Today the Biotechnology ETF (IBB) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. If we look "under the hood" we can see that participation continues to expand. The Silver Cross Index tells us how many stocks within this group have a 20-day EMA above the 50-day EMA or a Silver Cross. While it isn't reading above our bullish 50% threshold, it is rising strongly above its signal line.
Primary indicators are also positive. The RSI is not yet overbought. The PMO is on a Crossover BUY Signal and is rising above the zero line. Stochastics have camped out above 80 signaling internal price strength. We should see this group continue to outperform the SPY.
The weekly chart shows a rising weekly PMO, but we do note that overhead resistance is nearing and it is strong. We could see price stumble at that level before a possible breakout.
Conclusion: Biotechs saw a Silver Cross. The participation indicators under the hood are seeing improvement and primary indicators are bullish enough to look for some upside follow through.
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 market moved to an all-time high again today, but was unable to hold it before tracing back to the lows of the day. As usual, we expect this week's options expiration to result in low volatility on the last two trading days of the week. So far, so good.
The VIX is in overbought territory but hasn't punctured the upper Bollinger Band. We don't think it will, that would require an extremely low reading. Stochastics are very bullish. We are noticing that mega-caps are taking the lead again as we have rising relative strength when compared to the equal-weight RSP.
Here is the latest recording from Monday, May 13th:
S&P 500 New 52-Week Highs/Lows: New Highs pared back slightly. We expect by day's end we had fewer than we show right now, but this is a good reading. The High-Low Differential is picking up speed to the upside and so far is avoiding overbought territory.
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 OVERBOUGHT.
The Swenlin Trading Oscillators (STOs) turned down today. We see quite a negative divergence between the STOs and price. They are angling lower, but price is angling higher. We didn't lose any participation on the decline, but we did see slight damage done to %PMOs Rising. It does look toppy and price is still rising overall.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM continue to rise despite lower STOs. %PMO Xover BUY Signals did still see a percentage point increase on the decline.
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.
Yesterday's comments still apply:
"The market bias is BULLISH in all three timeframes.
Participation isn't expanding to the degree we would like, but percentages are robust enough to give us a BULLISH ST Bias. The Silver Cross Index is moving swiftly higher which is bullish, it is above its moving average so the IT Bias is also BULLISH. The Golden Cross Index is moving higher again and given it is above its signal line, the LT Bias is 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: Market participation is still robust and we have a fairly strong foundation based on the BULLISH bias in all three timeframes. We also notice that our Bias Table above is showing all but one (Energy) with a bullish bias in the intermediate term. Yet there are a few problems. We had both STOs turn down today and they are displaying short-term negative divergences. Today's intraday reversal could indicate some exhaustion after the breakout to new all-time highs. We would proceed with caution. Let's use our stops to keep us in the market while it continues to inch higher. Portfolio additions should avoid stocks holding overbought conditions unless momentum is particularly strong.
Erin is 40% long, 0% short.
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BITCOIN
Bitcoin pulled back to the breakout point today, digesting some of yesterday's big rally higher. We still like the PMO rising on a Crossover BUY Signal and Stochastics are almost above 80. At this point we are looking for Bitcoin to test the intermediate-term declining tops trendline.
BITCOIN ETFs
INTEREST RATES
Yields bounced back today, but rising trends have still begun to be compromised suggesting we should continue to see weakness in rates.
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 bounced back today but it remains outside its prior rising trend and below horizontal support. The indicators are very negative given the PMO's decline, negative RSI and Stochastics below 20. We expect more decline.
BONDS (TLT)
IT Trend Model: SELL as of 3/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT still managed a bit of a breakout today despite the rising 20-year yield. We believe yields are looking weak in the short term timeframe so we believe that TLT will continue to inch higher. Plenty of overhead resistance is ahead starting with the 200-day EMA. It is likely to be very slow going on this rally.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar moved slightly higher, holding onto its rising trend channel. Price is at horizontal support and the 50-day EMA. It could hold here a bit longer, but we ultimately are looking for a breakdown given the declining PMO and the move of Stochastics below 20.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold was down on the Dollar's small rally. The rising trend is fully intact so we aren't particularly concerned about today's decline. The PMO is rising again and Stochastics are rising above 80. We should see more rally for Gold.
Gold is no longer positively correlated with the Dollar. We see a weak Dollar and that bolsters the case for Gold. We can see a large bull flag formation on Gold's 1-year daily chart. This continuation pattern implies there is far more upside to go.
GOLD MINERS (GDX): Gold Miners were down given Gold didn't fare well and the market ultimately declined on the day. The rising trend is intact and there is a relatively new PMO Crossover BUY Signal. Consider the big move higher, price is technically not overbought based on the RSI. Participation couldn't get much better so we are expecting more upside from GDX.
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 formed a bearish filled black candlestick today implying we will see a decline tomorrow. We see the intermediate-term rising trend is intact. Now we look for the breakout from the short-term declining trend. The PMO is attempting to turn back up and Stochastics are rising again. The picture is somewhat mixed to us given the nearing Dark Cross of the 20/50-day EMAs. We would look for consolidation along the rising bottoms trendline.
This is a good reversal off very strong support so we should eventually see higher prices from USO after it finishes with its churn sideways.
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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