We'll address gold in the usual section below. Otherwise, today the Transportation Industry Group ETF (IYT) 20-EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. We notice that IYT rallied over +35% off its October low, then it double topped in March (at all-time highs). It corrected about -13%, then double bottomed in May/June. This was a healthy correction, consolidating the prior advance. It seems reasonable that IYT is on the way to make new, all-time highs.
The weekly chart confirms the positive picture, with the weekly PMO rising above the zero line.
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 tells us what we already know, price is overbought. The PMO continues its rise well above the zero line suggesting we could continue to see the index inch higher.
Mega-caps continue to lose ground based on relative strength to equal-weight RSP. This condition so far hasn't resulted in lower prices as the broader market has stepped in. Stochastics are rising again above 80 so there is internal strength.
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S&P 500 New 52-Week Highs/Lows: New Highs hit overbought territory today, but their big expansion tells us that indeed, the broad market is seeing outperformance. The High-Low Differential is rising strongly.
Climax* Analysis: There were unanimous climax readings today on the four relevant indicators, giving us an upside exhaustion climax. This could indicate that the up move is over, and that a downside reversal is about to begin. That could be the case, but we think that we should first look for a bit of churn before the price advance continues.
*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) are very overbought now with the STO-B at its highest all year. Participation is expanding as we would expect and given we have 85% holding rising PMOs, a rally could be supported longer. The problem is both indicators are overbought now.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
Both the ITBM and ITVM saw big up moves today. These indicators are not overbought and can definitely accommodate more upside. %PMO Xover BUY Signals is about to clear its negative divergence. It is not as overbought as it could be.
PARTICIPATION CHART (S&P 500): The following chart objectively shows the depth and trend of participation for the SPX 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 intermediate-term market bias is BULLISH.
The long-term market bias is BULLISH.
Today the Golden Cross Index saw a Bullish Shift across the signal line moving our LT Bias to BULLISH. Given we still see higher percentages above their 50/200-day EMAs, it could continue to rise. The Silver Cross Index is rising strongly suggesting strength is building within the index. Negative divergences on participation indicators are about to be cleared.
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 broad market is finally participating in the rally and now indicators are getting overbought. They can certainly accommodate more upside, but this is an attention flag. Another attention flag was today's upside exhaustion climax which suggests overbought conditions may need to be relieved sooner rather than later. A market decline isn't necessary to clear overbought conditions, consolidation will often do the trick. We suspect we will see some churn ahead as the market begins working out these overbought conditions. We still see plenty of strength, but the market has been running hot and needs to cool off a bit.
Erin is 45% long, 0% short.
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CALENDAR
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BITCOIN
Bitcoin continues to rally out of its declining trend. We are looking for prior highs to be tested soon. The RSI is not yet overbought and the PMO looks especially bullish on its new Crossover BUY Signal. Stochastics are rising above 80 implying internal strength.
BITCOIN ETFs
INTEREST RATES
As rate cut discussions continue, today yields dipped lower. The declining trends suggest to us that we will continue to see a drop to likely test support.
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
$TNX continues to move lower within a declining trend channel. It appears ready to test the bottom of the channel. A reversal here would be very bullish as it would mean price did not have to test the bottom of the channel and near-term support would be held. We don't favor this conclusion given the PMO decline beneath the signal line and zero line. Stochastics are also flashing weakness as they reside well below 20.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT should see an upside breakout given the bearish appearance of the 20-year yield. We now have a PMO Crossover BUY Signal and Stochastics above 80. The RSI is not overbought so higher prices can be handled.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar was unchanged today on a bearish filled black candlestick that implies we will see a decline tomorrow. The declining trend has not been broken yet. The indicators are looking very weak so we do expect the decline will resume.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold made fresh all-time highs today on a very strong breakout. Gold looks very bullish. We even note that the Gold Volatility Index ($GVZ) punctured its lower Bollinger Band that typically results in rally.
Stochastics are well above 80 signaling internal strength and the PMO is accelerating higher. Relative strength is on the rise against the Dollar and the inverse correlation is getting stronger. We still see a weak Dollar in our opinion and this is going to spur Gold even higher.
GLD Weekly Chart: We don't usually have a weekly chart except on Friday, but we needed to emphasize that today gold made new, all-time highs. The weekly PMO is on the rise and suggests we could see Gold rally further. The weekly RSI is overbought, but it can maintain this condition in a strong bull market move for Gold.
GOLD MINERS (GDX): Gold Miners are loving the rally in Gold as they push ever higher. With the picture being so positive for Gold, we have to believe the Miners will continue to enjoy a healthy rally. Participation is incredibly high and Stochastics are above 80. If we had a complaint, it would be that the RSI has gotten very overbought. However, we expect that condition to persist, something that often happens in a strong bull market move.
CRUDE OIL (USO)
IT Trend Model: BUY as of 6/21/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: Crude Oil is topping, but today it formed a bullish hollow red candlestick that does imply we'll see an upside reversal tomorrow. The PMO is nearing a Crossover SELL Signal and Stochastics are tumbling so the chart is leaning bearish. It looks very toppy, but maybe this candlestick will spur an upside reversal. It is possible as price is sitting on support at the 50-day EMA.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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