Today the Nasdaq 100 ETF (QQQ) and Semiconductor Industry Group (SMH) 20-day EMAs crossed up through their 50-day EMAs (Silver Cross), generating IT Trend Model BUY Signals.
The breakout today took price above overhead resistance at the October high. Additionally, the declining trend out of the July high has been broken. While this looks good, we would point out that participation shrank on the rally.
Semiconductors have led much of the rally, but under the hood we aren't particularly impressed. Like the NDX, despite a strong rally today, participation of stocks above their 20/50-day EMAs contracted. Our sense is that there are some strong semis out there (likely large caps) that are leading this charge. We'd like to see broader participation.
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: NEUTRAL as of 9/22/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: Today's rally took price right up to the declining tops trendline. This could pose a problem, but overhead resistance at the October highs was overcome suggesting this declining trend will be overcome. The PMO is nearing positive territory and the RSI is already in positive territory.
The VIX eased on today's rally, but readings are still well-below the upper Bollinger Band on our inverted scale. This suggests it could move higher without a puncture. Punctures generally lead to downside. Stochastics are oscillating strongly above 80 so we do have internal strength. Notice that RSP is underperforming the SPY. This tells us that large-caps are leading the market higher, it isn't necessarily a broad rally that we are experiencing.
SPY Weekly Chart: This week the weekly PMO turned back up which bodes well for an upside breakout from the declining tops trendline.
New 52-Week Highs/Lows: New Highs expanded, but we also saw an expansion of New Lows that also suggests this rally isn't all that broad right now.
Climax Analysis: Today's upside reversal was not expected after yesterday's downside initiation climax, but there were strong climax readings on three of the four relevant indicators, giving us an upside initiation climax. SPX Total Volume contracted to below the one-year daily average, which is okay but not a resounding confirmation.
*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 hit negative territory today as they continue to contract. This hasn't really resulted in much more than a deceleration of the rally. This has bullish implications.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
It won't be long before we can mark the intermediate-term market trend as "UP". Both the ITBM and ITVM reversed course upward. The ITBM saw a strong push upward. %PMO Crossover BUY Signals turned up today as well.
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 are turning it on. Currently they hold the highest IT Bias due to the strong improvement to the SCI. Financials in general are looking up as you can see a strong improvement to XLF's SCI.
The struggling sector is Energy (XLE) which holds the most negative IT Bias. With the drop in Crude Oil, Energy positions have been decimated. Unfortunately things could get worse as the SCI is still reading at 39 and the GCI is reading 87.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
Semiconductors hold the highest SCI reading, but it is still below out 50% bullish threshold. We should be seeing more improvement and higher readings given the strength of the rally. This seems to be more evidence that the rally isn't that broad.
Transports hold the lowest reading, but we did see improvement. We should be worried about Gold Miners (GDX) and XLE given they were the only ones to lose SCI points...a lot of SCI percentage points.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
XLE holds the highest GCI value, but it is deteriorating along with the SCI. This is a sector in decline and is showing weakness under the hood. It lost 4 percentage points on the GCI this week.
Regional Banks (KRE) is on the mend as noted earlier, but we aren't seeing any movement on the GCI yet. It currently holds the lowest reading. If the intermediate term is any indication though, we should begin to see improvement in the long term too.
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 but improving in the long term.
The market bias has been moved to "Bullish" in the short term given that %Stocks > 20EMA is above 50% and %Stocks > 50EMA are nearly above 50%. The SCI is above its signal line and rising which keeps the intermediate-term bias as "Bullish". The GCI is showing improvement, but it remains below its signal line so the long-term bias is listed at "Bearish".
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 happy to report that intermediate-term indicators are rising again. We were concerned their downturn was the beginning of a more serious decline on yesterday's drop and downside initiation climax. The rally is strong, but we have doubts about how broad it is. Participation is shrinking despite higher prices which leads us to believe there are a select group of stocks leading this charge. It is a sign to us that despite an upside initiation climax the market is still vulnerable to the downside. A giant decline doesn't appear to be in the cards, but short-term, the market needs to decompress. Portfolio positions should hold up, but as we discussed yesterday, weak positions should be dispensed with. If they haven't strengthened by now in the rally, they aren't likely to if the market weakens.
Erin is 55% long, 0% short.
Calendar: Options expire next week. Expect low volatility on Thursday and Friday. It is not an end-of-quarter expiration, so SPX Total Volume should be normal.
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact firstname.lastname@example.org for more information!
Rising bull flags don't usually resolve upward, but it certainly did for Bitcoin. ETFs may be arriving that follow Bitcoin and likely this is driving investors toward it. The RSI is very overbought, but the PMO has surged above the signal line and supports higher prices ahead. Even Stochastics have begun rising again. We expect the rally to continue despite overbought conditions.
This chart is to show where some of the support/resistance lines come from. The current breakout is very bullish for Bitcoin. Overhead resistance is scant at this point, offering Bitcoin the opportunity to rally even further.
Interest rates eased today which likely offered fuel for today's rally. They are pulling back in declining trends. Bond funds are enjoying this bit of relief.
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 was down slightly today, but up for the week. The rising trend remains intact so we could see the yield reverse higher from here. There was no need to test gap support before it turned back up and that is bullish. We've been waiting for the breakdown given the very negative PMO, but now the PMO is decelerating and Stochastics have ticked upward. Given the mixed messages on the chart, we vote for consolidation above gap support.
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 7.76 to 7.50.
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The 20-year yield moved into a declining trend and that offered TLT the opportunity to establish a rising trend. Currently TLT is consolidating, but given the positive RSI, rising PMO and Stochastics above 80, we would look for the rally to continue at least to overhead resistance at 91 or 92.
TLT Weekly Chart: The weekly chart suggests this rally could get legs. The weekly RSI is rising and the weekly PMO is beginning to rise as well. It isn't surprising that price is struggling right now as it is up against strong resistance at the 2022 low.
IT Trend Model: NEUTRAL as of 7/13/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar has still not decided whether it will breakout or breakdown. The PMO has suggested a decline ahead since the beginning of October on its Crossover SELL Signal. Yet price has only consolidated sideways. This speaks to internal price strength. Stochastics are rising again so we have mixed messages. When that happens we look for sideways consolidation. It appears the Dollar will continue moving sideways near-term.
UUP Weekly Chart: The weekly PMO is now surging (bottoming) above the signal line which suggests to us that overhead resistance will eventually be tested at the 2022 high when the consolidation phase ends.
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GOLD Daily Chart: Gold is on the skids short-term and based on the new PMO Crossover SELL Signal, we should look for more decline. While support is near at the 200-day EMA and gap support, we aren't confident that it will hold there. Notice that relative strength against the Dollar is fading.
Discounts are beginning to expand on PHYS so investors, not surprisingly, are getting bearish on Gold. We need to see them move much higher before we can view this as positive for Gold.
GOLD Weekly Chart: It was a rough week for Gold, but the weekly PMO is still technically rising. 1900 is the level we'll be watching for an upside reversal. Unfortunately there is a strong possibility a decline to that level will push the weekly PMO downward. Stay tuned.
GOLD MINERS Golden and Silver Cross Indexes: GDX lost support today but managed to close just above 27.00. We've already noticed the deterioration of the internals. This could be a good reversal point, but with Gold looking so bearish we believe a drop to 26.00 is likely. This makes sense given the negative RSI, now negative PMO and sliding Stochastics.
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 is reversing off support at the August low. The PMO is already decelerating and Stochastics have turned up. This may be the end of the decline in Crude. We expected the double top would push price down further, but we have to acknowledge the strengthening PMO, RSI and Stochastics. We wouldn't necessarily be buyers here, but we wouldn't be shorting.
USO/$WTIC Weekly Chart: The weekly chart tells us that Crude is vulnerable to more downside. The weekly PMO is headed for a Crossover SELL Signal and the weekly RSI has just moved into negative territory. There is still downside pressure that USO needs to overcome. The drop beneath the 43-week EMA is also a problem. Many say the decline is "overdone", but this chart tells us it isn't necessarily over.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
(c) Copyright 2023 DecisionPoint.com
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.
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.
Helpful DecisionPoint Links: