Today the Russell 2000 ETF (IWM) and Real Estate Sector (XLRE) 50-day EMAs crossed up through the 200-day EMAs (Golden Cross), generating new LT Trend Model BUY Signals.
Small-caps soared yesterday, but pulled back today. The pullback did take price back below the February and July tops. IWM ran hot and now it is likely set up for more decline. The PMO is still rising strongly, but it is overbought. A decline may not happen in earnest, but it sure looks ready for one.
XLRE couldn't be much more overbought right now. The RSI is well above 70 and take a look at participation. We have 100% of stocks above their 50-day EMA and the other two indicators aren't far behind as they both read above 96%. The Silver Cross Index is at 100%. Nowhere to go but down. We favor a pullback toward 39.00, but internal strength will need to soften to get there.
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: BUY as of 11/14/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: End-of-quarter options expiration gave us exactly the kind of market performance we expect -- low volatility (a 1.2% range on Thursday and Friday and very high SPX Total Volume on Friday. The market appears ready to exhale as we finally saw a decline today.
With the Bollinger Bands so tight on the VIX, we can't make any sweeping conclusions should it puncture the lower Band on our inverted scale. It is very overbought, but that hasn't been much of a problem. Stochastics have topped which is another sign the market may finally be ready to pullback somewhat.
SPY Weekly Chart: New all-time highs were accomplished this week. The weekly PMO is configured positively and is not overbought so more upside is likely ahead after a digestion phase.
New 52-Week Highs/Lows: We still quite a few New Highs on the decline. What is notable is that we finally saw some New Lows. Most notable however is the topping of the 10-DMA of the High-Low Differential. It is topping in very overbought territory. Another sign the market may be ready to pause the rally.
Climax Analysis: There were two climax readings of the four relevant indicators today, so we will declare a downside initiation climax. Volume was high as expected (224% of one-year average daily volume), but we must consider it part of options expiration, and not attribute it to the climax day.
*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) topped today and you'll note that %PMOs Rising took a pretty big hit today. We didn't see much trouble with participation based on %Stocks > 20EMA which only fell slightly on the day.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is EXTREMELY OVERBOUGHT.
Both the ITBM and ITVM are highly overbought and are begging for the market to decline. We notice a slight negative divergence on %PMO Xover BUY Signals.
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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.
This week's lowest IT Bias again goes to Energy (XLE). Good news is that we didn't see a loss in either the Silver Cross Index (SCI) and Golden Cross Index (GCI).
The highest IT Bias interestingly belongs to Utilities (XLU). The SCI didn't expand, but we saw a huge improvement on the GCI. The Bias is so high because the GCI is so low. It's catching up.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
Real Estate (XLRE) which we discussed in the opening holds a 100% SCI value. XLRE saw big improvement to both the SCI and GCI, but it is very overbought so we now hold our breath to see when we will get some decline in the SCI. Our problem with this sector is how overbought it currently is.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
Semiconductors (SMH) are reawakening as we see improvement on both the SCI and GCI. Currently the long-term bias is very bullish given the 80% GCI reading. This group is also overbought based on the high SCI reading so it may be late for entry here.
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 one issue we see is that the SCI and participation in general is very overbought. There is nowhere to go but down. We still have a negative divergence on the GCI. While readings are all above our 50% bullish threshold, we would be careful given overbought conditions. The SCI and GCI are both above their signal lines so we can read the IT and LT Biases as BULLISH.
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: It was only one day of decline, but it had both the STOs and the 10-DMA of the High-Low Differential topping. All of our indicators with the exception of the GCI are overbought and need relief. We are finally seeing come cracks in the foundation. Today's downside initiation climax with topping STOs tells us to expect a pause at a minimum or a decline. As noted yesterday, other than overbought conditions, we don't see evidence to suggest we will get a correction, more likely a pull back toward the prior digestion area. The market is too internally strong for a deep decline right now, but it doesn't mean it won't happen. We would apply stops to all positions ahead of what is likely to be a pullback. Deeper stops should keep your positions open, but profit taking could be worthwhile by shaving position sizes based on your risk profile.
Erin is 80% long, 0% short.
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BITCOIN
Bitcoin is in a digestion phase after losing ground on its prior parabolic rally. The PMO is beginning to accelerate lower so we would be careful with crypto right now. Stochastics haven't topped yet and the RSI remains positive so there is a chance we'll see more consolidation on the declining PMO rather than a nasty decline.
This chart is to show where some of the support/resistance lines come from.
INTEREST RATES
While yields are crashing, there is clear support at about 3.35. We also note that the inversion has become more severe because short durations a holding up as longer durations fall.
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 didn't move much but this week has been devastating which makes the market happy. Indicators are about as negative as they can be suggesting rates will continue to make their way lower. 3.6% looks like a strong support area, but as we noted above 3.35% is where strong support lies.
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 7.03 to 6.95.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bonds are having a field day with lower interest rates and we believe that will continue. TLT is on a nice rally with indicators very positive. The RSI is overbought so we could see a bit of a pullback, but overall, the rising trend will likely continue.
Overhead resistance is arriving at 100.00, but we expect that level to be no problem for TLT. We suspect TLT will make its way up to 106.00.
TLT Weekly Chart: The breakout looks great on the weekly chart. The weekly RSI is positive and not overbought. The weekly PMO is rising on a Crossover BUY Signal. 106 does look like a credible area for this rally to possibly cool.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/27/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: It was a bad week for the Dollar, but it did manage to rebound today. It didn't do much to improve the indicators so we are still somewhat bearish on the Dollar. While this is a good place for a reversal off the 200-day EMA, the declining trend is strong and we expect it to hold up even if the Dollar manages a small rally.
Overhead resistance is already upon us and as noted above with negative indicators plaguing the chart, there is a good chance UUP will fail at that resistance level.
UUP Weekly Chart: The weekly chart does not inspire confidence that this is where UUP will reverse. The weekly RSI just dipped below 50 and the weekly PMO triggered a Crossover SELL Signal.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GOLD Daily Chart: Gold was down as the Dollar was up. We do believe that Gold will find its legs after it finishes the current pullback. We like that Stochastics are still rising strongly despite today's nearly 1% decline. The PMO is flat and not declining and the RSI remains positive. We would look for a drop down to the 50-day EMA at a minimum on this pullback.
Discounts remain elevated and that should work in Gold's favor as sentiment is contrarian and high discounts mean bearish investors.
GOLD Weekly Chart: The weekly chart is still bullish, but we aren't fond of the weekly PMO decelerating. The weekly RSI remains positive and price is above both the 17/43-week EMAs. We will need to monitor the weekly PMO closely.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners got a shot in the arm this week on Gold's big rally. Since then price has pulled back. Given the declines we saw yesterday and today, the loss of participation was minuscule and the PMO is still headed higher. Today the Silver Cross Index crossed above its signal line so we now have a bullish bias in the intermediate term. The price pattern is what bothers us. Price hit overhead resistance and immediately turned down. This could be forming a bearish double top. We would use caution on Gold Miners.
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 is acting fishy again. It is all over the map. The declining trend is still in force and we have a Death Cross lining up on the 50/200-day EMAs. We're not sitting on strong support at this point. We are looking for a rally based on Stochastics, but we are only cautiously optimistic.
Strong support is at 60.00. Given improving indicators however, we aren't looking for that kind of decline yet.
USO/$WTIC Weekly Chart: The weekly chart shows price struggling to stay within the rising trend. The weekly PMO is in decline and the weekly RSI is negative. While we see some possible bullish signs of life on the daily chart, this chart tells us not to get overly optimistic on its chance at a reversal.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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