Today the Energy Sector ETF (XLE) 20-day EMA crossed down through the 50-day EMA (Dark Cross), above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. We're seeing a virtually uninterrupted decline from the November top, which is the top of a wide trading range. XLE is currently headed toward the bottom of the range. We have moderate confidence that support will not hold given weak participation and negative Stochastics.
The weekly chart shows that, at the very least, XLE could consolidate until the industry knows more fully how the policies of the new administration will impact the business.
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Also today, the Utilities Sector (XLU) 20-day EMA crossed down through the 50-day EMA (Dark Cross), above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. We can see a double top, and today it executed as the confirmation line was penetrated downward. The minimum downside target is about 70.50. This looks like a viable signal, although we do not assure particular outcome.
The weekly chart shows the double top at the end of a +57% advance from the October 2023 low. The very overbought weekly PMO has topped and crossed down through its signal 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
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: Price gapped down shortly after the open. Price attempted to recuperate, but the decline persisted midday. We did see some positive action to finish the day. We'll see if that holds up tomorrow.
SPY Daily Chart: Price continues to hold above support, but does look ready to break down. The PMO is still in decline but as we've noted previously, it is flat above the zero line so there is still some strength. The OBV is barely losing any ground.
The VIX is seeing expansion and that has put it below its moving average. Investors must be getting a bit nervous about this possible market top. Stochastics continue to tumble and that would suggest a breakdown ahead. Notice the relative strength line to equal-weight RSP. It is continuing to rise telling us that mega-caps still hold sway over the index and could keep it elevated.
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S&P 500 New 52-Week Highs/Lows: New Lows were more prevalent that New Highs today. Weakness continues to pervade the chart as the High-Low Differential is also in decline.
Climax* Analysis: There was only one climax reading on the four relevant indicators. Not a climax 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 OVERSOLD.
Swenlin Trading Oscillators (STOs) are definitely oversold now and are starting to reach extremes. This is typically good for the market as this normally occurs before bull market moves. However, given the market has yet to really decline, this may not hold true this time around. We now only have 15% of the index holding rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM are moving lower in negative territory. They are not at all oversold and can certainly accommodate more downside. %PMO Xover BUY Signals continue to decline but have reached oversold levels.
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 BEARISH in the intermediate and long terms.
Participation is falling lower and many of the %Stocks > 20/50/200EMAs are beginning to reach near-term oversold levels. There is plenty of room for improvement should the market want to rally further. For now, most stocks are languishing. The Silver Cross Index continues to decline alongside the Golden Cross Index which is also falling. Both are below their signal lines so the IT and LT Biases are 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 very red with "Bear" readings. This is an excellent way to view short-term conditions and clearly they are moving bearish. It is incredible that with so few stocks showing rising momentum and BUY Signals that the market should be so close to all-time highs. The mega-caps continue to push the market around based on rising relative strength against equal-weight RSP, but when they eventually fail, the market will slide quickly. We believe that Santa Claus should prevent a big decline, but internals are certainly weak enough that a decline could ensue despite the holidays. Buckle up for January. Weak internals will likely win out. Tomorrow is the Fed rate decision so we could see some turbulence.
Erin is 40% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
Bitcoin consolidated somewhat and now it is back on the rise. Fundamentals are in Bitcoin's favor as sentiment is soaring higher and discussions of a Bitcoin Reserve entice investors to take a stake in Bitcoin. We expect this rally will continue higher, but more consolidation will be necessary soon.
BITCOIN ETFs
INTEREST RATES
Yields essentially paused. We don't even have to annotate it, there are flags on most of the interest rates. That bullish formation suggests 2024 highs could be met again.
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 bull flag on $TNX executed as expected with a breakout. We now have a nearing PMO Crossover BUY Signal and Stochastics are above 80 so we do expect to see $TNX advance further.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: BUY as of 12/4/2024
TLT Daily Chart: Bonds rallied but it does look like a bearish shooting star candlestick that would imply a decline tomorrow. Yesterday's filled black candlestick didn't execute with a decline today so we'll see if this candle turns out to be a problem. The indicators are all negative. It is especially bearish to see a PMO Crossover SELL Signal below the zero line.
Support is nearby and given the negative indicators, we are expecting those lows to be met with a likely decline from there.
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 is ready to test its rising bottoms trendline again. The PMO is flat above the signal line so there is some strength even though the PMO is below its signal line right now. Stochastics are above 80 and do imply that this rising trend will likely hold.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold executed the bearish rising wedge with a breakdown. The PMO is now in the process of crossing below its signal line. We would look for support to be met at 235.
Sentiment is very bearish given the high discount readings so we should expect more decline. Readings aren't outrageously high so we aren't looking for a reversal on bearish sentiment extremes. It is not as extreme as it can get.
GOLD MINERS (GDX) Daily Chart: Yesterday's comments still apply:
"The PMO has topped well below the zero line which is especially bearish for GDX. Gold looks precarious as well and GDX will struggle if Gold breaks down. Participation has dropped off the map and both the Silver Cross Index and Golden Cross Index are below their signal lines. We had been looking for an upside reversal here but the Dollar spoiled all the fun."
CRUDE OIL (USO)
IT Trend Model: SELL as of 10/17/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: Crude looks ready to test the bottom of the current trading range. The indicators are still favorable so the upper bound could still be tested, but the way price is now rolling over, we suspect there will be some decline.
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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