The market spent the majority of the day in a steady uptrend as denoted by the very flat 5-minute Price Momentum Oscillator (PMO). Stochastics dove lower and the 5-minute RSI finished in negative territory. While this could signify weakness going into tomorrow, it could only be signaling profit taking in anticipation of next week. Look for some of today's cracks in the foundation to widen.
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: We didn't see anything new. The market continues to make its way further into all-time high territory. The RSI has become overbought. The PMO looks steady and won't be overbought until it hits +2.5.
The VIX is back above its moving average on the inverted scale. The Bollinger Bands are skinny so we could see punctures to either side. Stochastics look very strong as they rise above 80.
Here is the latest recording from 12/18 (no recordings on 12/25 or 1/1):
S&P 500 New 52-Week Highs/Lows: New Highs expanded as we would expect, but currently they hold a negative divergence with rising price tops. The 10-DMA of the High-Low Differential is very overbought, but still rising.
Climax* Analysis: Today there were three climax readings on the four relevant indicators, giving us an upside exhaustion climax. SPX Total Volume contracted to only 59% of the one-year daily average, which is undoubtedly due to holiday week trading.
*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 nearly in overbought territory. They continue to rise strongly which is good for the market, but they are sporting negative divergences that could be pointing to internal weakness. We saw some expansion in %PMOs Rising. They imply there is still fuel for the fire.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is EXTREMELY OVERBOUGHT.
The ITBM/ITVM don't generally reach these levels often yet they continue to rise. We also saw a slight expansion in %PMO Xover BUY Signals. That indicator isn't overbought yet.
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:
The GCI has a bearish negative divergence with price, but the rest of the chart is healthy. We have a strong number of stocks above key moving averages, quite a bit more than our 50% bullish threshold. Both the SCI and GCI are above their signal lines which gives us a bullish bias in 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: Holiday trading was in force with low volume and minimal volatility. However, today brought with it some weakness. First was today's upside exhaustion climax. This is accompanied by negative divergences on short-term indicators and New Highs. The market closed on a whimper. While we still see bullish biases in all three timeframes, those divergences suggest there is trouble on the horizon. It may not be necessary to close positions, but we would have the sell button not too far away. Tightening stops would also provide protection should price begin weakening.
Erin is 85% long, 0% short.
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BITCOIN
Bitcoin hit overhead resistance and began to turn back down. The indicators have weakened considerably with the PMO accelerating downward and Stochastics dropping in earnest. We would look for the rising trend to be tested with a likely drop below it.
INTEREST RATES
Rates were mixed overall on the day. They seem to pausing for the holiday.
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
We are adjusting the declining bottoms line to put recent price action within. Just know that it has accelerated its decline so while it is still within a bullish falling wedge, we don't hold out much hope for it breaking out. The RSI is very negative. Stochastics are hinting that a reversal could be nearing, but ultimately they are well below 20 which signals internal weakness.
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 has flattened and that has caused TLT to flatten. The PMO looks a little suspect and Stochastics have turned down. They do remain above 80 so this is only reflecting slight weakness. We expect price will eventually turn back up and test 102.
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 is traveling within a bullish falling wedge but indicators haven't ripened enough for us to look for an upside breakout. Stochastics look especially bearish so we consider the Dollar weak at best.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold should take advantage of a weak Dollar. The indicators are very favorable with the RSI above net neutral (50) and the PMO rising on a Crossover BUY Signal. Stochastics have popped above 80. All of this suggests higher prices ahead for Gold.
GOLD Daily Chart: Gold is showing relative strength against the Dollar which should also help it rise higher given the weakening of the Dollar. The reverse correlation is deepening which should be favorable for Gold.
GOLD MINERS Golden and Silver Cross Indexes: We have to look for more upside from Gold Miners given the positive outlook for Gold. The market winds haven't changed yet given the bullish bias and that should also help GDX move higher. Under the hood we have very robust participation numbers so internal strength is very visible. Stochastics just accelerated above 80.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/7/2023
LT Trend Model: SELL as of 12/18/2023
USO Daily Chart: Crude is making its way up. It has now reached strong overhead resistance at the 50/200-day EMAs and the August low. Today saw a bearish filled black candlestick. While we like the indicators, we still aren't happy with disjointed price action. We will default to the indicators and look for a breakout on Crude.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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