
The Bond market was closed today.
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
The Bond market was closed today in observance of Columbus Day.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The Bond market was closed, but the ETF for 20-year Bonds, TLT did trade. It rallied strongly of new support at 84. We don't have the monthly chart here, but the strongest level of support still lies at 80 so while this looks like a good price bottom, take it with a grain of salt. Indicators are already trying to improve so we may see some relief on the horizon for Bonds. We don't think it will be the beginning of a long-term rally, but certainly yields have gotten out of hand and could use a pause. TLT could use a little upside and that's what we think we'll get, "a little".
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 is pulling back, but we wonder if the decline will last. Many times geopolitical uncertainty will boost the Dollar so we wouldn't short here. It is due for more decline and the PMO favors that conclusion as it has a new PMO Crossover SELL Signal. Stochastics are in decline. The Dollar has been overbought for some time and this small decline has afforded the RSI the opportunity to alleviate overbought conditions. Based on the PMO and Stochastics, the rising trend is especially vulnerable right now.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: SELL as of 10/5/2023
GLD Daily Chart: Gold was goosed today possibly due to the war. The Dollar was down only -0.03% so Gold should've been up by that amount based on their inverse correlation. Instead GLD soared +1.84% and $GOLD was up +1.04%! That's excellent internal strength. The RSI is rising again, as are Stochastics. The PMO is flat but should turn up shortly.
GOLD Daily Chart: We've been commenting that the PHYS discounts were getting oversold and calling for a possible upside reversal. The timing makes sense not only for that reason, but support was arriving near 1800. There is plenty of overhead resistance for Gold, but we think it will work its way through it on a nice rally higher.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners look excellent right now. Gold's rally certainly helped and we believe with the market in for a rally, this could be a lucrative area of the market to dabble in. Notice that participation of stocks above their 20-day EMA popped higher with the rally. Stochastics are moving up again. It would be safer to wait for more stocks to get above their 50-day EMA, but much the move will likely have happened by that time. Tread carefully.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: Crude Oil formed a bullish hammer candlestick on Friday, but it was the Israel-Hamas War that stirred prices. It was up a huge 4% today. It wasn't enough to turn the PMO back up, but we don't believe we'll have to wait for that. Oil prices are likely to continue much higher given the Middle East is ground zero.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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