Today the Consumer Staples ETF (XLP) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. XLP has been moving more or less sideways since September, a trading range that appears to be a consolidation of a substantial up move. We think the consolidation is ending and that XLP will be making new highs soon.
The weekly PMO appears to be trying to bottom, and XLP has recaptured the rising trend line. Bullish chart. This also looks very much like a bull flag chart pattern.
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MARKET/INDUSTRY GROUP/SECTOR INDEXES
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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: Today the market opened higher, but instead of backing off as it did yesterday, it rallied all the way into the close. The Fed minutes told us we have a 0.25 basis point rate cut ahead and that could continue to keep prices moving higher.
SPY Daily Chart: We have now experienced our seventh day of rally since the last decline. The market is due for some consolidation at the very least. At this point the RSI is not overbought so price itself isn't that overbought near-term. The PMO is still on the rise after its recent Crossover BUY Signal.
The VIX is healthy above its moving average on the inverted scale so investors are complacent. It hasn't hit the upper Bollinger Band yet so we could continue to see it rise with price on the inverted scale. Stochastics also look very healthy as they have now moved above 80 signaling internal strength.
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S&P 500 New 52-Week Highs/Lows: New Highs contracted on today's rally, but we do see that the High-Low Differential is back on the rise. Only a few New Lows were detected.
Climax* Analysis: There were no climax readings today. We do note that Net Advance-Decline Volume was negative on a rally day.
*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 clearly overbought. They have seen higher readings, but it does have us on the alert for a possible decline. It was a rally day, yet we lost some stocks above the 20-day EMA and we saw a decline in PMOs Rising.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
Both the ITBM and ITVM are moving higher, confirming the rising short-term indicators. This tells us we shouldn't get surprised by a heavy downside day. We are seeing more PMO Crossover BUY Signals.
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 term.
The market bias is BEARISH in the long term.
It was a rally day, yet we saw a drop in %Stocks > 20/50EMAs. %Stocks > 200EMA held the same reading as yesterday, no improvement. The Silver Cross Index is still on the rise and we have more stocks above their 20/50-day EMAs than those with Silver Crosses so the Silver Cross Index could expand further. The Golden Cross Index is falling and given there are slightly fewer stocks above their 200-day EMA, we could see it fall a bit further. The Silver Cross Index is above its signal line so the IT Bias is BULLISH. The Golden Cross Index is below its signal line so the LT Bias is 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: The Bias Table above is getting green again suggesting the market is healthy right now. However, we saw a few issues today. First, participation did not expand on a rally day. Second, we had negative Net Advancing-Declining Volume on a rally day. These are small problems, but they could mean some churn ahead. With all of primary indicators moving up and participation holding at healthy levels, we aren't looking for a big decline. Holiday trading should really kick in tomorrow and Friday meaning we should see low volatility and volume.
Erin is 60% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
Bitcoin is beginning to digest the near vertical rally. The decline has taken the RSI out of overbought territory, but the PMO is now declining with price and Stochastics are dropping quickly. We think there may be more digestion ahead for Bitcoin with a possible pullback to 85,000.
BITCOIN ETFs
INTEREST RATES
Yields were mixed today with longer-term yields rising and short-term yields falling (likely due to Fed rate cuts). It is time for them to digest their advance.
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 up slightly. The PMO is still in decline and Stochastics look terrible. We don't think this support level will hold.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: SELL as of 11/21/2024
TLT Daily Chart: Bonds were down slightly as longer-term yields did advance. Overhead resistance is holding strong for now, but we do think yields are due for a decline so that level should be overcome. The PMO is rising nicely and the RSI has finally recaptured positive territory with a move above net neutral (50). Stochastics are also rising suggesting more upside ahead.
DOLLAR (UUP)
IT Trend Model: BUY as of 10/9/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar rallied back above support today. The rising trendline was not recaptured. The PMO is flat and unresponsive on the recent choppy trading. Stochastics are still above 80, but are declining. It is time for the Dollar to move lower.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold managed a small rally today. The PMO has topped beneath the signal line and is almost in negative territory. Stochastics are still moving lower. Investors are still very bearish on Gold based on the high discount level so more downside pressure is likely to be applied.
There are plenty of lines of support so Gold could find footing before losing too much more ground.
GOLD MINERS (GDX) Daily Chart: Gold Miners managed a small rally on Gold's rally. It didn't do much to improve participation numbers. Stochastics are topping so we will look for price to test the 200-day EMA and the prior low.
CRUDE OIL (USO)
IT Trend Model: SELL as of 10/17/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: A cease fire has been reached in the Middle East so many of the fears that were pushing Crude prices higher are no longer a factor. The chart was already looking more bearish as we got another top at the 200-day EMA. Now the PMO is nearing a Crossover SELL Signal beneath the zero line. We would look for price to move lower and test the bottom of the current trading range.
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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