Today the Silver Cross Index had a "Bullish Shift" as it crossed above its signal line. We also saw Communications Services (XLC) and Transports (IYT) have the same Bullish Shift. This moves the IT Bias to "Bullish". We thought we would look at the charts to determine if these are good signals or not.
We like the QQQ's chances of moving higher given the expansion in participation of stocks above their 20/50-day EMAs. The long term is little murky given the Golden Cross Index is still in decline and %Stocks > 200-day EMA are also in decline. The RSI is positive and the PMO is rising on an oversold Crossover BUY Signal. Stochastics are also above 80.
XLC had a terrible day, but we didn't see that much damage to %Stocks > 20/50/200-day EMAs. The other indicators are still healthy as well, but we aren't thrilled with the drop below the prior September high. The Silver Cross Index is oversold and it is rising quite strongly given today's decline. Under the hood XLC looks like it could see a reversal when the rally comes back to life.
We aren't very bullish on IYT despite today's Bullish Shift on the Silver Cross Index. %Stocks > 20/50/200-day EMAs are in decline and never really reached our bullish 50% threshold. Price fell at overhead resistance at the 200-day EMA almost as soon as it broke the declining trend.
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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: Today saw a big bearish engulfing candlestick which tells us to expect more decline tomorrow. The decline did decelerate the PMO but it is still rising on a Crossover BUY Signal. The RSI dipped into negative territory which also puts a damper on the rally.
The VIX reading rose as we would expect, but it does remain above its moving average on the inverted scale which suggests internal strength. Stochastics were not bothered by today's decline. They are above 80 which also implies internal strength.
Here is the latest recording from 10/9:
S&P 500 New 52-Week Highs/Lows: Clearly there are still plenty of laggards given we saw quite a few New Lows today. New Lows are still in a rising trend which is safe for now. The 10-DMA of the High-Low Differential continues to rise out of oversold territory.
Climax* Analysis: There were unanimous climax readings on the four relevant indicators today. giving us a downside initiation climax. SPX Total Volume was solid, so we'll be looking for some downside follow through.
*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) turned down on the decline which also suggests we'll see some downside follow-through. %Stocks > 20EMA took a hit and moved below our 50% bullish threshold. We lost quite a bit of momentum among the index, but the reading is still above 50%.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
The ITBM/ITVM and %PMO Xover BUY Signals are all rising. We now have 50% of the index with PMO BUY Signals which could keep prices rising in the intermediate term.
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 market bias is BEARISH in all three timeframes.
The loss of participation of stocks > 20-day EMA pushed the percentage below our 50% bullish threshold so we are moving back to bearish in the short term. The SCI has turned up and is nearing a Bullish Shift so the IT bias should move BULLISH soon. The GCI is below our bullish 50% threshold and is in decline leaving the long-term bias 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 Silver Cross Index for QQQ, XLC, and DJT crossed up through their 10-day EMA, shifting their BIAS to bullish.
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CONCLUSION: Interest rates rose significantly today alongside news that inflation is more sticky than the Fed wants. The rally was running hot so this was a good excuse for it to cool. In the process, we saw a downside initiation climax and the STOs move lower. The ITBM and ITVM are healthy so we believe after this pullback, we will resume the rally. We see this as a possible opportunity to build positions, but all should be done with stops in case the pullback turns into a correction. We would also add that it isn't the time to hold onto losers with hope that they'll start to prosper. A losing stock will likely be hit hard during this cooling off period.
Erin is 50% long, 2% short.
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BITCOIN
Bitcoin is now testing support at 26,500. We don't see it holding given the approaching PMO Crossover SELL Signal. Stochastics also look terrible. Look for a decline to 25,000.
INTEREST RATES
Yields spiked today which put a damper on the market. It's time for a cooling off period, but it seems rates are destined to continue rising based on inflation numbers keeping the Fed tightening in place.
We do note the yield curve flattening, but this isn't due to falling rates, it is due to longer-term rates rising to meet already 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
It was indeed a short correction for $TNX. We thought it would probably move further down based on the topping PMO, but now there is a high likelihood the PMO will "surge" or bottom above the signal line. For now given Stochastics are so negative, we'll look for some sideways movement.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT was hit hard as the 20-year yield spiked higher today. The PMO is now topping beneath its signal line which is especially bearish. Stochastics haven't reversed yet, so we do think there is an opportunity for this rally to resume, but don't look for it to go far.
DOLLAR (UUP)
IT Trend Model: BUY as of 8/3/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: Price managed to bounce off the rising bottoms trendline suggesting the rally for the Dollar isn't over. The PMO is already trying to reverse higher. Stochastics have turned up. The decline appears to be exhausted.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: SELL as of 10/5/2023
GLD Daily Chart: A stronger Dollar will be a problem for Gold, but it held up okay today given the Dollar was up +0.84%. GLD was only down -0.30% and $GOLD was down only -0.23%. We think this speaks to the internal strength that is building in Gold.
GOLD Daily Chart: We are cautiously optimistic on Gold for a few reasons. The PMO is number one. It is nearing a Crossover BUY Signal. We also like that Stochastics are rising. Finally, discounts on PHYS remain elevated and that generally is a positive condition.
GOLD MINERS Golden and Silver Cross Indexes: It was a painful decline for Gold Miners as Gold and the market fared poorly. We don't like that participation took such a big hit on one day of decline. It does tell us that this group is precariously bullish. Given the PMO Crossover BUY Signal, we are still optimistic about Gold Miners. A serious drop beneath the 20-day EMA would have us rethinking the viability of this industry group.
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 formed a bearish engulfing candlestick suggesting the recent decline isn't over yet. Fears over the Israel-Hamas war seem to have subsided quickly, but if the war expands, it will likely resume the rise. The PMO and RSI are very negative and now Stochastics have topped in negative territory. There is a high likelihood we will see a test of the 200-day EMA.
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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