Today the Communications Services (XLC) and Technology (XLK) Sectors 20-day EMAs crossed up through the 50-day EMAs (Silver Cross), generating IT Trend Model BUY Signals. Both charts are similar in that there was an advance from last November followed by a period of consolidation beginning in July. It would be reasonable to assume that another advance has begun.
XLK has the added benefit of a breakout from a bullish falling wedge. The PMO has just reached positive territory. Participation is healthy although we note that %Stocks > 20EMA lost some ground on a strong rally day just like XLC.
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: Overhead resistance has been met. The rally will likely use this excuse to consolidate sideways.
The VIX stalled today, but certainly could see lower readings before we see another puncture of the upper Bollinger Band. Stochastics are rising strongly above 80 so we do still see internal strength.
Here is the latest recording from 11/6:
S&P 500 New 52-Week Highs/Lows: While New Highs did expand on the day, they didn't reach the prior top. This sets up a small negative divergence.
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 OVERBOUGHT.
We have more negative divergences on the short-term indicator chart. Both STOs have topped while price set a higher high. We also note that on another rally day both %Stocks > 20EMA and %PMOs Rising both contracted adding more negative divergences in the short term.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
IT indicators are all still rising so we are looking for the intermediate-term declining trend to be broken.
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 BULLISH in the short and intermediate terms.
The market bias is BEARISH** in the long term.
We have over 50% of stocks above both their 20/50-day EMAs which settles us into a strong bullish bias in the short term. The SCI is above its signal line and rising keeping our IT bias as bullish. **The GCI topped today below its signal line.
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: We're seeing signs of weakness in the short term. Swenlin Trading Oscillators have topped, leaving us with new negative divergences with price. New Highs show a negative divergence. We should expect price to by stymied by current overhead resistance. We will be watching participation closely as we shouldn't have seen it contract on two days of rally. The obvious conclusion is that we will see a pause in this rally or even a small pullback. For now, the ITBM and ITVM are rising and our intermediate-term bias is BULLISH for the SPY. This tells us that when the rally has been digested properly, we should see the rally get wings again. Reevaluate your stop levels. Loose stops may be in order so you aren't stopped out too quickly on any consolidation or small pullback.
Erin is 60% long, 0% short.
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Yesterday's comments still apply:
"Bitcoin has formed a bull flag. The flag, however, is rising and not falling. Typically rising flags don't conclude with another flagpole. The PMO has angled over and the RSI is very overbought. We also see Stochastics slipping a little bit. We expect Bitcoin will hold up longer."
Yields dropped on the day. Most long-term yields have formed declining trends so we could see them pullback a bit further. Ultimately we believe they will recapture last month's highs after a period of pullback.
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 is holding above gap support and the intermediate-term rising bottoms trendline. This does look like a double top. Stochastics did tick up today, but the PMO isn't encouraging. We think there is a distinct possibility that gap support won't hold. This would bring the 4.1% level into focus as a more likely stopping point on this decline.
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: There is now a clear declining trend on the 20-year yield. This should afford TLT the opportunity to test overhead resistance around 91. The RSI and PMO are configured positively so we would look for higher prices on long bonds.
IT Trend Model: BUY as of 8/3/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar managed to find support at the 50-day EMA, but today's bearish filled black candlestick suggests it will decline tomorrow. The RSI is seeing some improvement, but Stochastics and the PMO are decidedly negative. We believe this support level will fail.
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold was down on the rising Dollar. Support has been reached at the 20-day EMA, but the curling over PMO has us concerned we will see more pullback on Gold. Stochastics are also in decline.
GOLD Daily Chart: Gold is pulling back from overhead resistance at the 2000 level. Discounts on PHYS have pared back considerably so while price may be in decline, investors are warming to Gold. With indicators breaking down we would look for Gold to continue to slide lower.
GOLD MINERS Golden and Silver Cross Indexes: We had a feeling that GDX would struggle at strong overhead resistance. The decline in Gold spurred Gold Miners to move even lower. We do see some damage to participation, but Stochastics and the PMO are favorable enough to suggest that resistance level will be broken. GDX may need another test of support at 27.50 first.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/7/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: We noted yesterday that we were quite bearish on Crude Oil for various reasons. One primary reason was sentiment. Too many investors expect Crude Oil to be a no-brainer trade. Today, there was an IT Trend Model Neutral Signal as the 20-day EMA dropped beneath the 50-day EMA while it was above the 200-day EMA. The double top suggested to us that the decline wasn't likely over. The 200-day EMA was broken on today's decline and indicators are going from bad to worse. Look for Crude to continue to move lower.
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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