The CPI was unchanged from last month, and it was up +3.2 from a year ago. The market reacted with much enthusiasm.
Also today, the S&P 500 Index (SPY) and the Dow Industrials (DIA) 20-day EMAs crossed up through their 50-day EMAs (Silver Cross), generating IT Trend Model BUY Signals. We'll discuss the SPY later.
DIA gapped up today in what appears to be a breakaway gap. The index is not overbought given the RSI is below 70 and indicators are not in overbought territory. The Silver Cross Index is rising strongly. We would like to see the Golden Cross Index pick up but we have solid participation of stocks above their 20/50/200-day EMAs. We do note that it isn't performing as well as the SPY.
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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 rally was broad today as we note that the SPY didn't perform as well as equal-weight RSP. We have now overcome the intermediate-term declining tops trendline. Today's breakout has the earmarks of a breakaway gap that suggests higher prices will follow.
The VIX is not as low as we've seen it previously which we believe is a good thing, it isn't as overbought as it could be particularly given the strong rally out of the October low. Stochastics turned up at the top of the range suggesting we have plenty of internal strength.
Here is the latest recording from 11/13:
S&P 500 New 52-Week Highs/Lows: New Highs popped today so we saw great performance out of leadership stocks. The 10-DMA of the High-Low Differential is rising strongly in positive territory and is not overbought.
Climax* Analysis: There were strong, unanimous climax readings on the four relevant indicators today, giving us an upside exhaustion climax. To clarify, there was an upside initiation climax on Friday, and the rule is that all climaxes following an initiation climax must be considered exhaustion climaxes. That said, we must say that this doesn't look particularly like exhaustion. SPX Total Volume was solidly above the one-year daily average, but not at what we would consider blowoff levels.
Of particular interest is the NYSE UP/DOWN Volume Ratio. On November 2 it reached 9.2, and we noted that was extremely bullish. Today the Ratio reached 10.8. If I remember correctly, in his book, Winning On Wall Street, Marty Zweig indicated that readings of 9.0 or greater are very bullish, and it is extremely bullish when another reading of 9.0 or greater follows close behind the initial reading.
*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) not surprisingly reversed upward with today's strong rally. Participation expanded with over 85% now showing price above the 20-day EMA. We have a tremendous 92% with rising PMOs. This rally was broad.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM and ITVM accelerated higher on the rally. We now have 84% with PMO BUY Signals and that can support higher prices.
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 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 as Bearish. We're seeing great improvement in stocks above their 200EMAs so we do expect it to overcome 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: We saw an excellent broadening of market participation. This was helped by better inflation expectations and lower interest rates. We now expect to see follow-through on this rally despite how hot it ran today. We see today's move as a breakaway gap that will precede even higher prices. The upside exhaustion climax doesn't really bother us right now, given the very bullish readings on NYSE Up/Down Volume. Swenlin Trading Oscillators are now on board as they reversed higher. IT indicators are confirming and participation is strong. Portfolios can be expanded carefully, but we would continue to use stops as this rally will need to be digested at some point.
Erin is 70% long, 0% short.
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We noted that Stochastics had dropped precipitously yesterday and that could be a problem. We didn't expect it to be this big of a problem, but it was time to see this rally cool off. Price is still above the 20-day EMA, but we do expect more decline based on today's new PMO Crossover SELL Signal.
Interest rates dropped heavily today adding to investors' giddiness on better than expected inflation readings. We do see them moving lower from here, but worry that this decline is already overdone.
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
We now have a convincing bearish head and shoulders pattern on $TNX. We have landed on strong support so a little bit of consolidation here would make sense. Indicators are still very bearish and with this chart pattern, we should look for the yield to drop further from its rising trend.
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: 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 finally had a terrible day. Today's decline took price below not only the 50-day EMA, it also took out horizontal support. The PMO is accelerating lower and the RSI looks very negative. The Dollar is likely in for more decline.
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold took advantage of the falling Dollar, but not as much as it could have. The Dollar was down over 1.5%, yet GLD was only up 0.89%. We still see some downside pressure on Gold due to this. Additionally, the PMO hasn't reversed upward yet. Stochastics have turned back up so the rally should continue.
GOLD Daily Chart: Price did reverse on the 200-day EMA and that could provide strong support, just not as strong as 1900. We like Gold right now and do expect more upside. It just may be a more muted rally as the majority of money is likely to land in equities right now.
GOLD MINERS Golden and Silver Cross Indexes: We've noted that this would be the perfect place for Gold Miners to reverse higher, but indicators have kept us on the sidelines. This looks like a solid rally as it brought participation back to life. The Silver Cross Index also reversed higher. We like Gold and the market right now so Gold Miners should rally further from here. We do have the development of a bullish reverse head and shoulders as well.
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 was down on the day, but maintained its short-term rising trend. It is still acting fishy with a negative RSI and a PMO that isn't rising much. Stochastics do look good so we should expect a breakout above short-term resistance, but we need more out of the PMO before we look for a longer lasting rally. We expect demand will pick up for the holidays and that should get prices moving higher again.
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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