Today the Energy Sector (XLE) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. Today's breakout looks promising, but there is resistance just ahead. Participation numbers look pretty good with a nice expansion in %Stocks > 20EMA. The Silver Cross Index also looks very bullish. Our best guess is that we will reach resistance and then likely breakout from 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/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: It looks as though Tuesday's selloff will be the fifth one-day downside fake out with SPY closing at another all-time high today. The RSI is not overbought and it can accommodate more upside.
The VIX is beneath its moving average on the inverted scale which suggests internal weakness. However, Stochastics still look fairly strong as they have turned back up.
Here is the latest recording from 2/12:
S&P 500 New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential reversed higher today which is bullish for the market. We saw fewer New Lows and a healthy expansion of New Highs.
Climax* Analysis: Of the four relevant indicators, we saw climactic readings on three. Total volume was not at blowout levels so we will label today as an upside exhaustion climax, but given the strength of our other indicators, we have a feeling this one won't come true.
*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) reversed higher on today's rally. What impressed us the most are the major advances on %Stocks > 20EMA and %PMOs Rising. This suggests the rally is broadening.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
IT indicators confirmed the STOs with an increase themselves. The negative divergences are far from being resolved however. We would like to see %PMO Xover BUY Signals get above our 50% bullish threshold.
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.
All of our relevant participation indicators are reading above our bullish 50% threshold. This gives us a BULLISH ST Bias. The Silver Cross Index is below its signal line so the IT Bias remains BEARISH. The Golden Cross Index is rising again and it is above its signal line giving us a LT Bias of 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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Calendar: This is the week for options expirations, and we should expect low volatility tomorrow. It is not an end-of-quarter expiration, so SPX Total Volume should not be affected.
CONCLUSION: Yesterday's upside initiation climax fulfilled its promise with a rally today. We got another climax today and it must be labeled as an upside exhaustion climax given it follows an initiation. However, given the upside reversal of the STOs and ITBM/ITVM, we aren't so sure it portends a decline tomorrow. The rally is broadening based on increased internal momentum and participation. The RSI tells us the market is technically not that overbought right now, but we would still be careful adding longs. Make sure your stops are in order. We continue to believe it best to set those stops and let the market stop you out. This will afford us the opportunity to take advantage of any upside left and protect us should the market finally weaken into a steady decline.
Erin is 70% long, 0% short.
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BITCOIN
Bitcoin has broken out strongly and based on the rising PMO and strong Stochastics, it should continue higher. The overbought RSI does leave Bitcoin exposed to downside, but as we have noted, overbought territory isn't necessarily a problem for Bitcoin. The OBV is rising and confirming the rally.
BITCOIN ETFs
INTEREST RATES
Yields moved lower again today, but aren't even close to damaging their current rising trends. We expect them to move higher in general.
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 has taken a breather, pausing its move higher. We should see a Silver Cross of the 20/50-day EMAs soon which will give us a bullish bias in the intermediate term. Stochastics have turned down, but remain comfortably above 80.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT rallied again today but formed a bearish filled black candlestick. We don't see this rally as a new move in Bonds. The PMO is still in decline.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar was down again and now the PMO looks vulnerable to a decline. We aren't particularly concerned yet as the rising trend has not been compromised and Stochastics are above 80.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold rebounded today. We don't think this will catch on but this rally did come off a fairly strong support level. The PMO is also trying to turn back up. Overriding any bullish activity is the upcoming Dark Cross of the 20/50-day EMAs. A Dark Cross will mean that Gold has a bearish bias in the intermediate term.
We do have to wonder if it is actually time for an upside reversal in Gold given the deep discounts that are being logged and Stochastics turned up. However, until the Dollar looks more bearish, we have to expect lower Gold prices.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners are making a comeback, rebounding off support at about 25.00. The "under the hood" indicators are still too bearish to sign on to a major rally, but this is a good start. We did see some expansion on %Stocks > 20/50/200EMAs, but the Silver Cross Index and Golden Cross Indexes still look rather bearish. Entry right now is pretty risky.
CRUDE OIL (USO)
IT Trend Model: BUY as of 2/12/2024
LT Trend Model: SELL as of 12/18/2023
USO Daily Chart: Crude Oil failed to breakout but did have a nice rally. We are expecting a breakout. The RSI is positive and not overbought. The PMO is rising nicely above the zero line on a Crossover BUY Signal and Stochastics are rising above 80. The setup is nice for a breakout right now.
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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