Editor's Note: This is an excerpt from today's DP Diamonds report.
UNG is down -0.12% in after hours trading. Today it had an over 6% rally and that is likely to lead into some downside tomorrow which would offer an opportunity to get in. The chart has really matured. The only problem I see is nearing overhead resistance where we could see it stymied. But the setup is pretty good. We have price back above both the 20/50-day EMAs. The RSI is positive and not overbought. The PMO has just crossed above the zero line on a Crossover BUY Signal and Stochastics are above 80. It's a good setup but be ready for a possible decline when it hits resistance. The stop is set at the 50-day EMA at 7.3% or $15.68.
We keep thinking that UNG is as low as it can go, but it has no problem setting new lows. This is a boom or bust play, it is either going to bust or you'll get a big boom. This is the best it has looked on the weekly chart since that last strong rally. The weekly PMO is giving us a Crossover BUY Signal. The weekly RSI is still negative, but it is rising as price moves up. The SCTR is terrible, reading is almost as low as you can go. This is a high risk play, but upside potential could be amazing. (Full disclosure: Carl and Erin both own UNG)
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: Today's SPX Total Volume was only 66% of the one-year daily average volume, so we have a market advancing on profoundly contracting volume. This is not a reassuring technical condition.
The VIX is reaching levels on our inverted scale that we have not seen in some time. Complacency is high and that is a condition that often leads to downside. Still, Stochastics are holding above 80 which does imply some internal strength.
Here is the latest recording from Monday, 5/6:
S&P 500 New 52-Week Highs/Lows: Today the S&P 500 had a healthy advance, but New Highs are essentially contracting, and just like SPX Total Volume contracting, this undermines the potential for the advance continuing.
Climax* Analysis: There were unanimous climax readings on the four relevant indicators today, which gives us an upside exhaustion climax, which follows the one on Monday.
*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.
Swenlin Trading Oscillators (STOs) are getting extremely overbought. Typically when they reach this level the advance is likely to be compromised. %PMOs Rising is also hitting near-term overbought levels. Participation of stocks above their 20-day EMAs did expand, but not as much as we would expect on a rally continuation.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
IT indicators tell us not to get overly concerned about a decline bleeding into the intermediate term. Both the ITBM and ITVM are rising and they are not at all overbought. %PMO Xover BUY Signals has reached near-term overbought territory.
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 and intermediate terms.
The market bias is BEARISH in the long term.
The big news would be a Bullish Shift by the Silver Cross Index. It crossed above its signal line today and that moves our intermediate-term bias to BULLISH. This also gives us hope that any decline will be limited to the short term. We are keeping the short-term bias as BULLISH given we have %Stocks > 20/50EMAs above our bullish 50% threshold. The long-term bias remains BEARISH as the Golden Cross Index remains below its signal line.
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 within about one percent of making new, all-time highs, but we are detecting exhaustion in the rally. Total Volume has been contracting as price has been moving higher and today saw a new upside exhaustion climax that implies lower prices in the next day or two. While ST indicators are rising, they are now getting very overbought. The VIX is flashing complacency. The Bullish Shift by the Silver Cross Index and the rising IT indicators suggest a decline won't catch fire, but ultimately we should expect price to begin pulling back. Make sure your stops are set.
Erin is 40% long, 0% short.
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BITCOIN
We opted to get rid of the bullish falling wedge and annotate a declining trend channel instead. Price appears headed to test the bottom of the channel in spite of today's rally. The PMO has topped beneath the signal line and the RSI is negative. Stochastics did tip upward on today's rally, but we expect to see lower prices ahead.
BITCOIN ETFs
INTEREST RATES
Yields were lower and we do expect them to continue to decline. We don't think we will see them move all the way down to support, but they are likely to break rising trends.
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 is in a rising trend channel that would imply we will see it begin rising. We aren't in favor of the conclusion, more likely we will see a breakdown. The RSI topped in negative territory and the PMO remains in decline. Stochastics have also topped below 20 which implies major weakness.
BONDS (TLT)
IT Trend Model: SELL as of 3/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT formed a bullish engulfing candlestick that implies we will see another rally tomorrow. Yields in general are looking very weak as they test rising trends. TLT should be able to get to the intermediate-term declining tops line. Stochastics look suspect but they are still above 80.
This is a strong level of overhead resistance that TLT has to contend with right now so it isn't surprising that this is where the rally paused.
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 had a bad day, dropping price back below the 20-day EMA. The RSI may be positive, but the PMO is in decline and Stochastics are trying to top in negative territory. It may be time for the bottom of this rising trend channel to be tested.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold powered higher and showed incredible relative strength against the Dollar. The break from the bullish falling wedge may finally be taking hold. We would feel more bullish if the PMO would turn back around, but the RSI and Stochastics look good suggesting we could see some follow through on today's advance.
GOLD MINERS (GDX): The rally in both Gold and the market helped Gold Miners a great deal. They have now broken out again. This time the PMO has turned back up. This is a strong group and looking under the hood we can see why. With participation being so high and Stochastics rising above 80, we expect to see more rally.
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 again and appears ready to make the turn. We note that price is reversing before having to test support levels. That is bullish. However, the PMO has just sunk below the zero line so we don't want to get too bullish.
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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