Last week the Energy Sector (XLE) got a "long-term" Death Cross SELL Signal. Today the XLE 50-day EMA crossed up through the 200-day EMA (Golden Cross) BUY Signal. The 50/200-day crossovers can indicate long-term change, but we can see that the moving averages are running very flat, and price has been cutting back and forth through them. Until price breaks out of this narrow trading range, signal changes won't carry much weight.
The general health of the sector remains robust given the rise in %Stocks > 20/50EMAs. The Silver Cross Index and Golden Cross Index do remain below their moving averages so the bias is still listed as "bearish" in the IT and LT, but this looks like a solid rally that should see more follow-through.
See today's DecisionPoint Trading Room on YouTube:
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
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: The SPY continues to log new all-time highs pushing price further into overbought territory. The RSI certainly demonstrates that price is overbought. The PMO is rising on a Crossover BUY Signal, but it has flattened.
Stochastics are very strong, but we note the VIX is back below its moving average on the inverted scale despite the rally. We note that mega-caps have been leading this rally the past several weeks based on the rising relative strength line of the SPY to equal-weight RSP.
S&P 500 New 52-Week Highs/Lows: We did see a gain on New Highs, but given the lengthy rally, we should be seeing far more. This has set up a negative divergence with price.
Climax* Analysis: Today there was only one climax reading on the four relevant indicators. SPX Total Volume was solid, but not so high that we can consider this 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 SOMEWHAT OVERBOUGHT.
The Swenlin Trading Oscillators (STOs) were mixed with the STO-B continuing lower and the STO-V reversing upward. Both hold negative divergences with price, but the STO-V is encouraging. Considering the height of this rally, we should definitely be seeing more stocks with rising momentum and we're not. This continues to be a problem for us as it is just one more negative divergence to add to the rest.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM/ITVM never hit negative territory and they are rising again. This leaves us more comfortable in the intermediate term. %PMO BUY Signals is rising, but again, considering this steep rally, we should have far more crossover buy signals.
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 short-term market bias is BULLISH.
The intermediate-term market bias is BEARISH.
The long-term market bias is BULLISH.
We are again seeing an expansion in stocks above their 20/50-day EMAs and readings are all above 50%. The problem lays in the intermediate term where we have a declining Silver Cross Index that is reading above %Stocks > 20/50EMAs. This means that the Silver Cross Index is likely to continue lower. It is below is signal line so the IT Bias is BEARISH. The Golden Cross Index is above its signal line so we have a LT Bias that is BEARISH.
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 setting new all-time highs, but we are not seeing broad participation. We only have one-third of the index holding PMO BUY Signal and New Highs are not at the levels they should be. The indicators should be under the spell of rising prices, but instead are mixed. There could certainly be more upside on the back of positive earnings. Magnificent 7 stocks are beginning to report and they've kept price elevated. We noted in the trading room this morning that most M7 stocks have healthy technicals going into earnings. While they can keep the index afloat a bit longer, more of the index needs to participate. This is why we feel the foundation is showing signs of distress and as such we need to stay protected with stops. The market is very overbought so you may want to hold off on new longs.
Erin is 60% long, 0% short.
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BITCOIN
Bitcoin is making a move out of recent lows and has now overcome both the 20/50-day EMAs. It is still in a consolidation zone, but given the nearing PMO Crossover BUY Signal, we would look for a move toward the top of the range near 46,000.
BITCOIN ETFs
INTEREST RATES
Rates were lower on the day, but rising trends are mostly holding up so we do expect rates will continue higher near-term.
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
The rising trend remains intact on $TNX. It is chopping around sideways at the moment. The PMO is still bullish, but we are seeing some deterioration to the RSI and Stochastics. The rising trend may need another tap.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Price has found a short-term bottom and the 20-year yield does look a bit weak. We could see a little upside for TLT. The PMO is decelerating its decline and Stochastics are back on their way up. We believe any rally will be short-lived as we are still mostly bullish on interest rates and that will put downside pressure on Bond funds.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: UUP formed a bearish filled black candlestick. It looks like this level of resistance is posing a problem. Overall the PMO is rising, the RSI is positive and Stochastics are rising so we should look for this level of resistance to be broken.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold has been in a holding pattern, specifically its now in a symmetrical triangle. The indicators are bearish enough to look for a breakdown yet. They are reading mostly neutral so we are likely to see more of the same from Gold.
Given the bullish outlook for the Dollar, we expect Gold will eventually break down. You'll note that relative strength is waning for Gold against the Dollar and the correlation remains very negative. Both will work against Gold should the Dollar strengthen further.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are making their way higher. Participation did turn up and the PMO is flattening. We could be looking at the beginning of a reversal for Gold Miners. With Gold looking weak, we aren't completely in love with Gold Miners, but the chart is definitely showing signs of improvement.
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 had a short-term breakout above the December high and it appears ready to break out of the next level of resistance. The PMO looks very bullish as it moves above the zero line. Stochastics are holding above 80 signifying internal price strength. We like Crude's chances for a breakout.
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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