The Industrials Sector (XLI) is the third sector to see its Silver Cross Index move above its 10-day EMA switching it to an Intermediate-Term Bullish Bias. As with all sectors, price has rallied strongly out of its low. It is seeing exceptional participation with %Stocks > 20/50/200EMAs all reading above our 50% bullish threshold. The RSI has entered positive territory and the PMO is on a new Crossover BUY Signal. Stochastics also reached above 80 today. It is beginning to outperform the SPY again. The market's rally is lifting all boats, but some are seeing more relative strength than others.
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: We had expected a decline today based on yesterday's shooting star candlestick and the upside exhaustion climax. Instead we saw more rally on a day where the Fed said they were likely staying the course, leaving rates the same next time around with a possibility of tightening again. The market didn't mind.
The indicators saw action today with the PMO on a Crossover BUY Signal and the RSI reaching above net neutral (50). The VIX has moved above its moving average on the inverted scale and Stochastics are nearly above 80. Both suggest internal strength.
Here is the latest recording from 10/9:
S&P 500 New 52-Week Highs/Lows: New Highs continue to expand and are not overbought. The 10-DMA of the High-Low Differential is rising strongly.
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) and %PMOs Rising are getting overbought. As we noted yesterday, they could get more overbought, and likely they will, given the internal strength of the market right now. For now all indicators are rising which is bullish in the short term.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The ITBM/ITVM are rising and unlike STOs are not at all overbought. These indicators suggest to us that this could be a more significant bottom than originally thought. The declining trend from the past two major tops has yet to be broken, but given bullish indicators, we expect it to be.
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 SOMEWHAT BULLISH in the short term.
The market bias is BEARISH in the intermediate- and long-terms.
We are moving our short-term bias to "Somewhat Bullish" given we now have %Stocks > 20EMA higher than our bullish 50% threshold. We won't go fully bullish until %Stocks > 50EMA is above that 50% threshold. The SCI has turned up which is bullish. We are waiting for it to shift above its signal line before calling the IT Bias as bullish. The GCI is below our bullish 50% threshold and is in decline leaving the long-term bias bearish.
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.
As noted in the opening, the Industrial Sector (XLI) Silver Cross Index crossed up through its 10-day EMA, changing the BIAS to bullish.
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CONCLUSION: The Producer Price Index (PPI) print didn't upset the apple cart today, but the release of the Consumer Price Index (CPI) could see some market turbulence if it reads hotter than the already expected 3.6%. The market is internally strong and the rally is likely to continue. With indicators in the short term already getting overbought, we should be on the lookout for some churn or a pause. Ultimately with IT indicators rising and not overbought, we do believe that we've hit a significant or cardinal market bottom. Portfolio expansion should work, but set loose stops to protect against a severe decline.
Erin is 45% long, 2% short.
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BITCOIN
Bitcoin toppled as Stochastics suggested it would. The RSI has just moved below 50 and the PMO has topped and is nearing a Crossover SELL Signal. We don't believe 26,500 will hold as support. We would look for chop and churn back down to 25,000.
INTEREST RATES
Nearly all yields moved lower on the day, offering Bonds an opportunity to solidify rallies.
We do note the yield curve flattening, but this isn't due to falling rates, it is due to longer-term rates rising to meet already high shorter-term rates.
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
Yesterday's comments still apply:
"We identified the parabolic pattern on Friday, and Tuesday we saw the breakdown. We just love the reliability of parabolics -- they beg for correction, and they usually deliver. We do not think that the top for yields has been reached, but a short correction is in order. The rising trend doesn't look vulnerable 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: TLT rallied strongly as the 20-year yield tumbled. With yields in correction mode, we should expect Bond funds to benefit. We don't see this as the beginning of a longer-term rally, but certainly a trip up to resistance seems likely given the improvement of the RSI, PMO and Stochastics.
DOLLAR (UUP)
IT Trend Model: BUY as of 8/3/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: Yesterday's comments still apply:
"The Dollar has pulled back to the rising bottoms trendline and based on the PMO and Stochastics, we have to believe the decline will continue. We do recognize this would be the perfect place for the Dollar to resume the rally given price is on the rising bottoms trendline and the 20-day EMA. We vote for a breakdown at this point based on deteriorating indicators."
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: SELL as of 10/5/2023
GLD Daily Chart: Gold is taking advantage of the falling Dollar, but is also showing internal strength on its own given it was up on a day where the Dollar was up slightly. We can see the rising relative strength line against the Dollar.
GOLD Daily Chart: We are bullish on Gold, but apparently most are not given the still high discount readings on PHYS. This is a favorable condition for Gold. We also have $GVZ puncturing the lower Bollinger Band on the inverted scale which can many times push Gold prices higher.
GOLD MINERS Golden and Silver Cross Indexes: We are now seeing improvement in %Stocks > 50/200EMAs which is bullish for Miners. The Silver Cross Index hasn't moved yet, but given expanding participation, we expect both the Silver Cross Index and Golden Cross Index to begin moving higher. Stochastics and the RSI are above net neutral (50) and the PMO has just given us a new Crossover BUY Signal. We are looking for price to easily test overhead resistance at the 200-day EMA and September top.
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 has eased, but we will tell you that Oil related ETFs filled one of Erin's Diamond PMO Scans today. Technically, Stochastics do suggest we will get an upside reversal, but it will take some serious upside to get the PMO to turn around. We expect Crude prices will continue to be volatile given the war in Israel.
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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