One sector that has quietly been outperforming this week was Utilities (XLU). This is a sector to keep an eye on. It was up considerably on a down day for the SPY. Participation has been shooting higher as far as stocks above their 20-day EMA. It will be some time before we see stocks get above their 50-day EMAs because it was beat down and caused an increase in margin between the EMAs. Most stocks in this sector are configured similarly. As soon as we start seeing more stocks above their 50-day EMA, the Silver Cross Index should turn back up and cross over its signal line. This is a defensive area of the market so it could also get more love next week should this decline continue as we suspect it will.
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/SPX SECTOR/INDUSTRY GROUP INDEXES
Change Today:
Change for the Week:
CLICK HERE for Carl's annotated Market Index, Sector, and Industry Group charts.
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: We saw followthrough on yesterday's downside initiation climax as the market dropped a half a percent. This has damaged the RSI as we would expect, but the PMO is still rising which gives us an indication that this decline will be temporary in the very short term.
The VIX saw a spike in fear as it punctured the lower Bollinger Band on the inverted scale. Those punctures often lead to upside price movement so this decline may be over next week. We think it will continue lower for another day or two. Stochastics did top and moved below 80, but it was tick lower and not overly damaging in our opinion.
SPY Weekly Chart: The weekly PMO did decelerate slightly this week on the rally and we do think this looks like a bullish cup with handle pattern. The handle may not be finished. An upside reversal on the weekly PMO would have us more bullish about the pattern. For now it is on the radar.
New 52-Week Highs/Lows: New Lows pared back on today's decline which is good news. We also saw quite a few New Highs considering the decline. The 10-DMA of the High-Low Differential has stalled it ascent which does have us alert to the possibility that this decline could stick.
Climax Analysis: There were no climax readings today.
*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.
Overbought Swenlin Trading Oscillators (STOs) are declining which suggests the short-term decline isn't likely over yet. We still have over half of the index holding rising momentum so again this is likely a short-term pullback.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is OVERSOLD.
We are still listing the ITBM/ITVM as "oversold". They continue to rise despite the short-term decline which implies the recent bottom should be a meaningful price low. Half of the index hold PMO BUY Signals which could also sustain an intermediate-term rally.
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PARTICIPATION: The following tables summarize participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation. There are three groups: Major Market Indexes, Miscellaneous Industry Groups, and the 11 S&P 500 Sectors.
The best IT Bias goes to Communications Services (XLC) which saw a significant increase in its SCI percentage. It is still bleeding off the GCI so we wouldn't get too bullish on the sector yet.
The lowest IT Bias belongs to Semiconductors (SMH). We saw some improvement to the SCI which had been decimated after the recent decline. We did lose some long-term strength from the GCI. We like this area of the market and suspect if the rally gets going again this could be a group to pull from.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
Energy (XLE) pulled back, but this week had a resurgence with the start of the Israel-Hamas war. Crude Oil pulled back a great deal and that has left some great upside potential for the sector. This week, it gained the most SCI percentage points among all. This should remain a safe area to invest in.
Regional Banks (KRE) continues to disappoint holding the lowest SCI value. It did see a one percentage point gain, but at the same time it lost a point on the GCI. We still see this as a weak group and one that should probably be avoided.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
XLE also holds the highest GCI value. The recent decline didn't really damage the GCI so long-term internals are very strong.
You'll note that none of the components increased their GCI percentage. Materials (XLB) lost the most points so long-term, it looks weak internally in the long term.
KRE also holds the bottom spot on the GCI list. As noted earlier this group is incredibly weak and not likely a place to invest.
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 in all three timeframes is BEARISH.
We saw improvement to %Stocks > 20EMA, only to see it dashed today. Readings are below our 50% bullish thresholds. The SCI was preparing for a Bullish Shift or crossover its signal line, but it has abruptly turned down leaving the bias as bearish in the intermediate term. The GCI continues lower and %Stocks > 50/200EMAs hold much lower percentages so that condition will persist.
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 Health Care (XLV) Silver Cross Index dropped below its 10-day EMA, shifting the BIAS to bearish. The Silver Cross Index for Gold Miners (GDX) and Semiconductors (SMH) crossed up through their 10-day EMAs, shifting the BIAS to bullish.
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CONCLUSION: While the decline to end the week was difficult, the SPY managed to finish the week higher. The PMO continues to rise in spite of the decline. As we would expect, STOs topped on the decline and continue lower suggesting this pullback may be sticky to start the week. However, with IT indicators rising, we have to believe that this decline will be followed by a resumption of the rally. It is a good time to play defense by applying stops in case the decline catches hold and morphs into something more dangerous. This decline is offering some good entries, we just want to make sure this price damage is temporary as indicators suggest it will be. We do not want to see the ITBM/ITVM turn down right now.
Erin is 50% long, 2% short.
Calendar: Next week is options expiration, and it is probable that Thursday and Friday will be low volatility, high volume days.
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BITCOIN
Bitcoin is rallying off support at 26,500 but we think this will not last long given the new PMO Crossover SELL Signal. Stochastics are also declining which is more evidence that this support level won't hold.
This chart is to show where some of the support/resistance lines come from.
INTEREST RATES
Rates were lower on the day after severe jumps yesterday. It is time to see them cool, but with the Fed keeping rates high with a possibility of raising them based on this week's inflation data, we should prepare for them to resume their ascent soon.
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
This week we saw the breakdown of the parabolic rally on $TNX. Typically we look for price, or in this case the yield, to move to the last line of support. That would be close to 4.4%. Given the new PMO Crossover SELL Signal, we think that is possible. We do not think the rising trend will be compromised, just likely it will be tested in the coming weeks.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount, which shuts many buyers out of the market, and potential sellers will experience pressure to lower prices (to no effect so far).
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This week the 30-Year Fixed Rate changed from 7.49 to 7.57.
BONDS (TLT)
IT Trend Model: SELL as of 5/16/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With yields cooling today, TLT had an opportunity to rally. It is holding a nice short-term rising trend and given we think rates will cool further, TLT should see a test of overhead resistance at 91. There is a PMO Crossover BUY Signal occurring and Stochastics have moved into positive territory. While Bonds look good, we think it will fail to breakout at 91.
TLT Weekly Chart: We noticed that the weekly PMO has decelerated on this week's rally so our supposition that TLT will test overhead resistance seems a good one. It is incredibly oversold based on the weekly RSI. Our main issue is that yields aren't likely to cool enough to get this rally to hold up for much longer.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 7/13/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar's rally is back on. Price bounced right off the rising bottoms trendline and it has confirmed a bull flag chart pattern with this bounce. Stochastics are rising again and the PMO has flattened in anticipation of higher prices. The decline pulled the RSI out of overbought territory. It is positive right now and still has some room to move higher. The Dollar looks bullish going into next week.
UUP Weekly Chart: The weekly RSI is very overbought, but we can see based on the parabolic rally that those conditions can persist when UUP gets going. The weekly PMO is rising and isn't overbought so we would look for price to test the 2022 high and likely breakout there.
GOLD
IT Trend Model: NEUTRAL as of 8/2/2023
LT Trend Model: SELL as of 10/5/2023
GOLD Daily Chart: In spite of the Dollar rallying today, Gold shot skyward. We love the new PMO Crossover BUY Signal and positive RSI. We also see that $GVZ punctured the lower Bollinger Band on the inverted scale and many times that will lead to continued higher prices.
Another item working in Gold's favor are the high discounts on PHYS. This suggests investors are still ultimately bearish on Gold. Sentiment is contrarian so that is good for Gold. Another reason we like Gold is that relative strength against the Dollar is improving. The correlation is beginning to lessen so Gold isn't as vulnerable to the swings in the Dollar.
GOLD Weekly Chart: Price bounced before testing support at 1800 which is bullish. It popped right above resistance at 1900 this week and overcame both the 17/43-week EMAs. The weekly PMO has also turned up. We like Gold right now.
GOLD MINERS Golden and Silver Cross Indexes: Good news for Gold is generally good news for Gold Miners. They were up much higher on the day and did pull back leaving us a bearish shooting star candlestick. We did see a Bullish Shift on the Golden Cross Index as it shifted back above its signal line. We are very unhappy with the loss of participation within the sector. The PMO is also in decline on a SELL Signal. Support is holding, but we would be careful here. If Gold takes a turn for the worse, GDX will definitely feel the pain. Fortunately we think Gold will continue higher.
CRUDE OIL (USO)
IT Trend Model: BUY as of 7/12/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: Crude Oil jumped on Monday with the start of the war in the Middle East. That will work in its favor, but so are the low production numbers. We expect to see Crude continue rising back above the prior high. The RSI has just moved back into positive territory and the PMO is beginning to curl back up. Stochastics are rising. All of this suggests we will see higher prices for Crude next week.
It is a good sign that price is back within the intermediate-term rising trend.
USO/$WTIC Weekly Chart: The pullback last week damaged the weekly PMO but it has quickly recovered, surging above the signal line (bottom above the signal line). Price is staying above the 17-week EMA and long-term rising trend. The weekly RSI has reversed upward in positive territory. Crude looks good.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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