Today the Utilities Sector (XLU) 20-day EMA crossed up through the 50-day EMA (a Silver Cross), generating an IT Trend Model BUY Signal. Defensive sectors are beginning to see more improvement and that generally isn't a good sign for the market. Today Erin's ETF scans returned Consumer Staples (XLP) so investors may be hedging their bets.
Participation is strong and does suggest we will see more upside from XLU. The Silver Cross Index is above the signal line and is likely to begin rising quickly given more than 80% have price above their 20/50-day EMAs. The PMO just moved above the zero line signaling pure strength in this move now.
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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: After yesterday's sharp decline, prices rebounded, but it was a less vigorous rebound than most of those that preceded it (bold purple circles). It is unclear if there will be upside follow through. The PMO remains on a Crossover SELL, but hasn't really put much margin between it and its signal line.
We continue to monitor the bearish rising wedge chart pattern which implies a break of this rising trend ahead. Investors remain a bit nervous as the VIX is near the bottom Bollinger Band on our inverted scale. Stochastics dropped below 80.
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S&P 500 New 52-Week Highs/Lows: We saw a number of New Highs, but not as much as we saw on yesterday's decline. This is a negative divergence in our minds. The 10-DMA of the High-Low Differential is extremely overbought right now and is due for a top. While tops in this indicator don't always spell disaster, it would be a sign of distress.
Climax* Analysis: There were no climax readings today.
*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) reversed yet again. They are not helpful right now except to show a very strong negative divergence with price tops. Participation is still very good at 75% above their 20-day EMA. We need to see more rising momentum within the index, but it is at least reading above our bullish 50% threshold.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM rose strongly today and does give us the impression that any decline will likely be limited to the short term. They still show a negative divergence. What we believe is the worst negative divergence is the lack of PMO BUY Signals given we have price so much higher than it was at the prior top.
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.
The ST Bias is BULLISH due to all of the participation indicators holding above 50%. In very bullish fashion, the Silver Cross Index is rising strongly. It is still somewhat bounded by how many stocks are above the 20/50-day EMAs and those percentages are nearly the same as the Silver Cross Index. A reversal could easily occur. The Silver Cross Index is above its signal line so the IT Bias is BULLISH. The Golden Cross Index is above its signal line so the LT Bias is BULLISH.
Negative divergences are still a serious problem on our Bias chart.
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: We didn't think the bullish IT Bias would hold today, but the Silver Cross Index is still rising, leaving us with a Bullish IT Bias. Today's rally was welcomed after yesterday's decline, but it was less vigorous than we've seen previously. This is the perfect place to look for a decline, but internals are still strong enough that we shouldn't expect a decline to bleed into the intermediate term. Negative divergences plague our charts and continue to concern us. This is why we would use caution. Portfolio expansion is risky, but less so with stops. Investors will be watching the Fed closely during testimony and the jobs report is released on Friday. Both could shake up the market or add volatility.
Erin is 60% long, 0% short.
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BITCOIN
Bitcoin righted itself today. We have to wonder if investors decided to 'buy the dip' from yesterday. This rise did bring the RSI back into overbought territory, but it also helped the PMO accelerate higher. It is well above the zero line flashing pure strength. We expect Bitcoin will breakout again after a possible period of some consolidation.
BITCOIN ETFs
INTEREST RATES
Yields continued to decline today. They headed back down toward support. That level should hold if it is even tested.
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 continued its decline and closed below the 200-day EMA. There is also horizontal support available here, but given the very negative configuration of the PMO and Stochastics, we expect that level to be broken.
BONDS (TLT)
IT Trend Model: SELL as of 2/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday's comments still apply:
"TLT and all Bond funds for that matter are enjoying new life. There is a nice bullish double bottom forming. Yields are looking particularly bearish so we see more opportunity for TLT to rally further. The PMO is on a new Crossover BUY Signal and Stochastics are above 80. We should see overhead resistance challenged and likely overcome."
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: We said that we saw the PMO as signaling diminishing strength, but given today's decline and topping Stochastics, we see weakness. You could even make a case for a bearish double top right now. Support has now been reached, but it is tenuous and given the configuration of the indicators, we would look for a breakdown here.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold continues its march higher and given the Dollar is looking so weak, Gold should continue to make new all-time highs. The only problem with the chart right now is the overbought RSI. Typically Gold doesn't like overbought conditions, but given the bullish PMO and Stochastics, the rally should see more continuation. A period of consolidation could be experienced on the way up but for now it looks as though Gold has further to go.
Gold's relative strength to the Dollar is barreling higher so even if the Dollar were to find its legs, Gold should still do well.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners have now fulfilled the minimum upside target of the bullish double bottom formation. Note that we said "minimum" upside target. GDX could see higher prices still. The Silver Cross Index is rising and participation of stocks above their key moving averages is soaring. One detractor today would be the shooting star quality of the OHLC bar. Those are bearish and could be signaling some consolidation ahead.
CRUDE OIL (USO)
IT Trend Model: BUY as of 2/12/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: Crude Oil rallied but formed a bearish filled black candlestick that would tomorrow will be a decline. We'll be okay with that as long as support holds. The saucer basing pattern suggests it is time for a rally back toward resistance at 83.00. Stochastics are a problem right now, but the PMO remains above its signal line.
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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