We'll look at the Swenlin Trading Oscillators in the short-term indicators section, but we deemed it worthy of the headline today.
The market paused today. Looking at the 5-minute bar chart we can see that the consolidation actually began last Friday after the final gap up. The market dipped into negative territory today but overcame. Today's trading was punctuated by a strong rally. The 5-minute PMO is surging above the signal line and Stochastics did angle upward in positive territory. We would look for this rally to pick up where it left off in the very short term, but ultimately we'd expect more digestion.
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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: Friday's upside exhaustion climax didn't result in lower prices, but the rally did cool. Last week's thrust has lost momentum. We now await a breakout from the intermediate-term declining tops trendline. It isn't surprising that the rally is starting to abate at overhead resistance at the October top and declining tops trendline.
Friday the VIX punctured its upper Bollinger Band on the inverted scale, but we now see that the Bands are expanding. This leaves room for it to move higher without another puncture. Stochastics have now moved above 80 suggesting internal strength.
Here is the latest recording from 11/6:
S&P 500 New 52-Week Highs/Lows: Another sign that the rally is cooling would be New Highs losing steam today. We like that the 10-DMA of the High-Low Differential is still rising strongly.
Climax* Analysis: There was only one climax reading out of the four relevant indicators, not enough to declare a climax day. SPX Total Volume contracted to well below the one-year daily average. This is consistent with the pause we were expecting.
*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 OVERBOUGHT.
We saw a little bit of deterioration on our short-term indicators. Of primary concern is the decline of the STO-V. Additionally, we shouldn't have seen %Stocks > 20EMA and %PMOs Rising turn down on a rally.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
All of our intermediate-term indicators moved higher on the day. Given the positive divergences that led into this rally, we tend to believe this bottom won't be tested anytime soon.
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 over 50% of stocks above both their 20/50-day EMAs which settles us into a strong bullish bias in the short term. The SCI is above its signal line and rising keeping our IT bias as bullish. The GCI did bottom but it remains below its signal line which gives us a bearish long-term bias.
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: The bias table shows the intermediate-term bias is moving bullish on most of the indexes, sectors and groups that we follow. The short-term bias is clearly bullish, but the market needs to finish digesting last week's strong rally. The short-term indicators saw deterioration today when they really shouldn't have. The rally has gotten too extended and too hot to expect prices to continue to shoot higher. We expect there will be some profit taking in the short term that could depress prices this week. With bullish biases returning and rising intermediate-term indicators, we do expect this digestion phase to resolve with more rally. This could offer an opportunity to take your own profits or to consider portfolio expansion on pullbacks. Continue to apply stops for protection.
Erin is 60% long, 0% short.
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BITCOIN
Bitcoin has formed a bull flag. The flag, however, is rising and not falling. Typically rising flags don't conclude with another flagpole. The PMO has angled over and the RSI is very overbought. We also see Stochastics slipping a little bit. We expect Bitcoin will hold up longer.
INTEREST RATES
Yields rose on the day after sliding most of last week. Rising trends were broken on some of the yields which suggests they are vulnerable to more downside. The FOMC is continuing to hold the pause button and not cut rates so ultimately expect them to continue rising.
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 has rebounded before testing gap support and the rising bottoms trendline. That is bullish and suggests that the second parabolic breakdown has concluded. Indicators are still negative, but this looks like a good place for $TNX to launch back up.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Friday's bearish filled black candlestick resolved with a decline today as we would expect. Yields have pulled back, but we sense that they are ready to rise again and that will put a damper on this rally. We see a double bottom, but price failed to confirm the pattern on the filled black candlestick. At best we believe TLT will continue to move within a trading range between 82 and 91.
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 looks vulnerable after last week's decline. Price has stopped on the 50-day EMA, but we see a breakdown likely ahead given the declining PMO and vertically falling Stochastics.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: The Dollar looks vulnerable and that should be good news for Gold which has been digesting its October rally for the past two weeks. The PMO has turned over and Stochastics are falling so we could see more consolidation. We are bullish on Gold overall and do expect an upside breakout.
GOLD Daily Chart: Gold stalled at overhead resistance at the psychological 2000 level. We say it is say it is a psychological level as most throw around "Gold at 2000" or "Gold at 1000" (those were the days) phrases. We will likely run into this again when Gold challenges all-time highs.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners digested Friday's rally with a pullback. Price is struggling to get back above overhead resistance. It is a strong level of resistance given it has numerous "touches" and coincides with the 200-day EMA. The PMO is rising again and today's decline didn't really damage participation readings. Ultimately we do expect a breakout for GDX. This looks like a complex bullish reverse head and shoulders.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: Supply and demand issues are causing Crude Oil to stagnate. At this point we would say that too many agree that Crude Oil is due for a big move higher. There is too much bullish sentiment. We have a bearish double top on this chart that begs for a breakdown. The PMO has just hit negative territory. It may not be a popular opinion, but we think Crude is going to head lower before it heads higher.
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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Price Momentum Oscillator (PMO)
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Bear Market RulesERT: 11-06-2023