Today the Energy Sector ETF (XLE) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. Participation is excellent with % Stocks > 20EMA and % Stocks > 50EMA at 100% and 86% respectively. While that is overbought, it is possible that those levels could be sustained for weeks as happened during March and April earlier this year. We believe this is dependent on the Crude Oil trade and that has become somewhat speculative based on Middle East tensions. Those will likely continue, but eventually as we've seen before, investors find the new normal and cool.
The weekly chart shows a long-term rising trend, and this week's advance could be headed for a breakout to new, all-time highs.
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.
Watch the latest episode of DecisionPoint on our YouTube channel here!
MARKET/SPX SECTOR/INDUSTRY GROUP INDEXES
Change Today: 
Change for the Week:
CLICK HERE for Carl's annotated Market Index, Sector, and Industry Group charts.
THE MARKET (S&P 500)
IT Trend Model: BUY as of 8/14/2024
LT Trend Model: BUY as of 3/29/2023
SPY 10-Minute Chart: The jobs report was initially cheered but price fell shortly after the gap up. It did recuperate and finished strongly.
SPY Daily Chart: The push at the end of the day took out the bearish filled black candlestick, now we have a bullish hammer candlestick. Keep in mind that those one-day patterns tend to work out best when the tail is at a low, but this is encouraging.
The PMO turned up as today's rally prevented a Crossover SELL Signal. Stochastics tipped upward in positive territory, but the VIX remains below its moving average on the inverted scale so we still see some short-term weakness.
Here is the latest recording from 9/30. Click HERE to get the link to the video library.
SPY Weekly Chart: We've identified a bearish rising wedge on the weekly chart that does imply we will see a breakdown of the rising trend. It could still move higher first given the weekly PMO is nearing a Crossover BUY Signal.
New 52-Week Highs/Lows: New Highs were not as plentiful as you would expect on a rally day. The High-Low Differential is still in decline displaying internal weakness.
Climax Analysis: There were climax readings on three of the four relevant indicators, giving us another upside exhaustion climax. Total Volume was low again so there wasn't huge conviction behind today's rally.
*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.
We mistakenly identified the STO-B as rising yesterday. It actually moved down to negative territory, but the bar wasn't so clear to us as it is today. Now we have a rising STO-V and falling STO-B. Their mixed readings tell us the market is basically in neutral right now. We saw an uptick in participation and an uptick in %PMOs Rising. The latter indicator is still reading below our bullish 50% threshold.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITVM actually reversed slightly higher today. It wasn't a huge vote of confidence as it was less than a point higher than yesterday. The ITBM continues to fall. Both indicators are still overbought and need to decompress. Despite the rally we lost more PMO Crossover BUY Signals.
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PARTICIPATION TABLES: The following tables summarize participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation. There are three groups: Major Market Indexes, Miscellaneous Industry Groups, and the 11 S&P 500 Sectors.
The highest IT Bias goes to Materials (XLB) which saw a HUGE upswing in the Silver Cross Index and that moved the IT Bias more bullish. Certainly a sector to keep our eyes on.
The lowest IT Bias goes to Communication Services (XLC). It is still seeing improvement to both the Silver Cross Index and Golden Cross Index and we know it is in a rising trend. Strength may be coming back into this sector of the market so we aren't particularly worried about its IT Bias right now.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
Utilities (XLU) holds the top spot on the Silver Cross Index table. This sector has been clicking and you can see the Golden Cross Index moved up to 100% too. It is overbought right now, but could continue to hold those conditions and move even higher based on strong participation.
Semiconductors (SMH) are holding the bottom spot on the SCI and we didn't see any improvement. This group does have a double bottom and is somewhat oversold right now so we see opportunity here should the market build on today's rally.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
Transportation (IYT) gained the most percentage points on the Golden Cross Index. This is definitely a group to add to your watch list given the foundation is strengthening.
Biotechs (IBB) hold the lowest Golden Cross Index reading and the Silver Cross Index is losing ground as well. Healthcare is pulling back and this aggressive group is likely one of the reasons it is being pulled down.
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 market bias is BULLISH in the intermediate and long terms.
Participation has thinned this week and is no longer overbought as far as %Stocks indicators go. However, the Silver Cross Index is somewhat overbought as is the Golden Cross Index. The Silver Cross Index did turn back up today, but we aren't expecting it to continue in that direction given there are fewer stocks above their 50-day EMA. The Golden Cross Index is flat. Both the SCI and GCI are above their signal lines so the IT and LT Biases are 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: We notice on the calendar for next week that Fed governors are speaking nine times. This presents numerous chances for market-moving comments to be made. That aside, we are still detecting weakness as far as internals, particularly the lack of rising PMOs and PMO BUY Signals. There was cause to cheer today as the PMO did turn back up with Stochastics, but the upside exhaustion climax weighs heavy on our outlook for next week. Mixed STOs and ITBM/ITVM suggest some neutrality in the market right now, not new strength. Our best guess is that we will see some churn as we approach all-time highs again, but we should be prepared for a possible decline first based on today's climax. We need more momentum.
Erin is 55% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
Bitcoin Daily Chart: Bitcoin is reversing off the 200-day EMA and could be ready for another run at overhead resistance. The PMO is decelerating and Stochastics have tipped up. The RSI is back in positive territory. We think there is more rally to be had, but aren't looking for a break above resistance just yet. We need the PMO to turn back up.
Bitcoin Weekly Chart: After trading in parabolic fashion, Bitcoin collapsed and began a period of high level consolidation. This is the fourth attempt to break out of the pattern. Ultimately we should see that breakout as this has formed a strong bull flag. The weekly PMO is bottoming so we should eventually get that breakout, it seems a bit too early given the weak daily PMO.
BITCOIN ETFs
Today:
This Week:
INTEREST RATES
Yields are back on their way higher after testing support. They are rising quickly now and with determination so we do expect them to continue to rise higher. You may want to take a look at PFIX which follows interest 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
The 10-year yield advanced strongly today and made it above the September top. The indicators, Stochastics in particular, are very bullish. We expect yields to continue to make their way higher.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount, which shuts many buyers out of the market, and potential sellers will experience pressure to lower prices (to no effect so far).
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This week the 30-Year Fixed Rate changed from 6.08 to 6.12.
Here is a 50-year chart for better perspective.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: Yields are on their way back up and this is weighing heavy on Bond funds. We still see a rising trend, but given the falling PMO, bullish yields and negative Stochastics, we do expect more decline.
Strong support is arriving at horizontal support and the 200-day EMA. We'll reevaluate conditions when they reach that level, but it looks very bearish currently.
TLT Weekly Chart: The weekly picture is a bit more bullish as we have a large bullish reverse head and shoulders. The problem is that price turned back down before testing resistance and reaching the minimum upside target of the pattern. The weekly PMO is topping. This may be all we'll get out of that bullish bottoming formation.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 8/5/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar shot to the moon this week. This put downside pressure on Materials and Gold. It certainly looks as though it will move even higher, but it is due for a pause. We'll look for that pause when the RSI gets more overbought. For now the PMO and Stochastics suggest more upside ahead.
Overhead resistance is nearing at 29.00 so that could be where we'll see a pullback or pause.
UUP Weekly Chart: The bearish rising wedge fulfilled with the breakdown, but now price is recapturing the rising trend. It appears we may be forming a new rising trend channel versus the bearish wedge. The weekly PMO is turning back up so we expect a run to the top of the channel eventually. First a likely pause at 29.00, then a resumption of the rally.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: With the strong rally on the Dollar we would've expected Gold to fall apart, instead it is moving mostly sideways. Falling discounts tell us investors are getting less bearish on the metal. With the Dollar still looking very bullish, we expect more downside pressure on Gold prices. The indicators are neutral so maybe it will continue to defy the Dollar, but we would prepare for a decline.
GLD Weekly Chart: Gold's weekly chart is very bullish as we see the strong rising trend after the breakout to new all-time highs. The rally is rather steep which is another reason we are preparing for a possible pullback or even correction. It is also very overbought based on the weekly RSI. The weekly PMO is still rising so it is probably too early to think 'correction', but we should be on the lookout.
GOLD MINERS Daily Chart: Gold Miners have formed a bearish head and shoulders top. We got a new PMO Crossover SELL Signal this week so it seems likely that we'll see them pullback with Gold based on the strongly rising Dollar. They did hold up well today, but the head and shoulders has us looking for a decline to likely test 36.00.
GDX Weekly Chart: This is almost a perfect place to see a decline as overhead resistance was met at the 2020 high. It has dropped below the 2022 high. It is range bound at this point and it is time for a decline as price is coming off the top of the range. The weekly PMO is trying to top already, so we do expect more decline ahead for this industry group.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 8/1/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: We have a bullish double bottom on Crude Oil right now. It isn't textbook as the bottoms aren't aligned perfectly with each other, but it does put another bullish spin on this chart. We do see this as somewhat speculative as it isn't based on production levels which haven't changed and won't be changing likely into the end of the year. The indicators are very bullish right now so we do expect more upside, we would just be careful with this near vertical rally.
Resistance has been met so maybe we will see a pause here.
USO/$WTIC Weekly Chart: USO is range bound. It is heading back to the top of the range, but for now we aren't expecting a breakout there unless things get really out of hand in the Middle East. $OVX, the Oil volatility index has penetrated the lower Bollinger Band and many times that will lead to rally. We've got the rally, now we see if it can keep it going.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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