Today the Consumer Discretionary ETF (XLY) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. This is the fourth signal change in two months, and the narrow trading range allows for a continuation of this behavior. The trend is up, but stay tuned.
The weekly chart shows a rising trend, but it is inside a rising wedge formation, which is most likely to resolve downward. We also have a negative divergence with the weekly PMO.
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 RSI is now overbought and while this can persist in a bull market move, it tells us that a pullback is needed and could be around the corner. We have an island formation that could lead to a 'reverse island' which would mean a gap down ahead. Still, the PMO is rising above the zero line.
The VIX is getting overbought, but it still hasn't penetrated the upper Bollinger Band on our inverted scale so it could accommodate lower readings. Stochastics look incredibly strong and do suggest more upside is available.
Here is the latest recording from 6/10:
S&P 500 New 52-Week Highs/Lows: We noticed a bump in New Lows today despite the rally. New Highs also pared back quite a bit which we wouldn't expect given the new all-time high.
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.
Interestingly the Swenlin Trading Oscillators (STOs) have yet to turn back up even with this rally. We had a gap up with follow through and yet they continue to decline. Participation actually thinned a bit on the rally. Breadth is a big problem for the market right now.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM also continue lower. We have negative divergences that led into this rally so we still advise caution. With them falling now as price rises, that is also a negative divergence. No ground was made by %PMO Xover BUY Signals and we likely won't see it move higher given only 40% have rising PMOs.
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 BEARISH in all three timeframes.
Participation indicators have shown no improvement. %Stocks > 20/50EMAs are below our bullish 50% threshold so we list the ST Bias as BEARISH. The Silver Cross Index has dropped below 50% and it is below its moving average so we list the IT Bias as BEARISH. The Golden Cross Index is still holding at a somewhat healthy level, but because it is below its moving average, we must keep the LT Bias as BEARISH.
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: It has occurred to us that yesterday's gap up move makes the market vulnerable to a reverse island or gap down move. We still have Stochastics above 80 and a rising PMO so an advance isn't out of the question, we just need to be cautious given this new chart formation. Participation saw no improvement on today's rally to new all-time highs. It is clear that the mega-caps have a strangle hold as evidenced today with NVIDIA (NVDA) and Broadcom (AVGO) responsible for higher closes on both the SP500 and Nasdaq. Adobe (ADBE) is up over 16% in after hours trading on earnings and that could spur more buying tomorrow. It is once again time to let the market take you out on your stops.
Erin is 45% long, 0% short.
Calendar:
Friday - Consumer Sentiment
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BITCOIN
The indicators are bearish right now, but we do note that the PMO is flat above the signal line and that can sometimes indicate strength. However, with the RSI now negative and Stochastics tumbling we think it is likely we will see lower prices, but the PMO could suggest we will see more sideways action before a concerted decline.
BITCOIN ETFs
INTEREST RATES
PPI came through for investors suggesting Fed rate cuts are still on tap and that is applying downward pressure on yields.
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 dropped out of the bullish falling wedge. Bearish conclusions to bullish chart patterns are especially bearish and so we should look for the yield to continue to move lower. It also broke down below the 200-day EMA. Indicators are bearish with Stochastics tumbling below 20.
BONDS (TLT)
IT Trend Model: SELL as of 3/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The filled black candlestick was no problem as today prices were up. Overhead resistance is now arriving but with good news on the inflation front, we expect yields to keep falling so a breakout is highly likely.
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 was back on the rise today. The PMO is on a new Crossover BUY Signal and is rising. Stochastics also tipped back up today. We see a bullish bias on the Dollar.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold is holding above the confirmation line of the bearish double top. It appears loathe to break down, but indicators still suggest it will as does the pattern. We also see that the Gold's relative strength to the Dollar is trending downward. With the Dollar looking somewhat bullish, it isn't likely that we'll see a lasting rally here.
Yesterday's comments still apply:
"Interestingly we are seeing discounts on PHYS fading which means investors aren't quite so bearish on Gold. They are not exceedingly low so it isn't likely time to look for an upside reversal on sentiment. We'll be watching for discounts to get down to where they were back in November. Then we can look for a lasting rally."
GOLD MINERS (GDX): GDX continues in its declining trend. We now have zero stocks that are above their 20-day EMA and only 25% above their 50-day EMA. This is going to get the Silver Cross Index moving lower very quickly. Deterioration is clear and so are the bearish indicators. We expect this group will continue to struggle particularly given that Gold doesn't look very bullish.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 5/20/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: The filled black candlestick did portend lower prices today. So far price is holding above the declining tops trendline. The PMO is rising alongside Stochastics so this could just be a stumble before the rally kicks back into gear.
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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