ETF Day is here early! I wasn't particularly thrilled with today's choices coming from the scans, but I did find three with interesting prospects.
One of the themes today was the SP500 ETFs. They filled the Surge Scan as the PMO for the SPY turned up today. I'm not enamored of investing in the variations of the SPY as I still see problems ahead for the indexes. It may seem like a broken record as far as terrible breadth, but it tells me that the market is still vulnerable. It also tells me that things aren't as strong as they may look.
I found the Financial sector in today's scans. I almost included the 3x leveraged Financial ETF (FAS) as I think the rally may be shorter versus longer, but I think it best not to present leveraged ETFs if I can help it, but this doesn't mean you can't get more aggressive than me.
One ETF that came up was the Metals & Mining ETF (XME). I am not confident about Gold Miners and this ETF does seem to mimic GDX, but I'll admit that XME's chart looked very constructive versus GDX. You may want to look at it. I am still looking for the Dollar to continue to rise and that will put downside pressure on these groups in my estimation.
Tomorrow is Reader Request Day, so get those Reader Requests in before tomorrow Noon PT!
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": INFL, PDO and XLF.
Runner-ups: IPAC and XME.
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Topic: DecisionPoint Diamond Mine (7/5/2024) LIVE Trading Room
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Welcome to DecisionPoint Diamonds, wherein I highlight ten "Diamonds in the Rough" per week. These are selected from the results of my DecisionPoint Scans which search for stocks that could benefit from the trend and condition of the market. Remember, these are not recommendations to buy or sell, but are the most interesting of the stocks that surfaced in my scans. My objective is to save you the work of the initial, tedious culling process, but you need to apply your own analysis to see if these stocks pique your interest as well. There are no guaranteed winners here!
"Predefined Scans Triggered" are taken from StockCharts.com using the "Symbol Summary" option instead of a "SharpChart" on the workbench.
Stop levels are all rounded down.
Horizon Kinetics Inflation Beneficiaries ETF (INFL)
EARNINGS: N/A
INFL is an actively-managed fund seeking long-term capital growth in inflation-adjusted terms from companies expected to benefit, directly or indirectly, from inflation. Click HERE for more information.
Predefined Scans Triggered: New 52-week Highs, Moved Above Upper Bollinger Band, Moved Above Upper Price Channel, P&F Ascending Triple Top Breakout and P&F Double Top Breakout.
INFL is down -1.60% in after hours trading. It appears to be pulling back to the breakout point in after hours trading which is okay, it may not translate tomorrow. I really liked the breakout from a choppy consolidation range. The indicators have really matured as well with the RSI rising and not overbought and a new PMO Crossover BUY Signal. It is also outperforming. Stochastics are rising toward 80. You could actually tighten up the stop, but I decided to go with the support level at the May low. It is set at 6.6% or $31.46.
The breakout looks very good on the weekly chart as price is now at all-time highs and broke from strong overhead resistance.
*If a stock is in the "hot zone" above 70, it implies that it is stronger than 70% of its universe (large-, mid-, small-caps and ETFs) primarily in the intermediate to long terms.
PIMCO Dynamic Income Opportunities Fund (PDO)
EARNINGS: N/A
The fund utilizes an opportunistic approach to pursue high conviction income-generating ideas across credit markets to seek current income as a primary objective and capital appreciation as a secondary objective. Click HERE for more information.
Predefined Scans Triggered: New 52-week Highs, Moved Above Upper Price Channel and P&F Double Top Breakout.
PDO is down -0.07% in after hours trading. This one tends to mimic the SPY, but doesn't usually move up as quickly. What I like about it is that it generally doesn't feel as much pain as the SPY on a downturn. Consider the market has been moving mostly sideways, but this one has been inching upward. You can see that it is outperforming the SPY right now. The RSI is positive and not overbought yet. The PMO is nearing a Crossover BUY Signal and Stochastics are above 80. I like that it doesn't require a deep stop. I've set it at 4.7% or $12.72.
Price just broke through resistance at the lows from the start of the fund. The weekly RSI is getting overbought, but isn't right now. The weekly PMO is surging above the signal line (bottom above the signal line) and the SCTR is already in the hot zone. Since the stop is thin, upside potential is a bit more limited at 12.7%.
Financial Select Sector SPDR Fund (XLF)
EARNINGS: N/A
XLF tracks an index of S&P 500 financial stocks, weighted by market cap. Click HERE for more information.
Predefined Scans Triggered: New CCI Buy Signals, Moved Above Upper Bollinger Band, Moved Above Ichimoku Cloud, P&F Double Top Breakout and P&F Bullish Triangle.
XLF is down -0.05% in after hours trading. This is to take advantage of new strength in this area. We do have a triple top we are monitoring, but I expect the pattern will be busted with a breakout. The RSI is positive and not overbought and the PMO is on a new Crossover BUY Signal. Participation is improving again and the Silver Cross Index looks particularly bullish on its new rise. Stochastics reversed in positive territory and we are starting to see slight outperformance. Now if the market makes a downturn, this will likely not hold up, but for now Banks are looking pretty good as well as the rest of the sector groups. I've set the stop below the April low at 6.2% or $39.09.
This looks like a flag formation on the weekly chart. Price is holding above the 2022 high. The weekly RSI is positive and not overbought and the SCTR just entered the hot zone. Unfortunately, the PMO isn't cooperating yet. Consider a 17% upside target to about $48.77.
Don't forget, on Thursdays I look at reader-requested symbols, click HERE to send me an email. I read every email I receive and try to answer them all!
Current Market Outlook:
Market Environment: It is important to consider the odds for success by assessing the market tides. The following chart uses different methodologies for objectively showing the depth and trend of participation for intermediate- and long-term time frames.
- The Silver Cross Index (SCI) shows the percentage of SPX stocks on IT Trend Model BUY signals (20-EMA > 50-EMA)
- The Golden Cross Index (GCI) shows the percentage of SPX stocks on LT Trend Model BUY signals (50-EMA > 200-EMA)
Don't forget that as a "Diamonds" member, you have access to our "Under the Hood" curated ChartList on DecisionPoint.com. You'll find it under "Members Only" links on the left side on the Blogs and Links Page.
Here is the current chart:
Full Disclosure: I am 40% long, 0% short.
I'm required to disclose if I currently own a stock I mention and/or may buy/short it within the next 72 hours.
"Technical Analysis is a windsock, not a crystal ball." - Carl Swenlin
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NOTE: The stocks reported herein are from mechanical trading model scans that are based upon moving average relationships, momentum and volume. DecisionPoint analysis is then applied to get five selections from the scans. The selections given should prompt readers to do a chart review using their own analysis process. This letter is not a call for a specific action to buy, sell or short any of the stocks provided. There are NO sure things or guaranteed returns on the daily selection of "Diamonds in the Rough."
Regarding BUY/SELL Signals: The signal status reported herein is based upon mechanical trading model signals and crossovers. They define the implied bias of the price index/stock based upon moving average relationships and momentum, 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.
Helpful DecisionPoint Links:
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
For more links, go to DecisionPoint.com