Today the U.S. Dollar Index (UUP) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. We will discuss the implications in the section on the Dollar.
Also the Energy Sector (XLE) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model BUY Signal.
A Death Cross implies a long-term problem, so let's look at the weekly chart. There is a rising wedge formation that has broken down, and there is a PMO negative divergence. Until some improvement is observed, XLE is not a very good place to park money.
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 made another all-time high today and given the new PMO Crossover BUY Signal, we should expect a continuation.
The VIX is getting overbought on our inverted scale. There is still some margin between it and the upper Bollinger Band. Stochastics are rising above 80. Internal strength is visible.
Here is the latest recording from 1/22:
S&P 500 New 52-Week Highs/Lows: New Highs pared back on today's rally showing us some broad market weakness.
Climax* Analysis: There were no climax readings today, but two of the four indicators were close. That means that we were close to an upside exhaustion climax. With that in mind, we should look at tomorrow being a potential down 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 NEUTRAL.
We've now identified four negative divergences on our short-term indicators which tempers the bullish rise of the Swenlin Trading Oscillators (STOs). On the rally we lost some rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM have decelerated their decline. We did see a few more PMO BUY Signals.
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 the short term.
The market bias is BEARISH in the intermediate term.
The market bias is BULLISH in the long term.
We have more than 50% of stocks above key moving averages which gives us a bullish short-term bias. The Silver Cross Index is falling and is below its signal line so the bias is bearish in the intermediate term. The Golden Cross Index stalled today and is trying to top. However, it is above its signal line giving us a bullish long-term bias. We would note that the GCI is not nearly as elevated as it was 2021 and this does suggest there is far more work to do within the index.
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: While we still see more upside potential for this rally given today's PMO BUY Signal on the SPY and rising STOs, there are new problems that arrived with today's rally. We should not have lost rising PMOs on a rally day. That is particularly bothersome, but now we have added strong negative divergences on the short-term indicator chart. Today's near miss upside exhaustion climax does not inspire confidence. The water seemed safer yesterday evening. You may want to hold off on portfolio additions on today's new information. Yesterday, we mentioned you would need to be nimble in the short term so if you did add today, be sure to set those stops.
Erin is 75% long, 0% short.
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BITCOIN
Yesterday's comments still apply:
"Bitcoin has lost support and we don't think it is done with the decline. The RSI is negative and falling and the PMO is has dropped beneath the zero line. New Bitcoin ETF holders are not happy and likely won't be for a bit longer. Stochastics are below 20 and falling. Lower prices ahead."
BITCOIN ETFs
INTEREST RATES
Yields were mixed with longer-term rates rising. We see longer-term rates continuing to rise in the near term and could begin catching up to the short-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 10-year yield was up on the day, preserving the rising trend out of the bullish falling wedge. Stochastics did tip over, but the PMO is resolute on its rise so we would expect the rising trend to stay intact.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday's bearish filled black candlestick was prescient as TLT experienced a decline on the day. We can see that the 20-year yield is in a rising trend and the PMO is in decline so we would expect to see TLT continue to slide lower.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: Today's "Silver Cross" bodes well for the Dollar which had already broken from the bullish falling wedge. It is holding a nice rising trend. The RSI, PMO and Stochastics are in agreement that we should continue to see a rising Dollar.
Overhead resistance was punctured briefly today.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold showed strength against the Dollar. Both rose when typically they travel is near equal and opposite directions. Price did hold beneath the 20-day EMA and the PMO is still falling. Stochastics, however, have turned up. They are rising which is good, but we sense given the slow rise that we are seeing diminishing weakness not new strength.
GOLD MINERS Golden and Silver Cross Indexes: The market and Gold helped GDX along today. Gold Miners did see some improvement under the hood, but we saw a similar rally before a precipitous drop in price last week. Notice that participation isn't as strong as it was on the last rally. Be careful.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/7/2023
LT Trend Model: SELL as of 12/18/2023
USO Daily Chart: Yesterday's comments still apply:
"Despite a rising PMO, Crude Oil has done nothing. Clearly the last PMO BUY Signal was indicating diminishing weakness not new strength. Price remains below the 200-day EMA. Stochastics did just push above 80 so this is about as good a time as any to finally see a breakout. As soon as it does, it'll be time to swoop in on a depressed Energy sector."
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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Bear Market RulesRT: 01-23-2023