Today the Biotechnology ETF (IBB) 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating an LT Trend Model BUY Signal. This was the "Industry Group to Watch" in last week's DP Diamonds Recap and it has performed admirably. The Healthcare sector is continuing its march higher and IBB is one reason. The Silver Cross Index is still rising along with the Golden Cross Index. Participation percentages are strong, albeit on the overbought side. The RSI also suggests IBB is overbought. While we see more upside ahead for this group, we would also caution against overbought conditions.
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/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: The market was down the majority of the day and finished in the red. The PMO has now topped. The RSI has been overbought for some time and needs relief. Relief will come on a decline.
The decline didn't move the VIX much. Stochastics are above 80 which is positive, but they did top with the PMO.
Here is a link to the last trading room on 12/18 (no trading rooms for 12/25 or 1/1):
SPY Weekly Chart: All-time continued to be logged on the SPY this week with the market finishing higher +0.31%. The weekly PMO is rising and is not overbought. While this bodes well, we must understand that a vertical rally is not sustainable.
SPY Monthly Chart: The big news this month was the breakout to new all-time highs. This has moved the monthly PMO even closer to a Crossover BUY Signal. While we do see near-term weakness, this chart tells us the bull market isn't likely to come to an end.
New 52-Week Highs/Lows: This week we saw the development of a negative divergence on New Highs. The 10-DMA of the High-Low Differential also topped this week and it is now headed almost vertically down; this is not good.
Climax Analysis: There were two climax readings on the four relevant indicators, and SPX Total Volume is light due to holiday trading, so this gives us a rather thin downside initiation climax.
*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.
We were concerned that Swenlin Trading Oscillators (STOs) had gotten so overbought so quickly. Today's decline saw both the STOs accelerate downward. %PMOs Rising took a giant hit today. This failing momentum screams for a decline. UPDATE
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is EXTREMELY OVERBOUGHT.
Both the ITBM/ITVM topped on today's decline. They are extremely overbought. %PMO Xover BUY Signals continues to make its way down even as price spent most of the week rising. We know it will sustain even more damage given only 40% of stocks have rising PMOs. Failing PMOs mean failing 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.
Utilities (XLU) hold the highest IT Bias primarily due to the low GCI reading. That reading is starting to improve but the SCI didn't gain any percentage points this week.
Energy (XLE) holds the lowest IT Bias primarily due to its high GCI reading. Energy had a strong rally that reversed weeks ago. The GCI hasn't had time to deteriorate to the degree it should as price was pushed so far above 200-day EMAs. We don't care for the XLE chart right now.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
Three industry groups hold 100% readings on the SCI denoting incredible internal strength. The big problem is the only place left to go is down. Tech is topping so we would expect Semiconductors to fail first. Transports increased the SCI the most (+10). This seems to be an up and coming group will likely fail last.
Real Estate is extremely overbought, but the GCI reading continues to increase so it is holding its own.
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) did see the highest reading for the GCI and also saw it expand further, but as noted earlier, Technology (XLK) is topping on a PMO Crossover SELL Signal so we do expect weakness next week.
Financials (XLF) also holds the highest GCI reading. While the GCI did improve, we should note that the SCI lost ground so this sector could be on the verge of a short-term decline.
Consumer Staples (XLP) holds the lowest GCI reading. While XLP has been steadily marching higher, it hasn't been a vertical rally. The GCI is improving, but it is a slow process.
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.
While all indicators are reading above our 50% bullish threshold. %Stocks > 20/50EMAs are still reading higher than the SCI so it could continue to rise. However, it is looking very toppy. It doesn't generally stay overbought for long. Given the SCI and GCI are above their signal lines, the bias remains bullish in both the IT and LT.
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: A few months ago we wrote that the market would likely rally into the end of the year and that a correction would begin in January. We still think that is the case, and given the warning shots fired today, we will be looking for the decline to begin next week. Both the short-term and intermediate-term indicators (STOs, ITBM, and ITVM) are overbought and all turned down, giving us a near perfect (yet not infallible) setup for a correction. Today's downside initiation climax suggests the decline could start as soon as Tuesday. It would be wise to do an honest review of your portfolio positions. Consider cutting already weak positions and tightening stops. Profit taking is a consideration as well. Hedges could be explored.
Erin is 75% long, 0% short.
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BITCOIN
Bitcoin's PMO has begun to accelerate downward, but we still see this as a possible flag on a flagpole. Should the rising trend be broken that pattern would be scuttled. Based on a now negative RSI, failing PMO and dropping Stochastics we assume that it will drop below that rising bottoms trendline.
This chart is to show where some of the support/resistance lines come from. This looks a lot like a bearish double top pattern.
INTEREST RATES
Long-term yields were up while shorter-term yields were down. We continue to look for yields to move lower toward 2023 lows. The inverted yield curve doesn't look to resolve given short-term rates are so much higher that long-term rates.
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
The bullish falling wedge busted when $TNX dropped out of the bottom of the pattern. We keep looking for a declining trend channel, but one really hasn't formed. The PMO looks very interesting as it bottomed today. While this is bullish, it is so far beneath the zero line that we have to read it as diminishing weakness, not a sign of strength. We still expect yields to continue lower.
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 6.67 to 6.61.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT's PMO topped today, but we aren't ready to get bearish on Bonds yet. Stochastics are still above 80. This looks like consolidation prior to a breakout above resistance.
The PMO topped previously and it didn't spell doom, but this could mean we will see more consolidation.
TLT Weekly Chart: The weekly chart is very favorable. The weekly RSI is in positive territory and isn't overbought. The weekly PMO is rising on a Crossover BUY Signal. This chart is one reason we can't get overly bearish on Bonds right now.
TLT Monthly Chart: We have a breakout on the monthly chart. Price is above both the 6/10-month EMAs. The monthly RSI is negative, but notice that the monthly PMO has turned back up. This bodes well for long-term prospects even if we do see TLT stumble in the short term.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/27/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: Price is making its way back into the bullish falling wedge. While the PMO is decelerating and Stochastics are rising, it seems too early to get bullish on the Dollar. The RSI is negative and the PMO is well below the zero line.
We could be seeing a small rally since very strong support was reached.
UUP Weekly Chart: Price is still holding above that level of support, but the weekly chart suggests it won't continue to. The weekly RSI is negative and falling. The weekly PMO looks especially bearish as it topped well below the prior top and is moving lower on a Crossover SELL Signal.
UUP Monthly Chart: The monthly PMO has topped for the Dollar suggesting the long-term picture is getting bearish. It is topping in overbought territory. It appears a large double top is forming. Those are bearish chart patterns.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GOLD Daily Chart: Gold finished the holiday week with a decline but we do note that today formed a bullish hollow red candlestick. The PMO looks toppy, but the RSI is positive and not overbought and Stochastics are above 80. Stochastics have topped but their current position makes them bullish nonetheless.
$GVZ punctured the lower Bollinger Band. That will typically lead to higher prices. Discounts are still quite high and that too could work in Gold's favor. There is certainly plenty of relative strength to the Dollar. We like Gold despite the fizzle of a finish this week.
GLD Weekly Chart: Overhead resistance was reached and that is likely causing some problems for Gold. However, the weekly RSI is positive and the weekly PMO is rising on a Crossover BUY Signal so we should look for a breakout to new all-time highs once again.
GOLD Monthly Chart: The breakout is beginning. We may finally be seeing the breakout from the bullish Cup with Handle pattern. The monthly RSI is positive and the monthly PMO is rising on a recent Crossover BUY Signal. We are bullish on Gold in all three timeframes.
GOLD MINERS Golden and Silver Cross Indexes: We still have a favorable outlook for Gold so we can't count Gold Miners out right now. Participation numbers are strong enough for an upside reversal, but %Stocks > 20EMA took a big hit to end the week. We also notice that the PMO has topped along with Stochastics. Stops should be tightened at the very least.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/7/2023
LT Trend Model: SELL as of 12/18/2023
USO Daily Chart: Crude killed the rally and is back in decline. We do not like any of the indicators right now. The RSI is negative, the PMO has topped well beneath the zero line and Stochastics have topped. We would look for a decline to the December low at a minimum.
Price did rebound off January/February lows, but we think USO is ready to drop back down to that level.
USO/$WTIC Weekly Chart: The rising bottoms trendline is barely intact and based on the ugly daily charts, we don't think it will hold up next week. 60.00 seems the best area of support. The weekly PMO is in decline and the RSI is very negative so we wouldn't be surprised if price dropped there.
WTIC Monthly Chart: The monthly chart is bearish. The monthly RSI is below net neutral (50) and the monthly PMO accelerated lower. Crude Oil is weak in all three timeframes.
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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