You may have noticed the new price strength on the Transports (IYT). IYT has been at the top of our Market Summary for two days. Internal strength has been building during the June rally and has pushed participation numbers into the stratosphere.
Currently 100% of stocks have price above their 20-day EMA and a whopping 95% with price above their 50-day EMAs. The Silver Cross Index shows us that 85% have a 20-day EMA above the 50-day EMA (i.e. they hold a "Silver Cross"). Admittedly all of these percentages are highly overbought, but in a strong rally overbought conditions can persist. Still, we don't have a breakout from the long-term trading range which leaves price vulnerable.
This group deserves attention right now. Dow Theory tells us that if Transports are healthy, the market is ultimately healthy as goods are being shipped and transportation companies are seeing profit. This should lift the market as far as the theory goes. We think overhead resistance is key right now. A strong breakout will change the character of this range-bound group, but as noted above price is vulnerable given it sits on resistance, particularly given the overbought nature of these indicators.
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 StockCharts TV's YouTube channel here!
MAJOR MARKET INDEXES
SECTORS
Each S&P 500 Index component stock is assigned to one of 11 major sectors. This is a snapshot of the Intermediate-Term (Silver Cross) and Long-Term (Golden Cross) Trend Model signal status for those sectors.
CLICK HERE for Carl's annotated Market Index, Sector, and Industry Group charts.
THE MARKET (S&P 500)
IT Trend Model: BUY as of 3/30/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: The market reversed higher just above support at the 20-day EMA. Unfortunately, the PMO is still falling and could trigger a Crossover SELL Signal tomorrow, barring a strong rally. Notice the dip in relative strength against the equal-weight RSP. This tells us that the mega-caps are beginning to underperform.
The VIX remains above its moving average on the inverted scale, but Stochastics are falling. This tells us there is no internal weakness, but also, no internal strength. Not particularly helpful.
Here is the latest recording (6/26):
S&P 500 New 52-Week Highs/Lows: New Highs really popped today. This is in line with our Climax chart which follows this one. The 10-DMA of the High-Low Differential is exceeding prior levels. Technically that indicator is near-term overbought, but it has seen much higher readings, even some as high as 100 so we see this as a mostly positive configuration.
Climax* Analysis: There were unanimous climax readings on the four relevant indicators today. This gives us an upside initiation climax.
*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) turned up on today's upside initiation climax. Participation expanded again today and we now have 2/3rds of the index with rising momentum. This can support more upside.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM and ITVM were mixed and hence aren't quite confirming rising short-term indicators. %PMO BUY Signals did tick upward today even though we only have 66% of stocks with rising PMOs. That's bullish.
PARTICIPATION and BIAS Assessment: The following chart objectively shows the depth and trend of participation 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 all three timeframes.
The bias in the short and intermediate terms moved back to bullish. We see expanding participation of stocks above their 20/50-day EMAs and percentages are above our 50% bullish threshold. The Silver Cross Index turned back up today and we have a higher percentage of stocks above their 20/50-day EMAs in comparison to the Silver Cross Index so we should see it continue higher. It is also reading above 50%. The long-term components are above the 50% bullish threshold and the Golden Cross Index just turned back up.
CONCLUSION: We weren't surprised to see today's upside initiation climax given the strong and broad rally. New Highs really popped and adds to the climactic behavior of today. Participation remains above our bullish thresholds and continues to expand giving us a bullish bias across the board right now. We do expect some follow-through tomorrow, but aren't entirely convinced the market is done declining. Carl will be writing a piece on seasonality soon. We are currently within a period of unfavorable seasonality and that could weigh heavy, particularly if indicators get overbought. We would use loose stops on positions with rising momentum and tighter stops on positions with deteriorating momentum.
Erin is 45% long, 0% short.
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BITCOIN
Yesterday's comments still apply:
"Price has now hit major overhead resistance at 31,000. The rally was practically vertical so we would expect a pause. This does look like a bull flag. The indicators are suggesting Bitcoin will breakout given the positive, rising and not overbought PMO. The RSI is barely overbought and Stochastics hover in territory above 80 suggesting internal strength."
INTEREST RATES
Long-term rates are seeing declining trends while shorter-term rates continue higher in rising trends.
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 rallied today but didn't break the very short-term declining trend so we still could see a bearish Adam & Eve double-tops. The RSI may be positive, but the PMO and Stochastics tell us we should look for rates to fall rather than rise.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We still see a bullish bias on the Bonds chart. The RSI is positive and the PMO is rising, almost in positive territory. Stochastics have turned back up suggesting internal strength. TLT may've declined today, but indicators tell us to look for an upside breakout.
DOLLAR (UUP)
IT Trend Model: BUY as of 5/18/2023
LT Trend Model: SELL as of 4/12/2023
UUP Daily Chart: The Dollar is back in decline, but holding above the 200-day EMA so we don't want to get exceedingly bearish. Indicators are very mixed. The RSI dipped below net neutral (50), but Stochastics turned up. The PMO is flat and unresponsive. We would look for more churn.
Erin is hoping the intermediate-term bearish rising wedge doesn't fulfill given her upcoming trip to Europe in a few weeks. Given price did turn back up before testing the rising bottoms trendline, an upside breakout isn't out of the question. However, based on Erin's prior experience, the Dollar usually takes a beating before she leaves.
GOLD
IT Trend Model: NEUTRAL as of 6/8/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: Generally we don't expect Gold to fall when the Dollar falls, but the Dollar and Gold are currently positively correlated. They have decoupled so the Dollar dropping won't insure that Gold goes higher as evidenced today. Support is holding so far above the 200-day EMA. Indicators are leaning bearish so we expect price to eventually breakdown.
GOLD Daily Chart: It isn't all bad for Gold right now. Discounts on PHYS have gotten very high. This means investors are very bearish on Gold right now. Given sentiment is contrarian, this could set up a good environment for a rally in Gold.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are holding support, but languishing given the deterioration of the internals. We now have zero Gold Miners with price above the 20/50-day EMAs. The Golden Cross Index does hold a greater than 50% reading but given the minuscule amount of stocks their 200-day EMA and no stocks above their 50-day EMA, it is going to accelerate lower.
CRUDE OIL (USO)
IT Trend Model: SELL as of 5/3/2023
LT Trend Model: SELL as of 12/6/2022
USO Daily Chart: Crude Oil is in the process of triggering a Crossover SELL Signal. The RSI is negative and Stochastics are falling. A trip to test the bottom of the trading range appears imminent.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
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.
Helpful DecisionPoint Links:
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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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