Momentum had been building on Energy (XLE) as price consolidated sideways, but instead of breaking out, it broke down swinging the PMO down into a Crossover SELL Signal. While the PMO may've been rising, we note that participation never expanded. %Stocks > 20/50/200EMAs are very low, but could get more oversold. Stochastics look terrible as they fall quickly lower. We see lower prices and a breakdown below 80.00 ahead.
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MARKET/INDUSTRY GROUP/SECTOR INDEXES
CLICK HERE for Carl's annotated Market Index, Sector, and Industry Group charts.
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: Despite another down day, price is still traveling mostly sideways. The PMO topped yesterday and the RSI continues to fall. Based on relative strength to equal-weight RSP, the broad market will need to hold things together as the larger-cap stocks begin to underperform. We don't think the glue will hold as the market is highly dependent on Mag 7 and other mega-caps for its fuel.
Despite three down days, the VIX readings remain very low suggesting investors are too complacent. Stochastics have now dipped below 80 so internal weakness is beginning to seep in.
Here is the latest recording from 12/4:
S&P 500 New 52-Week Highs/Lows: New Highs were higher today than yesterday on a decline. That could be considered a positive divergence, but we don't see it holding things together particularly given the 10-DMA of the High-Low Differential is falling.
Climax* Analysis: There were no climax readings today.
*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 are still listing Swenlin Trading Oscillators, %Stocks > 20EMA as overbought. %PMOs Rising is no longer overbought. All of these indicators continue lower suggesting short-term weakness.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is EXTREMELY OVERBOUGHT.
After topping yesterday, both the ITBM and ITVM moved lower again. They are coming out of extremely overbought territory and require more decline to clear overbought conditions. We still have many PMO BUY Signals still intact, but given only 60% of PMOs are rising, this indicator should take a big hit 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 all three timeframes.
All indicators are reading at or above our bullish 50% threshold. This is bullish for the short term. However, we do expect to see more deterioration moving forward given market weakness in the near term. The Silver Cross Index (SCI) and Golden Cross Index (GCI) are both above their signal line so we must read the intermediate and long terms as bullish. Readings for both the GCI and SCI are quite a bit below the readings at the July top which we've overcome. That is a negative divergence.
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 market is getting ready to turn over. All of our primary indicators are declining, most out of overbought territory. One thing that seems to be holding it altogether are the number of stocks holding PMO BUY Signals. We also still have many that are holding above key moving averages. This isn't likely to continue given the weakness we're seeing in the Magnificent 7. We would prepare for a short-term decline. Based on IT indicators, that could turn into a longer-term decline, but for now given internal strength within the index, think short-term. A hedge or two couldn't hurt.
Erin is 65% long, 2% short.
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BITCOIN
Bitcoin opted to pause its rally. It is parabolic and begs for a swift decline, but speculation that there will be new ETFs for Bitcoin has kept price elevated. The RSI is very overbought, but as we've mentioned before, those conditions often persist on Bitcoin. Still, we would be on the lookout for a decline to ease the rising trend.
INTEREST RATES
Interest rates were mixed on the day with longer-term rates declining and short-term rates ticking up in some cases. Overall we see the decline continuing as rates move closer to support levels.
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 should note that the bottom of the initial falling wedge was violated, and the next declining bottoms line was violated today. Bearish outcomes to bullish patterns is especially bearish. It does not look like an upside breakout is going to materialize.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT has now rallied above the 200-day EMA. We initially thought this would be a difficult level to overcome, but interest rates are experiencing a persistent decline. Indicators remain very bullish, although the RSI is now overbought. We favor a breakout above 97.00.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/27/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: Yesterday's comments still apply:
"The Dollar has broken away from its bearish declining trend channel. It appears to be at a pivot point. The RSI just moved into positive territory and the PMO is rising again. Stochastics look especially bullish as they rise in positive territory. We think the Dollar will continue to rally from here."
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: GLD managed a small rally despite a rising Dollar today. This gave us a bottom on support. This looks like a good area to resume the rally, but today we had a bearish filled black candlestick so we should expect a decline at least tomorrow. Stochastics are falling so the bias is bearish currently.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are still holding above support, but the PMO is turning down and we are seeing some deterioration in participation indicators. It's too early to call for their demise, but they are certainly vulnerable to more downside.
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 gave it up and has been declining in earnest. This is part of the reason the Energy sector is under pressure. Holiday demand hasn't impressed. Given the voracity of this decline, we are now looking toward the next support level at 60.00.
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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