Today the Consumer Discretionary Sector (XLY) and Retail (XRT) ETF 20-day EMAs crossed up through the 50-day EMAs (Silver Cross), generating new IT Trend Model BUY Signals.
Currently XLY is consolidating after its likely continuation gap. We do not like that participation didn't expand much on today's rally but it remains robust enough to look for an eventual move higher.
XRT is not yet above overhead resistance but it is showing improving participation. We don't have enough stocks above their 200-day EMA to expect the Golden Cross Index to shift above its signal line, but a continuation of this rally should fix that. This looks like a saucer-shaped basing pattern. It is vulnerable to a "handle" or pullback, but overall the chart and indicators are healthy and imply further upside.
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.
Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!
MARKET/SPX SECTOR/INDUSTRY GROUP INDEXES
Change for the Week:
CLICK HERE for Carl's annotated Market Index, Sector, and Industry Group charts.
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: As expected, options expiration resulted in low volatility on Thursday and Friday, with a price range of less than 0ne percent. This has given the SPY an opportunity to digest the strong rally out of the October low. Price hasn't seen much damage, but as we noted yesterday, the RSI is getting overbought so we should expect more consolidation at a minimum.
The VIX is in overbought territory, leaving investors mostly complacent right now. Stochastics and the PMO are very strong and suggest any stumble will be temporary.
Here is the recording from 11/13:
SPY Weekly Chart: This week's breakout from the flag formation was impressive. The weekly PMO is rising toward a Crossover BUY Signal. The weekly RSI isn't overbought so while we could experience issues due to a daily RSI being overbought, in the intermediate term we should see follow-through.
New 52-Week Highs/Lows: New Highs continue to contract reflecting a negative divergence with price which continues to rise. The 10-DMA of the High-Low Differential is beginning to show signs of deterioration.
Climax Analysis: NYSE Up/Down Volume barely crossed the climax threshold. None of the other three showed signs of a climax so we will list today as a non-climax day.
*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) may be rising, but they currently show a negative divergence with price tops. Participation of stocks above their 20-day EMA did expand on the rally which is more than we can say for prior rallies. It is somewhat overbought. Also somewhat overbought is %PMOs Rising. We have a strong 88% showing rising momentum so that could fuel this rally after a market digestion period.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM continued to rise which does suggest this rally isn't in jeopardy in the intermediate term. We have a strong number of PMO BUY Signals, although that indicator did not rise (nor fall) today.
PARTICIPATION: The following tables summarize participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation. There are three groups: Major Market Indexes, Miscellaneous Industry Groups, and the 11 S&P 500 Sectors.
Regional Banks (KRE) have been rallying strongly and currently hold the highest IT Bias reading. This is primarily due to the incredible increase in the SCI this week. It shows you that this industry group is very hot right now.
The lowest reading goes to Energy (XLE). The SCI was decimated in the fall from grace of this sector and that pushed the IT Bias deeply into negative territory.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
The effects of this rally can be seen clearly in the incredible increase in SCI values across most of the sectors/indexes/groups we follow. Double digit increases were visible for all but six entities.
The biggest improvement was to KRE which had been camped out at the bottom of this table for weeks. Transports are in last place, but ultimately they still showed an increase in the SCI so it's not as bearish as it may appear.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
Energy (XLE) remains ensconced at the top of the GCI table, but we do think we'll see some deterioration as the decline in Energy doesn't appear over just yet given the loss on the SCI value.
Utilities (XLU) are long-term bearish as they sit at the bottom of the GCI table. But, we note that the SCI saw significant increases this week that could potentially propel the GCI forward as well.
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 very strong readings on %Stocks > 20/50EMAs that imply a bullish short-term bias. The SCI is above its signal line and rising strongly so the IT bias is bullish. The long-term bias remains bearish given the GCI is still below its signal line. This should change based on the higher percentage of stocks above their 200-day EMAs as compared to the GCI reading.
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: The SCI table reflects the strength of the current rally. However, it is time for the rally to cool. Negative divergences on the STOs and a topping 10-DMA of the High-Low Differential suggest this week's mild rally wasn't enough digestion. The RSI is also getting overbought which would also suggest the need for consolidation at a minimum. Participation is still robust enough to keep things afloat, but ultimately the market needs more digestion of the almost straight up rally out of the October low. Investors are awfully complacent based on the VIX which also points to a short-term decline. Revisit the stops in your portfolio to protect against a deeper decline. Selling doesn't appear necessary yet, but stops are required.
Erin is 70% long, 0% short.
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Bitcoin is digesting its rally in rather volatile fashion. The indicators have been unable to make up their mind, but ultimately Stochastics have turned up and the RSI is positive. Price is holding above the 20-day EMA. We believe more digestion is needed as represented by the PMO. We expect sideways movement a bit longer.
This chart is to show where some of the support/resistance lines come from. 37,000 is currently holding as overhead resistance.
Yields are in declining trends and while they did tick upward today, we believe they are vulnerable to more downside. Support is holding for 10-year yield but it hasn't held up for all. We expect they will travel lower longer.
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
Gap support is holding but the IT rising trend was compromised. There is a large bearish head and shoulders on the chart that implies this support level will not hold. Indicators are in agreement.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount, which shuts many buyers out of the market, and potential sellers will experience pressure to lower prices (to no effect so far).
This week the 30-Year Fixed Rate changed from 7.50 to 7.44.
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yields should continue to move lower offering Bond funds like TLT the opportunity to rally further. The indicators are strong with the PMO now entering positive territory for the first time in months. Stochastics are above 80 and the RSI is positive. There is also a large bullish reverse head and shoulders pattern visible. We expect TLT to continue to inch higher.
TLT Weekly Chart: There's a large bullish falling wedge on the weekly chart that also implies more upside ahead for TLT. The weekly RSI is negative but rising and the weekly PMO has turned up. We should expect an upside breakout.
IT Trend Model: NEUTRAL as of 7/13/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: UUP gapped down this week ending its period of consolidation. The indicators are negative and suggest further downside for the Dollar in the short term.
UUP Weekly Chart: The weekly chart also suggests more downside ahead. Price was turned away before testing overhead resistance which is bearish. Price has dropped beneath the 17-week EMA and the weekly PMO has topped.
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GOLD Daily Chart: Gold is showing new relative strength against the Dollar, but today it did not. The Dollar was down on the day and instead of rallying, Gold held steady. The RSI is positive and the PMO is attempting to have a crossover its signal line so ultimately we should expect a rally that will overcome the October high.
The correlation between Gold and the Dollar is somewhat positive instead of holding its typical inverse correlation. You'll note how it should work based on the correlation back in the first part of the year. We would actually like to have the inverse correlation back given the Dollar looks very weak.
GOLD Weekly Chart: Gold held above the 43-week EMA again this week. The weekly RSI is positive and the weekly PMO is nearing a Crossover BUY Signal. We do expect all-time highs to be tested. Right now it is consolidating sideways. A breakout above 2025 should occur soon.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners ultimately had a good week with participation beginning to expand again. We need to see the SCI shift above the signal line. Given we have a higher percentage of stocks above their 20/50-day EMAs v. the SCI, a crossover should occur soon. Gold looks somewhat bullish, but the market looks somewhat vulnerable which would likely pose a problem for Gold Miners. We are cautiously optimistic based on participation, but wouldn't be surprised if price continues to struggle beneath 30.
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 Oil rebounded strongly today. It was still down on the week. The double top pattern hasn't hit its minimum downside target around 62.50 yet. The PMO did decelerate today. Stochastics did turn back up but barely. We don't think the decline in Crude is over just yet. We are still expecting a breakdown at the next support level.
USO/$WTIC Weekly Chart: We would look for the rising bottoms trendline to be broken right now given the negative weekly RSI and new weekly PMO Crossover SELL Signal. We are not looking for a breakdown below 60 as we do expect demand will pick up shortly during the holidays.
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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