As expected, the Fed did not hike interest rates, but the real news was that Chairman Powell said further rate hikes are unlikely. This raises expectations that rate reductions will be in the near future. The new mantra is, "Bonds are back!" Here is the long-term 30-Year Bond chart we have been watching, and we expect to see a breakout from the falling wedge formation.
Additionally, stocks rallied, the Dollar (UUP) tanked, and Gold (GLD) rallied. More on those later.
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!
MARKET/INDUSTRY GROUP/SECTOR INDEXES
CLICK HERE for Carl's annotated Market Index, Sector, and Industry Group charts.
THE MARKET (S&P 500)
IT Trend Model: BUY as of 11/14/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: The market rallied strongly on news from the FOMC. We are somewhat concerned by the parabolic nature of this rally out of the digestion phase. Notice that this rally wasn't necessarily generated on mega-caps. You can see this based on the declining relative strength of the SPY versus equal-weight RSP.
The VIX punctured the upper Bollinger Band and that can lead to a downside pivot, but given the strong rally, we aren't expecting lower prices just yet. Stochastics are reading near 100 suggesting we have a lot of internal strength.
SPY Weekly Chart: SPY made a new, all-time high today.
To clarify, the S&P 500 ($SPX) did not make record highs because its data are not adjusted for dividends.
Here is the latest recording from 12/4 (no trading room on 12/11):
S&P 500 New 52-Week Highs/Lows: New Highs rose sharply on the rally. This is pushing the 10-DMA of the High-Low Differential to the top of its typical range. While a reading like this could be a sign of exhaustion in the near term, we see too much internal strength.
Climax* Analysis: There were strong and unanimous climax readings on all four relevant indicators today, giving us an upside initiation climax. SPX Total Volume was 120% of the one-year average daily volume, which is potentially a blowoff, but we doubt it.
*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.
Short-term indicators are now reading overbought, but there is still room on the upside to accommodate more rally. Swenlin Trading Oscillators (STOs) spiked higher which pushed them back into overbought territory. There isn't much upside available to %Stocks > 20EMA, but this reading does imply incredible internal strength. We do still have a negative divergence visible on STOs, but that condition will likely clear on more rally.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is EXTREMELY OVERBOUGHT.
The ITBM and ITVM are extremely overbought. As we noted yesterday, we do need to keep in mind that these indicators are "oscillators". Oscillators must oscillate. They could turn down even as the market moves higher to alleviate overbought conditions. %PMO Xover BUY Signals crossed back above the signal line.
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 BULLISH in all three timeframes.
Internal strength is clear on the bias chart and on the table below. We have all of our participation indicators reading above our bullish 50% threshold. The Silver Cross Index and the Golden Cross Index are both above their signal lines giving us a bullish bias in both the intermediate and long terms.
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 items with highlighted borders indicate that the BIAS changed today.
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CONCLUSION: The FOMC and lower interest rates fueled the market higher today. Internals are incredibly strong. It is the reason we haven't seen a decline out of overbought conditions. It isn't only mega-caps holding things together, the broad market is participating in a big way. Today's upside initiation climax suggests we have even higher prices ahead. The rally is coaxing sideline investors back to the table. Fear of missing out could also continue to fuel prices. With seasonal strength and clear internal strength, we should see higher prices through the holiday season. While mental stops are okay right now, we recommend adding at least deep stops if nothing else to protect against a strong reversal or black swan event.
Erin is 75% long, 0% short.
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BITCOIN
It appears the correction is over for Bitcoin. Today's upside reversal off the 20-day EMA looks good. The RSI remains positive and the PMO appears to be bottoming above the signal line. We'll feel more bullish if Stochastics turn back up. Since they are in decline, Bitcoin could still see another pullback.
INTEREST RATES
Yields dropped greatly on news that the FOMC is done with rate hikes. We believe this slide will continue as rates work their way down toward strong support and 2023 lows.
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 tumbled today and took out strong support at the 200-day EMA and 4.1%. We have a bullish falling wedge, but it is disintegrating as price is beginning to move below the pattern. A bearish conclusion to a bullish chart pattern is especially bearish.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT took advantage of yields moving much lower. Overhead resistance is arriving, but we expect we will get a rally continuation. The RSI is getting a bit overbought so a pause could be seen, but ultimately the rising PMO and Stochastics above 80 tell us to expect a breakout here.
Overhead resistance was broken on the 1-year daily chart which bodes well for TLT moving forward.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/27/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar dove lower today. It is about ready to reenter its prior declining trend channel. We were beginning to see positive movement on the PMO, but it has reversed and is nearing a Crossover SELL Signal. Stochastics also tumbled. We have a strong suspicion that this decline will continue at least to support at the 200-day EMA.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold shot up on the Dollar's weakness, but it also showed relative strength given it was up +2.26% and the Dollar was down -0.85%. The indicators have completely reversed. The RSI is back in positive territory and the PMO is turning back up.
The declining trend was broken and so was overhead resistance at the October high. Discounts are still elevated based on yesterday's readings so contrarian sentiment could be assisting Gold's rally.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners just lost their bullish bias in the intermediate term as the Silver Cross Index crossed below its signal line. We were seeing participation shrink. The rally in Gold clearly goosed Gold Miners. Gold is looking more bullish so we may be done with the correction. Participation shot back up today suggesting conviction in this rally. This was a big rally and we believe we will see a little bit of digestion, but at the same time internal strength for GDX and the market as a whole could mean another rally to test November highs.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/7/2023
LT Trend Model: BUY as of 8/3/2023
USO Daily Chart: Crude Oil also rallied today. The indicators haven't really improved so we are still expecting more decline.
Support doesn't arrive until USO hits 60.00. We are looking for it to make its way down there.
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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