Today the Utilities Sector (XLU) 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating an LT Trend Model BUY Signal on today's big rally. The Silver Cross Index shows solid participation at 73% and given we have strong readings from %Stocks > 20/50EMAs that should hold up.
Also today, the Regional Banks ETF (KRE) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. This is not a very convincing signal because price has been in a very narrow range for the last two months, and it does not appear that the trading range has been resolved yet. We could see more of these signals as the 20-day EMA and 50-day EMA are 'braiding'. It would only take a few trading days below those averages to switch the signal back to a IT Trend Model Neutral Signal.
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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: After a brief pullback toward support, the market rebounded back up with a solid rally today. The PMO is technically on a Crossover SELL Signal but given its flat appearance above the zero line, we see pure strength.
Stochastics turned back up and should move above 80 soon which would signify internal price strength. We notice a dip in the relative strength line to equal-weight RSP suggesting mega-caps were not necessarily a big factor in today's rally higher.
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S&P 500 New 52-Week Highs/Lows: New Highs rose as we would expect and no New Lows were found. We still don't like the negative divergence on the High-Low Differential, but it did turn back up today.
Climax* Analysis: Today there were strong climax readings on all of the relevant indicators, giving us 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) did not turn up on today's rally, but they barely moved down. They continue to chop. We saw great improvement to %PMOs Rising and participation also rose strongly based on %Stocks > 20EMA.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT.
The ITBM and ITVM moved higher today, but the negative divergence remains. Still this is a good sign as is %PMO Xover BUY Signals moving back above 50% and crossing above its signal line.
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 Silver Cross Index avoided a negative crossover its signal line so the IT Bias remains BULLISH. We have robust readings above 80% on %Stocks indicators, robust enough to keep both the Silver Cross Index and Golden Cross Index elevated. The Golden Cross Index is above its signal line so the LT 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 market avoided a fourth down day in a row once again this year. The market internals couldn't get much better and today saw an upside initiation climax that portends higher prices tomorrow. Interestingly it wasn't the mega-caps that held things together. They performed, but the broad market really kicked into high gear. STOs are declining, but barely and the ITBM/ITVM turned back up. As we mentioned yesterday, the market will likely need a catalyst to send it lower and we don't see anything on the horizon yet. In any case, until the catalyst happens, we should have our stops updated. Portfolio expansion can be done carefully with stops. Let the market take you out.
Erin is 60% long, 0% short.
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BITCOIN
Bitcoin's decline today turned the PMO downward, but Stochastics are still rising. Could be signaling some consolidation ahead. At this point we don't expect the rising trend to be compromised.
BITCOIN ETFs
INTEREST RATES
Near-term we see interest rates falling further. They will likely remain above support for some time.
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 forming a bearish double top that implies we will see far more downside. It actually implies that support will be test at 3.8%. We aren't that bearish yet, but we do think support will be tested at the confirmation line for the pattern at 4.1%. Stochastics are in decline and the RSI just dropped below net neutral (50). The PMO is on a new Crossover SELL Signal.
BONDS (TLT)
IT Trend Model: SELL as of 3/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With yields in decline, we should see more upside out of Bonds. This symmetrical triangle implies an upside breakout ahead given the prior trend was up. Stochastics are rising and the RSI just hit positive territory above net neutral (50). The PMO is very close to a Crossover BUY Signal.
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 up slightly. It is holding onto its rising trend and given the positive configuration of the RSI, PMO and Stochastics, we expect more of the same.
Longer-term overhead resistance is nearing so we may see some consolidation before a breakout.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold had a great day despite a rising Dollar. The RSI is overbought again, but we are expecting an upside breakout soon so that condition may persist. Stochastics turned back up in positive territory. Gold is beginning to show relative strength against the Dollar so even with the Dollar in a rising trend, Gold could continue to make its way higher.
The inverse correlation with the Dollar is easing and that will also work in Gold's favor should the Dollar rally higher.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners rallied strongly on a good day for Gold and the market. Participation is strong so the rally should continue. The Golden and Silver Cross Indexes should continue to rise given we have so many more stocks above their 20/50/200-day EMAs.
CRUDE OIL (USO)
IT Trend Model: BUY as of 2/12/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: It looks like the bull flag was not finished. After the strong rally (flagpole), we are seeing some consolidation that is forming a pennant (symmetrical triangle) on the flag pole. Indicators are still favorable with Stochastics getting above 80 today. The PMO is flat above the zero line indicating strength and the RSI is comfortably above net neutral (50) and is not at all overbought. We expect more upside from Crude.
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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