It was an impressive rally but it was especially great for the Transports (IYT) which led the charge. Something we noticed however, was the lack of participation beneath the surface. %Stocks > 20/50EMAs didn't see any real expansion. The PMO did surge above the signal line (bottom above the signal line) and we have both the Golden Cross Index and Silver Cross Index above their signal lines. This gives us a bullish bias in both the intermediate term and long term. We like the transports right now, but do want to see better participation moving forward.
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 bounce today came off support at both the 20-day EMA and January high. The question remains whether this will be all the decline we'll see. It very well could. We saw another expansion in small-caps. Unfortunately today's rally was not enough to turn the PMO back up.
The VIX penetration of the bottom Bollinger Band did result in higher prices today. Stochastics however look suspect as they have dropped beneath 80.
Here is the latest recording from 2/12:
S&P 500 New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential continued lower on the day. New Highs expanded as we would expect and there were fewer New Lows.
Climax* Analysis: Yesterday's downside initiation climax is being answered with today's upside initiation climax. SPX Total Volume contracted slightly from yesterday's strong level. However, today's climax strength was somewhat weaker with only three climax readings for the four relative indicators, and the climax readings were not nearly as strong as yesterday's. It is still unclear if yesterday's down thrust will prove to be another fake out.
*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) did not reverse on today's rally, but they were down negligibly. We did see an expansion in rising PMOs, but it is still very low given the rally continuation. Negative divergences continue to pepper the charts.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
As confirmation of the STOs, both the ITBM and ITVM reversed lower today. The negative divergences are still very strong. We'll need more rising PMOs if we're going to see %PMO Xover BUY Signals rise again.
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 the short term.
The market bias is BEARISH in the intermediate term.
The market bias is BULLISH in the long term.
We're back to BULLISH in the short term based on %Stocks > 20EMA getting back above our bullish 50% threshold. The Silver Cross Index continues to decline quickly and it is below its signal line so the IT Bias remains BEARISH. The Golden Cross Index is rising again and it is above its signal line giving us a LT Bias of 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's rally healed the wound of yesterday's decline, but it didn't heal our indicators. The question remains as to whether yesterday's decline was another head fake to the downside. Today's upside initiation climax does seem to suggest so, but STOs are still in decline. We often say that when bearish signals (like yesterday's downside initiation climax) don't result in a decline, it is especially bullish. We aren't ready to sign onto "especially" bullish as there are still issues like big negative divergences and weak internal momentum. Set those stops and let the market take you out of your positions. This way we can benefit from more rally and still be protected when the market takes a turn for the worse.
Erin is 70% long, 0% short.
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BITCOIN
Bitcoin only paused for a day and it is now back to the rally. The overbought RSI is the only problem on the chart and given Bitcoin lives in overbought territory, we aren't going to get overly concerned. The PMO and Stochastics are very bullish and we can see volume coming in based on the OBV. More upside is likely for Bitcoin.
BITCOIN ETFs
INTEREST RATES
Yields tipped over today but it doesn't change our bullish outlook. We expect a rising rate environment to continue.
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
$TNX took a breather, pausing its advance. We should see a Silver Cross of the 20/50-day EMAs soon which will give us a bullish bias in the intermediate term. The indicators are already configured bullishly so look for higher rates to continue.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The decline in the 20-year yield gave TLT the opportunity to rally. It wasn't enough to push price back above prior support and it didn't affect any of the negative indicators so we are expecting more downside.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: Yields paused and so did the Dollar. It doesn't change our bullish outlook as the PMO continues to rise and Stochastics are above 80. We even have the RSI moving out of overbought territory.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold is likely to lose the next level of support at the 200-day EMA and December low. The Dollar is bullish and that will put more downside pressure on Gold. It has held up fairly well given the Dollar's rally, but that is likely to change as Gold continues to weaken in relative strength against the Dollar.
We did see an expansion in discounts. We believe that they reflect more bearishness among investors and are not quite overbought enough to look for an upside reversal. The PMO is now below the zero line and the RSI is very negative. The correlation to the Dollar is getting very negative again and with the Dollar looking bullish, this isn't going to be good for Gold.
GOLD MINERS Golden and Silver Cross Indexes: Gold's decline didn't bother Gold Miners today, instead they took advantage of the market's rally to rally themselves. Support is arriving and it looks sturdy, but participation is too slim for us to look for a meaningful reversal right now.
CRUDE OIL (USO)
IT Trend Model: BUY as of 2/12/2024
LT Trend Model: SELL as of 12/18/2023
USO Daily Chart: Crude Oil was down quite a bit today. It formed a bearish engulfing candlestick right at overhead resistance. Another decline seems likely and that could take the PMO lower. Stochastics did top, but they remain above 80. We would expect to see a breakout here eventually, but it may need another day of decline.
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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