Today the Consumer Staples ETF (XLP) 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating an LT Trend Model BUY Signal. XLP has been marching higher somewhat quietly, at least in comparison to many other sectors out of the October low. We like that participation numbers are reading above our 50% bullish threshold and there is room for more improvement since %Stocks > 20/50EMAs are reading just above 70%. The big problem for XLP is the topping PMO. It isn't entirely overbought, but this is a dangerous condition nonetheless.
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: It's early, but it appears a double top may be forming on the SPY. The PMO has been moving steadily downward suggesting more decline ahead.
Today the VIX punctured the lower Bollinger Band on the inverted scale. Typically these punctures will arrive before a rally, but Stochastics have topped and moved below 80 suggesting internal weakness is seeping in. We do note that the SPY is outperforming RSP which tells us that mega-caps could keep a price decline in check for the index.
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Recording & Download Link HERE.
Passcode: January#8
S&P 500 New 52-Week Highs/Lows: New Highs show a negative divergence with price tops which are rising. New Lows were finally detected for the first time this year. The 10-DMA of the High-Low Differential continues to decline.
Climax* Analysis: There was one climax reading today and one near climax reading. SPX Total Volume expanded as well. We're not going to call it a downside initiation climax day, but it is close. So it is a good idea to anticipate more downside follow through.
*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 (STOs) are back in decline together. These are near-term oversold conditions, but we doubt they will stop here. We would look for them to finally decline into oversold territory. %Stocks > 20EMA is tumbling lower, confirming the loss of rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM and ITVM are both in decline, but remain in overbought territory. %PMO Xover BUY Signals are now getting oversold, but we suspect the indicators will continue even lower as rising momentum diminishes within the index.
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 NEUTRAL in the short term.
The market bias is BEARISH in the intermediate term.
The market bias is BULLISH in the long term.
We have moved our short-term bias to "Neutral" today given we now have less than 50% of stocks above their 20-day EMA. We are also seeing participation bleeding off %Stocks > 50EMA. The SCI had already topped. It is below its signal line marking the intermediate-term bias as Bearish. The GCI is above its moving average and rising so the long-term bias remains Bullish.
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: Today saw a near miss downside initiation climax and a switch to a Neutral bias in the short term. STOs are in decline and the decimation of PMOs within the SPX continues. The index could hold up a bit longer should mega-caps continue to outperform the equal-weight, RSP, but we wouldn't count on it. The PMO foundation has crumbled and now weakness is being spotted in %Stocks > 20/50-day EMAs. Stops should be applied at a minimum. Weak positions could be closed as upside reversals are less likely in the short term.
Erin is 75% long, 0% short.
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BITCOIN
The Bitcoin ETF news is now over and apparently Bitcoin's rally is over as well. We wouldn't completely count Bitcoin out. The RSI is almost back in positive territory and the PMO is decelerating. Stochastics have even tipped upward. We see support holding with a likely 'melt up' in price.
BITCOIN ETFs
INTEREST RATES
Rates bounced today and appear headed into a new rally. Bond funds are going to experience downside pressure.
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 believe that interest rates are ready to resume the rally. Today's strong move higher and the accelerating PMO suggest the yield will breakout here. Stochastics have even turned back up. The RSI is back in positive territory.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With the pop in the 20-year yield, TLT gapped down on the day. This was the first drop below the 200-day EMA since the rally began out of the October low. The RSI tumbled lower and the PMO is in decline. We are expecting lower prices for Bonds.
This was a strong level of support that was lost. The 50-day EMA is available as support, but we don't expect it to hold.
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 finally broke out of its congestion area. The indicators are very bullish so while overhead resistance has been met, we expect another breakout.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: The Dollar's rally was Gold's demise today. It showed particular weakness today as it was down further than the Dollar was up. Support is holding up for now, but a strong Dollar is likely to pull Gold down even further. Stochastics are rising which is positive, but the PMO needs to turn back up.
Gold discounts are very elevated suggesting investors are bearish on Gold. We wouldn't say they are excessively bearish so we aren't looking for an upside reversal based strictly on sentiment.
GOLD MINERS Golden and Silver Cross Indexes: The Dollar's rally didn't help Gold and Gold didn't help Gold Miners. The market is weak and likely to decline so it won't be helpful to GDX. Gold is weak and that is not there to help GDX. The GCI is about to cross below its signal line which would add a long-term bearish bias to the already bearish intermediate-term bias. We don't like Gold Miners right now.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/7/2023
LT Trend Model: SELL as of 12/18/2023
USO Daily Chart: Crude Oil continues to chop around sideways and based on the indicators, we don't see that ending in the near future. The PMO is flat and unresponsive, the RSI is below net neutral (50) and yet Stochastics are rising. Until the indicators join forces, we would expect more choppy sideways trading.
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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