The market steadily rose the entire day which afforded many sectors and groups the opportunity to rally. Semiconductors (SMH) rallied very strongly. The rally was accompanied by a pop in %Stocks > 20EMA. We already have strength coming through based on a 100% reading on the Silver Cross Index and 92% reading on the Golden Cross Index. Stochastics have now turned up. Our caveat to this bullish chart is that the PMO is still falling and price hasn't quite recaptured the rising trend.
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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 rallied strongly off support at the 20-day EMA. We weren't expecting a rally of this magnitude or even a rally for that matter given weak internals noted last week. The PMO isn't rising yet.
The VIX is below its moving average on the inverted scale and that does imply some internal weakness, but overall it is still flashing complacency among investors. Stochastics did turn back up which is bullish, but they still remain well below net neutral (50).
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S&P 500 New 52-Week Highs/Lows: New Highs did not pop despite today's big rally. New Lows are still absent. The 10-DMA of the High-Low Differential continues lower out of overbought territory.
Climax* Analysis: There were three climax readings on the four relevant indicators today, giving us an upside initiation climax.
*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.
Today saw improvement on our short-term indicators. The Swenlin Trading Oscillators (STOs) turned back up today but do remain in negative territory. This is near-term oversold territory suggesting we could see some follow-through in the short term. %PMOs Rising and %Stocks > 20EMA made up some lost ground. We still see a declining trend in %PMOs Rising.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
STOs may've turned back up, but the ITBM and ITVM continued to fall suggesting this rally may be short lived. We need to see more PMO BUY Signals to support more rally.
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.
We saw nice improvement to %Stocks > 20EMA that suggests the bullish short-term bias is still viable. We do still see issue with the topping Silver Cross Index. This could mean the short-term bias is deteriorating. Given both the Silver Cross Index and Golden Cross Indexes are above their signal lines, the bias is BULLISH in the intermediate and long terms.
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: You'll note on our Bias Table above that bearish biases are beginning to arrive in the intermediate term. This is deterioration in the broader market that shouldn't be ignored. Today's rally and newly rising STOs put us more at ease, as does today's bullish upside initiation climax. However, we are still uneasy about the falling ITBM and ITVM as well as the thin amount of rising PMOs. We do expect to see some follow through tomorrow, but would still exercise caution as IT indicators are still in decline.
Erin is 75% long, 0% short.
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BITCOIN
The new Bitcoin ETF will be arriving this week and so we would expect to see Bitcoin rally further. The chart looks good all the way around with a positive RSI, nearing PMO Crossover BUY Signal and rising Stochastics that have remained in positive territory for some time.
INTEREST RATES
Yields were down on the day, but are making a comeback. We would avoid Bond funds in the short term for this reason.
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 chart looks bullish for $TNX and so we would expect to see this rally move higher. Today it got stuck beneath strong resistance at the 200-day EMA and March/July tops. Given the PMO is rising on a Crossover BUY Signal and Stochastics have popped above 80, we should look for the yield to rise further.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT rallied on the decline of the 20-year yield, but we don't see this as continuing. Price has broken the rising trend and the PMO is headed lower on a Crossover SELL Signal. Stochastics are below 20. Note the rising trend on the 20-year yield. None of this bodes well for TLT.
This is a very strong area of support so we could see some sideways movement as it attempts to hold on to it.
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 is looking less bullish as price struggles to break from a bullish falling wedge. Given the look of the PMO and Stochastics, we would look for price to eventually break higher.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: The Dollar was down and Gold was also down. Gold showed significant weakness today given the inverse correlation didn't hold up at all. The RSI has moved into negative territory and the PMO is now increasing the margin between it and its signal line while on a SELL Signal.
GOLD Daily Chart: Stochastics look particularly bearish on their decline. Investors are still bearish on Gold based on the elevated Discount levels. We need to see this bearish sentiment get more bearish as sentiment is contrarian. The good news is we've seen Gold rally off these discount levels. For now we are short-term bearish on Gold.
GOLD MINERS Golden and Silver Cross Indexes: Lower Gold prices likely depressed Gold Miners which didn't get a lift from today's strong rally. The Silver Cross Index has dropped beneath its signal line giving GDX and bearish bias in the intermediate term. Still, we did see a slight improvement in %Stocks > 20/50EMAs so it isn't necessarily over for GDX. It has an opportunity to reverse here. However, if the rising trend or this support level is broken in a more decisive way, we could see an extended decline. It is a bit risky to bank on a reversal 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 dropped precipitously today. This is the second time the PMO has topped beneath the signal line. Clearly the last Crossover BUY Signal was marking diminishing weakness, not new strength. The RSI has moved into negative territory and Stochastics have topped. We would look for 64.00 to be tested. There has been discussion that we could see US strategic reserves built back up and that would get prices moving back up, but it isn't happening yet.
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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