The Fed left interest rates alone today, so yields took a hit. We think this is a momentary dip rather than a permanent change of direction. The next Fed announcement is December 13. We would be prepared for rates to move higher again.
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: The rally brought prices back up to the 200-day EMA and 20-day EMA. Both could present some difficulties, but given yesterday's exhaustion climax didn't result in a decline, we believe a breakout is imminent.
The VIX is rising above its moving average on the inverted scale and Stochastics are also rising suggesting internal strength in the short term. The PMO and RSI are rising.
Here is the latest recording from 10/30:
S&P 500 New 52-Week Highs/Lows: New Highs picked up as we would expect, but we did see a rather large increase in New Lows considering the strength of today's rally. The 10-DMA of the High-Low Differential is oversold but still declining.
Climax* Analysis: There were no climax readings today. SPX Total Volume was strong enough to suspect a blowoff, but it probably isn't.
*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 DOWN and the condition is NEUTRAL.
Swenlin Trading Oscillators (STOs) hit positive territory today. We would've liked to have seen a greater increase in stocks above their 20-day EMA, but we will settle for nearly 2/3rds of the index holding rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
IT indicators continue to rise, confirming the rise of our short-term indicators. We saw a positive crossover on %PMO Xover BUY Signals. We have strong positive divergences on all three indicators.
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 NEUTRAL in the short term.
The market bias is BEARISH in the intermediate and long terms.
We don't have enough expansion in %Stocks > 20/50EMAs to consider the short term as bullish, but they are in what we would consider neutral territory on their way to our 50% bullish threshold. The Silver Cross Index is below its signal line, but did turn up today. The Golden Cross Index is below its signal line and declining. This gives us a bearish bias in the intermediate and long terms.
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.
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CONCLUSION: We saw more flips to "Bullish" on our Bias table above which does imply the market is readying for a continuation rally. Our upside exhaustion climax resulted in a rally rather than a decline so we do think this rally could get legs. Internal strength is visible and positive divergences also suggest we will see follow through. We would still plan on this being a short-term in nature until we see more upward movement by the Silver Cross Index. We just entered a period of favorable seasonality so an extended rally isn't out of the question. Still, stops should be kept in play and can likely be tightened on the way up to protect against a premature end to the rally.
Erin is 20% long, 10% short.
Calendar: The 6-month period of favorable seasonality begins today.
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BITCOIN
Bitcoin broke out of the bullish flag formation and is likely ready to rally even higher despite the RSI being so overbought. The PMO is also very overbought, but is showing no signs of deterioration. Stochastics couldn't look any better. We would look for this rally to continue.
INTEREST RATES
Yields pulled back heavily today, but as we mentioned in the opening, we believe this is short-term.
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
Instead of a swift parabolic breakdown, we see a declining trend that is taking it down somewhat slowly. The 20-day EMA is being tested, but we could see price move to test the 50-day EMA as it has done on the way up. The PMO is in decline along with Stochastics so that seems a good place to expect an upside reversal. The 20-day EMA could hold, but Stochastics suggest not.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The PMO is putting more margin between it and its signal line. We suspect yields will pull back a bit more so TLT should see more upside. Stochastics are rising again, but we do need them to get back above net neutral (50). We expect to see TLT move higher, likely to the last price top. We expect any rally to fail at that point.
DOLLAR (UUP)
IT Trend Model: BUY as of 8/3/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar rallied today but formed a bearish filled black candlestick. Until the PMO starts to turn around, we expect any rally to be slow going. Today's candlestick does imply we will see a decline tomorrow.
Overall, we do see a high likelihood that the rally will continue. This looks like a textbook pennant on a flagpole. We don't expect another rally the height of the flagpole as the pattern suggests, but it does suggest we will see some kind of follow through.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold is cooling, but we believe it is temporary. The RSI is positive and the PMO is still rising despite the decline. The correlation has moved into positive territory suggesting Gold will likely follow the Dollar's lead, but not in the typical inverse correlation. Both could rise together.
GOLD Daily Chart: We aren't surprised Gold is struggling here as it has reached the psychological 2000 level. There is new bullish sentiment appearing as discounts are paring back. That could help push Gold higher. It isn't bullish enough to think contrarian sentiment yet.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners saw a small rally today. It didn't improve the participation picture. In fact, the Silver Cross Index has topped. Support is arriving so you could consider holding to see if we will get a reversal at this level or tighten your stops in case it doesn't hold. The slippage in participation does suggest stops should at the very least be tightened on your Gold Mining positions.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: USO formed a bearish engulfing candlestick that implies we will see another decline tomorrow. Support is near and we do expect it to hold. Technicals suggest we will see a breakdown there, we just aren't ready to get too bearish given the war in the Middle East.
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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