Two of the most aggressive sectors out there are showing new momentum and improved participation. Technology (XLK) and Communication Services (XLC) both got new PMO Crossover BUY Signals. Additionally participation "under the hood" shows these sectors could continue to outperform the market as a whole. Technology driven areas of the market like Semiconductors (SMH) and the Nasdaq 100 were some of the best performers this week.
Typically, when aggressive sectors begin to outperform, the market as a whole can be lifted or under the current circumstances override bearish deterioration within the index. You'll note on the charts below that rotation is definitely coming through for aggressive areas of the market.
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: On options expiration week we normally expect low volatility on Thursday and Friday, but two strong rally days dashed that expectation. We have now set another all-time high for the SPY. What looked like a developing double top has been obliterated by today's strong rally.
The VIX is back above its moving average on the inverted scale and Stochastics have turned up in positive territory. We do see near-term internal price strength. Mega-caps are leading the charge based on the rising relative strength against equal-weight RSP.
This week's episode is not available on YouTube, but you can access it using the recording and download link below. Recordings will be taken down after two weeks:
Recording & Download Link HERE.
Passcode: January#8
SPY Weekly Chart: The rally has been forceful out of the October low with very little pullback. While the market is overdue to alleviate overbought conditions, the weekly PMO is rising and isn't overbought suggesting the rally will likely have staying power.
New 52-Week Highs/Lows: New Highs popped as we would expect on a rally of this magnitude. It has gotten the 10-DMA of the High-Low Differential to turn up.
Climax Analysis: Two of the four relevant indicators had climax readings today, and SPX Total Volume was solid, so we have an upside 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 NEUTRAL.
Swenlin Trading Oscillators (STOs) both turned back up today, moving them out of oversold territory. We see that nearly 1/3rd of the index hold rising PMOs. That could fuel a rally continuation, but we want to see more.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM have both left overbought territory, but both continue to decline. We do like seeing them decline as they have been entirely too overbought for too long. This decompression will set them up for an upside reversal. We saw a small amount of new PMO 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.
The highest IT Bias goes to Consumer Staples (XLP). Unfortunately XLP is on its way back down as sector rotation moves toward aggressive sectors of the market.
The lowest IT Bias belongs to Energy (XLE) and it is getting worse as both the SCI and GCI lost ground this week.
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) shows 100% of stocks with a 20-day EMA above the 50-day EMA. Unfortunately there is nowhere left to go but down. So far it is holding up, but we suspect this somewhat defensive area of the market will see deterioration moving forward.
Energy (XLE) continues to lose ground on its SCI. The sector is plagued by bearish forces and this is clear when we look at how low the SCI is compared to the others.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
Financials (XLF) hold the highest GCI and they saw more improvement this week. XLF should hold up longer as it also saw an increase to the SCI.
Biotechnology (IBB) holds the lowest GCI reading, but it did see some improvement this week. Currently we are unimpressed by near-term action as noted by the decrease in the SCI.
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 in the short term is BULLISH.
The market bias in the intermediate term is BEARISH.
The market bias in the long term is BULLISH.
The rally has improved %Stocks > 20EMA and moved the percentage back above our bullish 50% threshold so we are moving the short-term bias to BULLISH. The SCI continues to decline and given it is below its moving average, the bias is BEARISH. The GCI has topped which is a bearish sign, but it currently resides above its moving average and thus the long-term bias is 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: The complexion of the market changed today. Not only are we seeing sector rotation moving toward aggressive areas of the market, but we saw both the STOs and 10-DMA of the High-Low Differential turn back up. We also saw a strong upside initiation climax. We are seeing PMO indicators repairing. Mega-caps continue to outperform the broad market and could also keep price elevated longer. The ITBM and ITVM continue to decline so we shouldn't get too comfortable. Stops should be placed for protection. Any positions added to your portfolio should have an applied stop and should be considered very short-term as we wait for the internals to improve further.
Erin is 65% long, 0% short.
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BITCOIN
After opening new Bitcoin ETFs, Bitcoin itself has been declining. Currently support is holding at December lows, but we would prepare for this level to be broken given the negative RSI and falling PMO. Stochastics confirm internal weakness.
This chart is to show where some of the support/resistance lines come from. This is not a strong area of support in the long term.
BITCOIN ETFs
Today:
This Week:
INTEREST RATES
We invite you to read Carl's latest article on interest rates.
We believe we have entered a new rising rate environment for most yields. We will likely see some of the inversion of the yield curve alleviated, but given the height of very short-term rates, we don't expect the inversion to end anytime soon.
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 is rallying out of a cup with handle pattern. The long wick on today's OHLC bar suggests we could see a slight decline near-term, but given the strongly bullish indicators, the rising trend should hold.
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 6.66 to 6.60.
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 but we can see a rising trend that suggests it isn't ready to decline. This will continue to put downside pressure on TLT. Support was lost at the 50/200-day EMAs this week. The next level of short-term support is at about 91.00.
Longer-term support doesn't arrive until 88.00.
TLT Weekly Chart: The weekly RSI is nearly in negative territory and the weekly PMO is in the process of topping. We're looking for an extended decline in Bond funds.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/27/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The is stair stepping its way higher. Today it did see a decline, but new support is holding. We do note that price seems stuck beneath the December top. The RSI is positive and the PMO has now reached positive territory. Stochastics are holding well above 80 suggesting we will see more rally out of the Dollar next week.
UUP Weekly Chart: The weekly RSI has now entered positive territory and the weekly PMO is turning back up suggesting the Dollar's rally isn't finished yet.
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 declining Dollar today to rally. Price still hasn't quite captured the rising trend. Indicators are mostly neutral. The RSI is nearing positive territory, Stochastics are still very negative (although rising again) and the PMO is declining. Given the mixed signals, we will vote for more sideways action from Gold.
Discounts remain elevated and that could eventually work in Gold's favor. For now it just tells us that investors are bearish on Gold, but not overly so.
GLD Weekly Chart: The weekly PMO has turned down which doesn't bode well. While discounts are elevated as we discussed above, we can see that they aren't as elevated as they can get.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners managed a small rally to finish the week, but the damage has been done with the big decline on Tuesday. Participation was slashed. We also saw a Dark Cross of the 20/50-day EMAs this week. A continued rally in the market could help GDX, but at this point we are still looking for more downside.
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 Oil continues to chop around moving sideways. The rising PMO has done nothing for price, neither has rising Stochastics. We don't see anything new on the chart to tell us to expect a breakout, but at the same time we don't see anything bearish that would mean a breakdown. For now we think the choppy sideways movement will continue.
USO/$WTIC Weekly Chart: The weekly PMO has decelerated but is still in decline. Price is bounded by the 17/43-week EMAs and the rising bottoms trendline. The weekly RSI is rising. Just like the daily chart, we don't see anything that would imply a breakout or a breakdown and therefore we should expect more consolidation.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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