The Energy sector (XLE) is still in the midst of a declining trend and is situated within a declining trend channel. This channel does have a bullish aspect to it as it is a flag on a flagpole. The bull flag is a continuation pattern and suggests that we will eventually see an upside breakout and move higher. The chart isn't all roses as the RSI is negative and the PMO is still in decline, but we do note that participation has been improving under the hood for %Stocks > 20EMA. The other two are holding above our bullish 50% threshold. There are some stocks out there that could pull Energy out of this decline.
This would be an excellent area to see a new rally given it is sitting on very strong support. The weekly PMO doesn't look great as it is flat. It remains on a Crossover BUY Signal so a rally is not out of the question.
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: In spite of two bearish filled black candlesticks, the market managed yet another rally. Total volume remained very low on this rally so we still aren't seeing much enthusiasm for it. The PMO continues to rise. The OBV is getting close to a negative divergence. It hasn't reached the height of the last two tops. Low volume is the culprit.
The VIX is moving lower on our inverted scale but remains well above its moving average which is positive. Stochastics are flat above 80 signaling internal strength.
Here is the latest recording from Monday, May 13th:
S&P 500 New 52-Week Highs/Lows: New Highs pared back which is not a condition we should have seen on a rally day.
Climax* Analysis: There was only one climax reading on the four relevant indicators, so we do not have a climax day. SPX Total Volume was only 82% of the one-year daily average, so there is not a lot of conviction behind today's rally.
*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.
The Swenlin Trading Oscillators (STOs) were mixed today with the STO-B continuing lower and the STO-V reversing upward. We would read this a neutral for the market. We should have seen more expansion in participation. It has basically stagnated over the past week. Not everyone is participating in this rally.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM are both rising still but we note the slow down in %PMO Xover 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 all three timeframes.
Participation is stagnating, but given percentages are above our 50% bullish threshold, we are leaving the short-term bias as BULLISH. The Silver Cross Index looks very bullish and is above its moving average giving us a BULLISH bias in the intermediate term. The Golden Cross Index has flattened but remains above its moving average so the bias is BULLISH in the long term timeframe as well.
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 advance again today, but as with previous rally days, Total Volume is not supporting the current rally and it could be setting up a negative OBV divergence soon. Clearly investors are on the fence about pouring more money into this overbought market. The STO-V did turn up today and we can't ignore the rising PMO. We believe more rally can be eked out, but with such a lack of conviction behind the current rally, we wonder how much further it can advance. As we have said through most of this rally, keep your stops in play and enjoy what rally is left.
Tomorrow the CPI report will be released at 8:30a ET and it will likely inject volatility into the market given investors are hyper focused on inflation and the Fed.
Erin is 40% long, 0% short.
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BITCOIN
The RSI is no longer positive, but the PMO is nearing a Crossover BUY Signal and Stochastics are rising again. Price looks like it wants to test the bottom of the declining trend channel, but with indicators looking somewhat positive, we would look for sideways movement for now.
BITCOIN ETFs
INTEREST RATES
Yields were lower, but so far the rising trends have not yet been compromised. They are still at an inflection point.
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 is clinging to its rising bottoms trendline. It's been moving mostly sideways so we could see the trend broken with a drift sideways. The PMO tells us to expect a breakdown here. The RSI is negative. Stochastics are below 20 so the set up is for a breakdown. We aren't so sure though with the likelihood that rate cuts aren't likely to appear until the fall at the soonest.
BONDS (TLT)
IT Trend Model: SELL as of 3/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday's comments still apply:
"The 20-year yield hasn't done much and neither has TLT of late. It does look like a petite bull flag formation that would imply more upside, but that will be dependent on whether the 20-year yield breaks down here. $TNX looks like it could reverse higher, so we have to believe the 20-year yield will do the same. That will bring Bond prices lower."
The declining trend looks sturdy.
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 is drifting lower and that has moved the RSI into negative territory. The PMO is still in decline and Stochastics are in negative territory. We see a bearish bias on the Dollar based on weak indicators.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold rallied today. The PMO is still in decline but it has decelerated greatly. Stochastics did tip over but remain at a high reading. The RSI is positive and not overbought. We expect Gold to continue in its short-term rising trend.
We can see a large bull flag formation on Gold's 1-year daily chart. This continuation pattern implies there is more upside ahead for Gold.
GOLD MINERS (GDX): Gold Miners were higher on the day likely due to the rally in Gold. We're sure a market rally didn't hurt either. The PMO is already nearing another Crossover BUY Signal above the zero line. Participation readings are incredibly high so there is a strong foundation among these stocks that should keep GDX elevated.
CRUDE OIL (USO)
IT Trend Model: BUY as of 2/12/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: Crude Oil finished lower on the day but it is holding above the 200-day EMA and remains in a longer-term rising trend. However, the RSI is negative and Stochastics topped in negative territory. The PMO is declining below the zero line. We also notice a Dark Cross aligning on the 20/50-day EMAs. We were looking for a reversal here, but we may need to see more sideways action or a test of the rising trend.
This is actually a fairly strong level of support when we look back so this is a good place to see a reversal. Indicators just aren't bullish.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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