Today the Gold Miners ETF (GDX) 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating an LT Trend Model BUY Signal. We'll discuss the implications in the section on Gold Miners.
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: BUY as of 11/14/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: The market begs for a pullback, but bulls are having none of it. The RSI has been overbought or near overbought for weeks. The PMO is well past its normal range of -1.5 to +1.5. The rally remains broad given the weakening relative strength of the SPY against its equal-weight counterpart RSP.
The VIX remains overbought as investors continue to feel complacent given the market refuses to decline. Stochastics have turned up again while above 80 so there is plenty of internal strength, but that is clear on most of our charts.
Here is the latest recording from 12/18 (no trading room 12/25 or 1/1):
S&P 500 New 52-Week Highs/Lows: New Highs expanded as we would expect. The big news is that 10-DMA of the High-Low Differential bottomed and is headed higher in very overbought territory.
Climax* Analysis: On the four relevant indicators we had three climax readings and an "almost," so this will be counted as an upside initiation climax. That combined with the obvious upside bias shown by the market will probably bring more upside.
*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 (STOs) turned back up today like the 10-DMA of the High-Low Differential. We do have clear negative divergences on both, but participation remains very strong with over 90% of stocks holding above their 20-day EMAs. Nearly 3/4ths of the market hold rising PMOs which could fuel the market even higher.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is EXTREMELY OVERBOUGHT.
The ITBM and ITVM topped yesterday, but are back to rising today. They are incredibly overbought right now, but internal strength keeps the market moving higher. Almost 80% have PMO BUY Signals right now. More fuel for the rally fire.
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.
All participation indicators carry readings above out 50% bullish threshold which gives us a bullish bias in the short term. The Silver Cross Index is above its signal line so we have an IT Bullish Bias. It is now overbought, but given there is a slightly higher amount of stocks above their 20/50-day EMAs, it should continue rising just a bit longer. The Golden Cross Index is also above its signal line giving us a LT Bullish Bias. The Golden Cross Index currently has a negative divergence with price, but it continues to diminish as the Golden Cross Index rises even higher.
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: When bearish indicators do not result in bearish price activity, it is especially bullish. Indicators had pulled back slightly, but all are back to rising even in overbought territory. Today's upside initiation climax promises the market will continue its march skyward. Favorable seasonality is helping as well with Santa Claus really delivering right now. While the market's price action and the RSI beg for a pullback, internal strength across the indexes will likely keep things moving higher from here. We would still apply stops for protection, mental or otherwise. Portfolio expansion can be done carefully in the short term.
Erin is 80% long, 0% short.
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BITCOIN
Yesterday's comments still apply:
"Bitcoin continues to consolidate following its sharp rally to the upside at the beginning of the month. A declining trend has been established but we don't have a lower low yet. This sets up a symmetrical triangle for now. Those are continuation patterns so we currently will look for an upside breakout given the prior trend was up."
INTEREST RATES
Yields moved lower for the most part. Inversions still remain strong and until short-term rates begin to fail, the inverted yield curve will persist.
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
Yesterday's comments still apply:
"A new declining trend channel has developed on $TNX which suggests to us rates are still vulnerable to more downside even after the deep decline. The RSI is very weak, as are Stochastics. The PMO continues to tumble so look for the 10-year yield to continue lower. We could see a slight rally that would bring it to the top of the trend channel, but we expect the channel to hold strong with $TNX ultimately succumbing to the downside."
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The 20-year yield was down on the day so TLT managed a rally. The RSI is overbought, but like the market, it isn't slowing TLT down. The PMO is overbought, but Stochastics are staying strong above 80. We don't think the decline in yields is over so expect TLT to continue to show strength.
Overhead resistance is arriving just above 100.
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 formed a falling wedge, but we notice that price turned over long before the upper bound of the pattern was tested. This puts a bearish spin on the chart that aligns with the negative RSI and falling PMO. Stochastics are trying to turn up, but remain very weak. We were just feeling a bit more bullish about the Dollar, but now we are questioning its strength.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold took advantage of a falling Dollar to rally back toward all-time highs. The PMO is flat but remains above the zero line so we do still have underlying strength. Stochastics have turned back up and are back in positive territory above net neutral (50).
Discounts are beginning to pare back so investors are beginning to get more bullish on Gold. That should be helpful in continuing the rally that began yesterday.
GOLD MINERS Golden and Silver Cross Indexes: As noted in the opening, we have a new Golden Cross on the chart. Our outlook is improving on GDX as it decided to rally after its brief pause and participation numbers remain very high. A continued rally in Gold could keep price moving higher. Stochastics just moved above 80. We see more upside ahead for GDX, but any depression in Gold prices will likely set up another pause or digestion period.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/7/2023
LT Trend Model: SELL as of 12/18/2023
USO Daily Chart: We finally have a solid PMO Crossover BUY Signal on Crude Oil. This follows a rally out of a small double bottom formation. Price held above the 20-day EMA most of the day and it ignored yesterday's bearish filled black candlestick. The RSI just moved into positive territory and Stochastics are rising nicely. We believe the bottom in Energy and Crude has arrived.
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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