Today the Materials Sector ETF (XLB) 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating an LT Trend Model BUY Signal. Additionally, the Golden Cross Index (GCI) dropped beneath its signal line giving us a Bearish long-term bias. Ultimately we see a reverse head and shoulders pattern that was confirmed last month with the breakout above the 200-day EMA. The minimum upside target of the pattern would take price to the July high. Given robust participation, we believe it will get there.
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: The market is continuing to digest the November rally. Today it formed a somewhat bullish hollow red candlestick. We aren't reading too much into that. We have noticed that relative strength for the SPY has really tanked against equal-weight RSP which tells us the Magnificent Seven are in trouble. They tend to lead the market so there is definitely downside pressure being applied by their performance.
The VIX remains overbought. The Bollinger Bands have narrowed. The PMO is still rising and this digestion phase has offered the RSI an opportunity to leave overbought conditions. Continued consolidation could relieve overbought conditions further, but a decline would really get those conditions to clear.
Here is the latest recording from 12/4:
S&P 500 New 52-Week Highs/Lows: New Highs were still quite visible on a down day. New Lows were nowhere to be found which suggests this rally has been quite broad. The 10-DMA of the High-Low Differential is overbought, but rising.
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 have overbought conditions across the board on our short-term indicators. It is somewhat promising that the Swenlin Trading Oscillators (STOs) continue to rise and we're seeing a healthy number of stocks above their 20-day EMAs and holding rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is EXTREMELY OVERBOUGHT.
We like seeing rising ITBM and ITVM, but these readings are getting extraordinarily overbought and will need relief soon. %PMO Xover BUY Signals is overbought and today dropped beneath its signal line. Given only 80% have rising momentum, we expect to see fewer PMO BUY Signals which means this indicator will continue to drop.
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.
With the exception of the Golden Cross Index (GCI), all indicators are reading above our bullish 50% threshold. This is bullish for the short term. The Silver Cross Index (SCI) and GCI are both above their signal line so we must read the intermediate and long terms as bullish also.
One important thing to note (something we discussed in today's DecisionPoint Trading Room) is that 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 indicators overall are bullish in their readings, but nearly every one is overbought. Participation is still robust, but we are seeing more weakness from the mega-cap Magnificent Seven. This is one of the big issues for the market right now. It is overbought and leadership stocks are backing off. Overbought conditions need to be relieved and the best way for this to occur is with a decline. The Magnificent Seven could get a decline going. Caution is warranted right now. Booking profits is never a bad idea especially if you don't want to brave a bumpy market. We would refrain from adding positions for now. Stops are a necessity.
Erin is 70% long, 0% short.
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BITCOIN
We had been monitoring a bearish rising wedge on Bitcoin, but instead of the expected decline we saw a breakout. A bullish conclusion to a bearish chart pattern is especially bullish. We believe speculation is occurring as investors wait for the emergence of Bitcoin ETFs. The PMO looks the most bullish it has in weeks. The RSI is now overbought, but those conditions rarely bother Bitcoin. While we see higher prices ahead, we would be prepared for a likely pullback given this rally is becoming parabolic.
INTEREST RATES
Interest rates were up on the day, but remain in declining trends. They appear headed to equilibrium around 3.5%. The curve remains inverted.
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 aren't particularly bullish on yields in general, but they are due for bounce. There is now a bullish falling wedge on $TNX that implies an upside breakout ahead. The PMO is still declining, but Stochastics are trying to rise again. 4.1% is the next level of support. It may need to be tested before we see an upside breakout, although today's bump could mark a turning point.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We like Bonds in general right now and TLT is no exception. The technicals on the chart are still very bullish so we are expecting a move to at least the 200-day EMA. That could be the problem area, especially given yields may be at a turning point.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/27/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar has formed a small double bottom formation which is bullish. The RSI is rising and the PMO is now turning back up. Stochastics also look bullish. Yields may be at a turning point and the Dollar may be too. However, it still remains in a bearish declining trend channel so we don't want to get too bullish here. We will stay neutral to bearish on the Dollar until price breaks out.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold had a terrible day, far worse than the Dollar called for. The PMO has topped and the rising trend is already in jeopardy. The bottom Bollinger Band on $GVZ was punctured on our inverted scale. That typically leads to upside reversals. Stochastics are still above 80 so the picture isn't overly bearish.
GOLD Daily Chart: We aren't surprised Gold is struggling here. All-time highs had been exceeded and this is a psychological resistance level. Stochastics on $GOLD did drop below 80 and we do see bearish sentiment seeping back in. More than likely we will have to test support just above 2000 at this point. We still like Gold in the intermediate term.
GOLD MINERS Golden and Silver Cross Indexes: Gold fell hard and that likely took the wind out of the sails of the Gold Miners. Participation remains strong which tells us that most Miners are holding up well in spite of the big decline today. We do see some short-term problems for Gold and that likely will take a toll on GDX. We would tighten stops on your Gold Miners so you can preserve some of the profit out of the November low.
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 continues to chop around, but it is still holding above support. We liked what was going on with momentum, but the PMO has since topped beneath the signal line. Crude also lost the short-term rising trend on Friday. At this point we expect more sideways chop with a bearish bias based on Stochastics.
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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