Today the Silver Cross Index for the SPX moved above its 10-day EMA/signal line. This gives us a Bullish Shift and sets up an intermediate-term market bias that is now BULLISH. Typically these shifts occur at the beginning of a prolonged rising trend. We'll talk more about the bias in all three timeframes in the Bias section, but we wanted to alert you to this new condition.
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
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THE MARKET (S&P 500)
IT Trend Model: NEUTRAL as of 9/22/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: The market rallied strongly today but we can see that it is part of a period of churn as the rally out of the lows is worked through. The RSI is back in positive territory and the PMO continues to rise on a Crossover BUY Signal. Volume wasn't particularly impressive on this rally.
The VIX closed above its moving average on the inverted scale which does imply some internal strength. Stochastics aren't completely on board but they are very close to territory above 80 which would also suggest internal strength.
Here is the latest recording from 10/16:
S&P 500 New 52-Week Highs/Lows: We would've expected to see more New Highs not a decline in them. We're okay with that for now given the 10-DMA of the High-Low Differential is accelerating higher.
Climax* Analysis: Today there were strong and unanimous climax readings on the four relevant indicators, giving us an upside initiation climax; however, SPX Total Volume was a little light and did not confirm. There is potential for the rally to continue, but it would be prudent to wait and see how the market performs tomorrow morning.
*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 NEUTRAL.
Swenlin Trading Oscillators (STOs) are already reversing back up. We have over 50% of stocks with price above their 20-day EMA and over 3/4ths of the index with rising momentum. This speaks well for today's upside initiation climax.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM and ITVM have now moved into neutral territory and out of oversold conditions. They are rising which confirms today's upside reversal on short-term indicators. %PMO BUY Signals is above our 50% bullish threshold and is accelerating higher.
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.
Short-term market bias is NEUTRAL to BULLISH.
Intermediate-term market bias is BULLISH.
Long-term market bias is BEARISH.
As noted in the opening, the upside crossover of the SCI above its signal line has moved the IT Bias to Bullish. We now have over 50% of stocks above their 20-day EMA, but still need 50%+ of stocks above their 50-day EMA before we can list the short-term as fully bullish. The GCI does appear to be pausing the decline but it remains below 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.
Five market/sector/industry group Silver Cross Indexes crossed up through their 10-day EMAs, changing their BIAS from bearish to bullish. It is good to see the left side of the table showing some green. It's flipping to green and that is a good sign for the market.
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CONCLUSION: Short-term indicators are turning back up and we had a bullish upside initiation climax. Participation is expanding again and has moved one of our participation indicators above our bullish 50% threshold. We like the market's chances to continue to rally higher. It isn't clear sailing as we saw fewer New Highs on a strong rally day and some of the mega-caps look vulnerable. The war isn't affecting the market directly, but any expansion to the war could lead to a black swan type of event. Be careful bottom fishing, while reversal plays aren't off the table, tighter stops may be required.
Erin is 50% long, 2% short.
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BITCOIN
Sparked by fake news that the SEC had approved iShares Bitcoin ETF, Bitcoin rallied strongly. BlackRock CEO, Larry Fink thinks that this is a flight to "quality". We disagree regarding 'quality', but certainly rising interest rates have had some looking toward unsupervised Bitcoin. Bitcoin came off today's highs but did close higher than it has in months. The RSI and PMO now look more bullish and Stochastics are rising again. The trading range between 25,000 and 29,000 is still viable, but we have to be open to a rally to 31500 given the rising trend out of the September low.
INTEREST RATES
Interest rates moved higher on the day dashing hopes that we might see some relief for Bonds. The yield curve is flattening, but it is due to longer-term rates catching up to high shorter-term rates.
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 PMO still tells us to expect $TNX to resume the breakdown out of the parabolic price rally. Typically we will see the breakdown of a parabolic bring price down to the last base, in this case we see it as 4.1 to 4.4%. Stochastics did tick upward but not enough to completely dispel our bearish outlook.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The rise in the 20-year yield put a damper on TLT's latest rally. It broke the fragile short-term rising bottoms trendline. Stochastics have tipped over and the RSI remains below net neutral (50) so Bonds are internally weak. However, the PMO is rising on a new Crossover BUY Signal so we can't write off this rally yet.
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 topped. This is beginning to look like a mini bearish head and shoulders pattern. It's 'mini' so we can't assign too much weight to it, but given the PMO top beneath the signal line, we think this is about as bearish as UUP has looked in months. It's not a completely bearish chart, however, the RSI remains positive and Stochastics are rising hesitantly so there is still some internal strength that the Dollar could grasp.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: SELL as of 10/5/2023
GLD Daily Chart: We were surprised to see Gold had a bad day given the weakness in the Dollar. It was an inside trading day (today's candle body fits inside the prior candle body) which is neutral so we don't see today's decline as a harbinger of decline.
GOLD Daily Chart: Stochastics are rising strongly and the PMO is rising bullishly after a recent Crossover BUY Signal. We don't yet have a breakout above the declining tops trendline out of the May top, but it is looking good. Discounts on PHYS are still very elevated telling us investors are still very bearish on Gold. Sentiment is contrarian so this is a positive condition. We remain bullish on Gold.
GOLD MINERS Golden and Silver Cross Indexes: GDX, like Gold, hasn't overcome the intermediate-term declining tops trendline, but we believe it will. The SCI is rising again and participation is robust. Stochastics are now above 80. Look for price to breakout above the 200-day EMA.
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 attempting to recapture is prior rising trend. We believe it will find success. The RSI is positive and the PMO is now rising again. Stochastics look particularly favorable.
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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