One of the things we keep track of is the performance of the S&P 500 Index (SPY), which is cap-weighted, versus the S&P 500 Equal Weight Index (RSP). In a healthy bull market the equal weighted index (tan line) will out perform the cap-weighted index (blue line) because the advance is broadly based. This is demonstrated by the chart below.
As an advance gets closer to a top, participation narrows and the cap-weighted index takes the lead. We are now at that point in the rally, as you can see from the next chart -- the leadership shifted months ago. That doesn't mean that the rally has to end right away, but it will probably end sooner than later.
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: BUY as of 11/14/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: The market had a mild rally. It was unable to set a higher high and it set a lower low than yesterday. The steam seems to be running out of the rally. We note that the RSI is nearly in overbought territory which would also imply the rally could be ready to reverse.
Stochastics are still very positive as they remain at the top of their range suggesting internal strength. The VIX is comfortably above its moving average and isn't as overbought as it can get.
Here is the latest recording from 11/13:
S&P 500 New 52-Week Highs/Lows: New Highs contracted again today deepening the negative divergence. The 10-DMA of the High-Low Differential decelerated which could also be signaling it is time for the rally to cool further.
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 SOMEWHAT OVERBOUGHT.
Swenlin Trading Oscillators (STOs) are beginning to get somewhat overbought. They are rising strongly which tells us we still have price strength. We saw a slight negative divergence between price and both %Stocks > 20EMA and %PMOs Rising as they both declined on a rally day.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
We're still listing the ITBM/ITVM as "neutral" but note that they are nearing somewhat overbought territory. They seem healthy for now and we did see a slight increase in rising PMOs. The intermediate term appears bullish.
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 short-term market bias is BULLISH.
The intermediate-term market bias is BULLISH.
The long-term market bias is BEARISH.
We saw negative divergences on participation as both %Stocks > 20/50EMAs contracted while price moved higher. Still, we have strong readings in participation of stocks above their 20/50/200EMAs. They are all above our 50% bullish threshold. The Silver Cross Index is now rising almost vertically above its signal line. The Golden Cross Index is below its signal line and that is the only thing keeping the long-term bias Bearish. The upper bound for the Golden Cross Index is determined by %Stocks > 200EMA. That reading is higher than the GCI so we should expect a crossover its signal line soon.
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.
CONCLUSION: It wasn't a strong rally and that was confirmed by contracting participation and New Highs. The RSI is getting overbought so while indicators are still on the rise, we should expect at least some consolidation sideways to relieve it soon. Mega-caps are in charge based on the SPY and RSP. They can keep things moving upward, but they too will need a cooling off period. There is a bullish bias in the short and intermediate terms so no need to get overly bearish. We should just be prepared for a period of digestion. We don't see evidence that we'll get a deep decline, but stay alert with stops "just in case".
Erin is 70% long, 0% short.
Calendar: Options expiration is tomorrow, and we expect volatility to be low.
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Ah Bitcoin...talk about whipsaw! We had originally expected the decline set in motion last week would continue based on the PMO and Stochastics. Then wham! yesterday saw a strong upside reversal that moved Stochastics back up and triggered a PMO Crossover BUY Signal. Today the PMO whipsawed back into a SELL signal and Stochastics turned back down. Ultimately, the PMO is overbought and begs for a decline. The 20-day EMA is holding up for now, but indicators do suggest it will break.
Interest rates turned back down today. They remain in declining trends. We know that the 10-year yield has hit strong support, but those declining trends do seem to suggest more downside for yields.
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 continues to hold its own above gap support. The indicators remain very negative suggesting a breakdown ahead. Stochastics look particularly bearish. The large head and shoulders also suggests that this level of support will not hold up.
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday's comments still apply:
"With the strong reversal in interest rates, Bond funds are finding favor. TLT has now formed a bullish reverse head and shoulders pattern that does suggest we will breakout above overhead resistance that is looming ahead. Stochastics reversed and are back above 80. The RSI is positive and the PMO is nearing positive territory on an oversold Crossover BUY Signal. We would look for a breakout."
IT Trend Model: BUY as of 8/3/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar so far is unable to get back above overhead resistance. The PMO and Stochastics certainly suggest we will see more downside, but we do have another support level nearby. We suspect it will drop down to the 200-day EMA.
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold rallied strongly. The Dollar was up a tiny bit which normally would mean a small down day for Gold. You'll notice the rising relative strength line against the Dollar. The PMO has now turned back up and Stochastics are moving higher. Gold should overcome the October high.
GOLD Daily Chart: Discounts are fairly low meaning that investors are feeling better about Gold. Discounts will deepen when investors are more bearish. Certainly overhead resistance will be tested and based on positive indicators, it should break out from there.
GOLD MINERS Golden and Silver Cross Indexes: GDX enjoyed a nice rally on Gold's good day. There is still a declining trend out of the October top and the Silver Cross Index is below its signal line so risk is still evident. However, we do see participation expanding again, the RSI is positive now and the PMO is nearing a Crossover BUY Signal. We also have a complex bullish reverse head and shoulders. We like this group, but would still tread carefully based on the Silver Cross Index.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/7/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: Crude tumbled today, accelerating its already steep decline. The indicators look terrible with the RSI in negative not oversold territory, the PMO declining after recently topping beneath the signal line and Stochastics topping in negative territory. We would look for the double top to fulfill its minimum downside target with a drop to at least 62.50. We will watch closely to see what price does at the next line of support.
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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