Today the Energy (XLE) Sector triggered a Price Momentum Oscillator (PMO) BUY Signal as it crossed above its signal line. This is probably coming in right before we see a pullback in Energy. Notice that price closed well off its highs today. Participation is incredibly strong within the sector so a breakout is likely. The RSI is getting a bit overbought, but Stochastics look very strong above 80. XLE will be very attractive on a pullback.
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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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: Friday's filled black candlestick suggested we'd see a decline today. This looks like a mechanical pullback toward support after a rally. The PMO is still rising on a BUY Signal and the RSI is comfortably within positive territory above net neutral (50).
The VIX finally came off its lows to pull back within the Bollinger Bands on the inverted scale. This begs for a short-term decline. Stochastics did top but remain above 80 so internal strength is still available.
Here is the latest recording 8/28 - no recording on Labor Day:
S&P 500 New 52-Week Highs/Lows: New Highs pared back as expected, but we saw quite a few New Lows. New Lows are near-term oversold. The 10-DMA of the High-Low Differential is rising which is good for the intermediate term in particular.
Climax* Analysis: Only two of the four relevant indicators had a climax reading, and SPX Total Volume was light, so this will be a marginal downside initiation 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 OVERBOUGHT.
Swenlin Trading Oscillators both moved down on today's decline and remain in overbought territory. They are vulnerable to more downside. We saw a significant loss in both %Stocks > 20EMA and %PMOs Rising. That doesn't bode well in the short term.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
Given only 39% of stocks hold rising PMOs, it wasn't a complete surprise to see the loss of PMO BUY Signals. Most important would be that both the ITBM and ITVM are continuing to rise.
PARTICIPATION: 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 short-term bias is BEARISH.
The intermediate-term bias is NEUTRAL.
The long-term bias is BEARISH.
The bias has shifted in the short term to BEARISH given the marked losses in %Stocks > 20/50EMAs. Both percentages are now below the 50% bullish threshold. Intermediate-term, the Silver Cross Index is topping beneath its signal line. It is still very near to our bullish 50% threshold so we are leaving it as "Neutral". %Stocks > 50/200EMAs are below our 50% threshold and are less than the Golden Cross Index percentage, leaving the long-term as BEARISH. The Golden Cross Index also topped beneath its signal line.
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.
Today the Dow Jones Industrials long-term BIAS changed to bearish as the GCI crossed below its signal line, and the intermediate-term BIAS changed to bullish as the SCI crossed above its signal line for a Bullish Shift.
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CONCLUSION: Short-term indicators and participation lost ground today alongside a downside initiation climax. The market is primed for a pullback to support. If participation and the Silver Cross Index don't shift higher, the market is very vulnerable to an intermediate-term breakdown. For now IT indicators are rising so we will look for a decline in the short-term followed by an upside reversal. Make sure you have your stops in play. As we mentioned last Friday, we need to have a safety net in case this short-term decline morphs into something more serious.
Erin is 40% long, 0% short.
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BITCOIN
Bitcoin is back in a trading range and based on the indicators we think it will continue. The RSI and Stochastics are negative, but the PMO is flat suggesting no momentum in either direction.
INTEREST RATES
Interest rates cooled last week, but they are back in line to move higher 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
$TNX bounced strongly off support Friday and today saw a continuation of that rally. It hasn't moved the PMO upward yet, but given Stochastics had a strong move higher, we believe the PMO will follow soon. The RSI is very positive so we are looking for the yield to rise higher.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds enjoyed some time in the sun, but rates are again on the rise putting downward pressure on Bonds. Indicators are negative and suggest the August low will be tested. The PMO has topped as have Stochastics. The RSI is negative.
While support is available at 92, we see 90 as the more likely stopping point on this decline.
DOLLAR (UUP)
IT Trend Model: BUY as of 8/3/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar had a hiccup last week, but it has righted itself and looks as if it will continue higher. The RSI is now overbought so a pause would be welcome. The PMO has surged above the signal line (bottomed above the signal line) and Stochastics are back above 80.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: BUY as of 1/5/2023
GLD Daily Chart: With the rally in the Dollar, Gold felt the pinch as it moved lower in response. The RSI is now in negative territory and Stochastics have topped. The PMO is above its signal line but is looking rather toppy.
$GOLD Daily Chart: This decline came right against the declining tops trendline. On the bright side, the correlation between Gold and the Dollar is about zero which means Gold isn't tied as closely to the Dollar right now. This will afford Gold and opportunity to rise even as the Dollar rises.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners appeared ready to rock but the decline in Gold and the market has hit them hard. Notice that what little participation they had has vanished. The RSI is negative, the PMO has topped and Stochastics have dropped below 80. Prepare for a short-term decline down to support.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: Crude Oil is off to the races, but today formed a bearish filled black candlestick. The RSI is now overbought so it is time for a pullback. The PMO Crossover BUY Signal does suggest a decline would be short-lived.
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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Price Momentum Oscillator (PMO)