Today the Financial Sector (XLF) and Regional Banking Industry Group (KRE) 20-day EMAs crossed up through the 50-day EMAs (Silver Cross), generating IT Trend Model BUY Signals.
XLF formed a bull flag before we saw the breakaway gap yesterday. It implies more upside ahead for this sector. Our only concern is that participation is actually getting overbought as far as %Stocks > 20/50EMAs. The Silver Cross Index is rising strongly however so even if we do see XLF stumble it won't likely fall hard.
KRE is one reason the Financial sector is so healthy right now. They too saw a breakaway gap yesterday. They were beaten down on the crisis and this has offered a nice opportunity for them to recover. Price is up against resistance at the 200-day EMA and that has previously proved fatal for KRE, but given the strong amount of participation and the strongly rising Silver Cross Index, we would expect a breakout here.
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: Today saw the formation of a bearish filled black candlestick. It isn't the worst one we've seen but it is bearish nonetheless. The RSI is still rising and isn't overbought yet. The PMO is rising above the zero line so overall we see health.
The VIX is somewhat overbought right now, but there is plenty of room before it hits the upper Bollinger Band on the inverted scale. Stochastics are incredibly strong right now as they have camped out at the top of the range.
Here is the latest recording from 11/13:
S&P 500 New 52-Week Highs/Lows: New Highs contracted today so we did see a negative divergence. The 10-DMA of the High-Low Differential reflects internal strength.
Climax* Analysis: There was only one climax reading on the four relevant indicators today, so this will not be a 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 NEUTRAL.
Swenlin Trading Oscillators (STOs) continue to rise giving us confidence in the current rally. %Stocks > 20EMA is getting overbought, but it can still accommodate more upside. A whopping 92% of stocks have rising momentum. That will provide fuel for a rally continuation.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM and ITVM are continuing to confirm short-term indicators as they rise in positive territory. They have plenty of headroom to move higher. %PMO Xover BUY Signals is getting overbought, but also has room to move higher from here. Given 92% have rising PMOs, we should see this indicator rise further and toward 92% itself.
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 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: The rally lost some steam as represented by New Highs contracting on a rally. While indicators are very bullish right now, we know that this rally has been somewhat overdone at this point and requires some consolidation at the very least. Today's "almost" climax numbers suggest a continuation of yesterday's upside exhaustion climax. Prepare for some chop and likely churn as the incredible rally out of October lows cools. This will give some of our overbought indicators the opportunity to ease those conditions. Given strongly bullish indicators in both the short and intermediate terms, the rally will likely only hit the pause button before resuming.
Erin is 70% long, 0% short.
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Stochastics fooled us on Bitcoin which obstinately reversed higher after a PMO Crossover SELL Signal. The RSI is back to being overbought. We suspect this rally is due to the high likelihood we will see a BlackRock ETF that would prime the Bitcoin pump. Price pulled back to support at the 20-day EMA and reversed. This speaks to internal strength. Based on reversing indicators, we should expect Bitcoin to maintain this price level at the very least.
Interest rates reversed higher today. We do believe the pullback has been overdone. We're watching the 10-year yield closely to see if it will hold support.
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 reversed higher off gap support, but the large bearish head and shoulders pattern suggests it will decline further. Indicators are very negative, so we would expect to see this support level give way.
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 saw a small rally, but it was unable to recapture support. The PMO did accelerate its decline and Stochastics are below 20 so we do expect the Dollar to continue to decline.
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold was down slightly today. Stochastics do suggest a rally continuation is possible but, we wouldn't look for much upside movement until the PMO reverses higher. It's close.
GOLD Daily Chart: Gold wasn't down as much as the Dollar was up so it did show some strength despite the decline. One concern is that the correlation between the two has become positive. The Dollar looks weak and that correlation could work against it.
GOLD MINERS Golden and Silver Cross Indexes: We like the rally off support and that participation overall is improving. What we do not like right now is the Silver Cross Index topping beneath its signal line. Based on the PMO we do expect the rally to continue, but the Silver Cross Index does suggest this is a more risky investment than previously.
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 broke its short-term rising trend and reversed at overhead resistance. We expect demand will pick up for the holidays and that should get prices moving higher again, but until then we suspect USO will flounder a bit more given the declining PMO, bearish double top and topping Stochastics. It looked like a great reversal point, but the last two days of decline suggest we may need to test support closer to 67.00.
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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