Today the Industrial Sector (XLI) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. XLI is in a five-month trading range and is about to challenge the top of that range. We have double top that was never confirmed and now appears will be busted with a breakout. Participation is healthy, but the Silver Cross Index and Golden Cross Index show bearish biases as both are below their signal lines right now. This should improve given stocks above key moving averages are running higher.
The weekly chart shows the weekly PMO near the top of the visible range, but XLI looks very positive.
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: Based on the RSI price is clearly overbought, but nonetheless keeps inching its way higher. The PMO continues to rise well above the zero line.
The VIX is getting close to puncturing the lower Bollinger Band and that usually means more upside ahead, but Bands are tightly squeezed so a puncture in either direction is very possible. Stochastics dropped below 80 but still look relatively healthy. Notice we are seeing the mega-caps relative strength waning. So far the broad market has been able to pick up the slack.
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S&P 500 New 52-Week Highs/Lows: New Highs continued to expand as we would expect on a rally day. The High-Low Differential looks very healthy on its rise out of near-term oversold territory.
Climax* Analysis: There were no climax readings today. Remember Friday was an upside initiation climax and it turned out to be correct.
*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 now in overbought territory. We can see that they can expand further in a bull market. Right now they are confirming the current rally. Somewhat unexpected was the loss in participation of stocks above their 20-day EMAs and in rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
We like the strength and direction of both the ITBM and ITVM. We also have a good reading on %PMO Xover BUY Signals. Regardless, we still see negative divergences.
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 BEARISH.
It may seem strange that the long-term bias is still bearish considering the fairly good reading on the Golden Cross Index, but it is below its signal line and that tells us it is still BEARISH. The Silver Cross Index is rising strongly and is above its signal line so the IT Bias is BULLISH. Negative divergences are easing and could be overcome as far as percent stocks above their 20/50/200-day EMAs. It will take some time to erase negative divergences on the Silver Cross Index and Golden Cross Index.
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: Take a moment to look at the Bias Table above. You'll note that nearly all IT Biases are bullish right now. There is strength under the foundation that we haven't seen during the mega-caps' reign. Our participation indicators have moved upward and are on their way to erasing negative divergences. We would have liked to have seen an expansion in these indicators today, but readings are healthy as they are. As long as the broad market continues to see action, we think the index could rise even further. However, we know the market is very overbought so be sure to set those stops and as we keep saying, let the market take you out. Candidates should be easier to find now that the rally has broadened out.
Erin is 45% long, 0% short.
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CALENDAR
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BITCOIN
Bitcoin had a great weekend and it has changed the face of this chart. It has been stuck in a declining trend and now that has been broken. We have a new PMO Crossover BUY Signal and Stochastics are rising strongly. The double top was confirmed with the break below the May low, but now it appears the pattern could be busted. That however, would require a breakout above prior tops. That isn't out of the question given the new strength on the PMO.
BITCOIN ETFs
INTEREST RATES
Long-term interest rates were higher on the day, but it didn't break any declining trends. We still see them as vulnerable to more downside. We had one inversion clear between the 1-month and 3-month yields which swapped places.
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 was higher on the day. It remains in a declining trend channel. The bottom of the channel hasn't been tested yet. That is what we are waiting for. The PMO is falling on a Crossover SELL Signal and Stochastics are 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: The 20-year yield was up today and that put downside pressure on TLT. So far overhead resistance is holding. It does look double or triple top-ish, but yields are still in declining trends so we do expect TLT will resume its rally. The PMO is in agreement as it is on a Crossover BUY Signal and is mostly flat above the signal line. Stochastics are also holding above 80.
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 still looks very bearish despite today's rally. The steep declining trend is still intact. The bearish rising wedge resolved as expected with a drop out of the pattern. The PMO and Stochastics are bearish so we do expect to see more decline from 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 very close to logging new all-time highs after spending months consolidating the rally out of previous all-time highs. The bearish double top is about to bust as price is nearing a break above those prior tops. We like the rising PMO and Stochastics holding above 80.
You can see that relative strength is building for Gold against the Dollar and the correlation is becoming more negative. All things being equal, the Dollar and Gold should have a natural reverse correlation. With the correlation becoming more negative, we think that will work in Gold's favor given newfound relative strength against the Dollar and the weakness of the Dollar itself.
GOLD MINERS (GDX): Gold Miners paused their rally interestingly on a day that Gold was up. They have run too hot and are now overbought based on the RSI. They could use a period of consolidation, but participation is still strong enough to look for more upside. It is likely a bit too late for entry here given the prior rally. A pullback would do wonders but so far it is holding easily above support.
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 backed off slightly today but is still clinging to support. The PMO is beginning to look toppy and Stochastics have topped. We think we will see more consolidation to work out the strong rally out of the June low. This does look like an extension of the flag on a flag pole so once consolidation is over, it should move higher not lower.
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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