Today the S&P 400 Mid-Cap Index ETF (MDY) 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating an LT Trend Model BUY Signal. Price is forming a possible bull flag right now that implies we will eventually see more upside. Participation readings are strong yet not overbought so there is still room for improvement. The Golden Cross Index (GCI) has accelerated its rise. Stochastics have turned down so this flag may develop further.
Also today, the Biotechnology ETF (IBB) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. Participation readings are what impress us. We've seen a steady growth in %Stocks > 20/50/200EMAs and readings aren't really overbought yet. Price managed a close above the 200-day EMA today. The PMO is rising strongly and is not overbought. This group should continue to outperform.
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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 SPY saw a nice rally today, but it does remain below overhead resistance. The RSI is positive and not overbought given the pause. The PMO did turn up today but remains overbought. Interestingly, we are starting to see the SPY outperform equal-weight RSP, so Mag 7 stocks may be waking up. Their internal strength would translate to the market's internal strength.
Investors remain complacent given the low reading on the VIX. Stochastics paused their decline. Volume was strong on today's rally and not at blowoff levels.
Here is the latest recording from 12/4:
S&P 500 New 52-Week Highs/Lows: New Highs hold a strong negative divergence with price right now. We should've seen them expand on today's healthy rally. The 10-DMA of the High-Low Differential continues to decline out of overbought territory.
Climax* Analysis: Only one of the four relevant indicators had a climax reading, so today is not 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 OVERBOUGHT.
While Swenlin Trading Oscillators (STOs) aren't that overbought, %Stocks > 20EMA is. It could move higher from here, but we need to monitor its behavior closely. Nearly 2/3rds of the index hold PMO BUY Signal which is good, but we do have another negative divergence that has developed on this indicator.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is EXTREMELY OVERBOUGHT.
The ITVM technically rose today, but barely enough to look at it as a bullish sign. It is very overbought along with the ITBM. Their recent top has us on alert. %PMO Xover BUY Signals is still overbought, but given we have fewer rising PMOs, it should leave overbought territory fairly quickly.
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. 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 still 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: Our intermediate-term indicators are very overbought and have topped, and short-term indicators are bleeding off from overbought levels. Negative divergences are a problem that can't be ignored. This is a near perfect setup for price to pull back, but price has been flat for about three weeks. This is an unusual expression of market strength, but internal corrections still have a long way to go, so we need to stay on our guard. We may only see pause and not decline, but stops should be applied. Hedges aren't required, but small ones could be used to manage risk on a heavily long portfolio.
Erin is 65% long, 2% short.
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BITCOIN
Bitcoin pulling back rather than plunging off this parabolic rally. This speaks to internal strength as does Stochastics oscillating above 80. The PMO has decelerated so we could see a bit more pullback, but ultimately we see Bitcoin traveling higher after a pause or digestion phase.
INTEREST RATES
Interest rates were mixed. 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 noted the very bearish breakdown from the bullish falling wedge yesterday. It is especially bearish. Currently $TNX is holding above support at the 200-day EMA and July top. We expect a breakdown.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT paused today but formed a bullish hollow red candlestick implying we will see the rally resume. Overhead resistance is arriving at 97.00, but given strong Stochastics and a rising PMO (along with bearish interest rate charts), we are expecting a breakout.
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 pulled back today and that took the RSI out of positive territory. Still, the PMO is nearing a Crossover BUY Signal and Stochastics are above 80 so we should expect the rally to continue, although falling yields may pressure it downward. For now we rely on the PMO and it says to expect higher prices.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: GLD really wants to rally here, but it did not take advantage of its reverse correlation with the Dollar. The Dollar was down -0.58%, but GLD was only up +0.17%. There is another bearish filled black candlestick that formed today and the PMO is nearing a Crossover SELL Signal in overbought territory. We expect sideways movement to continue.
GOLD MINERS Golden and Silver Cross Indexes: Yesterday's comments still apply:
"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 formed a bearish filled black candlestick, but it also is a hammer candlestick. We are banking on the filled black candlestick to bring lower prices. If this is the best rally it could muster have days of deep decline, it tells us there is still internal weakness. Right now we aren't looking for an upside reversal until 60.00 is met.
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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