Today the Health Care Sector ETF (XLV) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. It looks like a possible breakaway gap today, but we also have to be cautionary as it could be setting up a reverse island formation. The PMO has just entered positive territory and participation is good. The Silver Cross Index is flying upward. We should see some follow through.
The weekly PMO has turned up which bodes well for further rally ahead.
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: After what was perceived as a positive CPI report, the market rallied to new all-time highs. The rally never petered out even with a lack of volume that led into today's rally. Today volume was below the annual average, but not as low as we've seen through much of this rally.
The VIX popped higher on our inverted scale as investors returned to their complacent selves. We would say the VIX is overbought right now. Stochastics look fantastic and do suggest we will see more rally ahead.
Here is the latest recording from Monday, May 13th:
S&P 500 New 52-Week Highs/Lows: New Highs were prolific today which does lend credence to today's rally. The High-Low Differential looks very bullish as it continues to rise. It isn't overbought yet.
Climax* Analysis: There were no climax readings today.
*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) are both rising again, but we would have expected a bigger expansion in participation numbers. 80% hold rising PMOs which is very good, but shouldn't there be more after a rally of this magnitude?
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM are rising and confirming now rising short-term indicators. We have 3/4ths of the index holding PMO BUY Signals which could keep things elevated.
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 isn't expanding to the degree we would like, but percentages are robust enough to give us a BULLISH ST Bias. The Silver Cross Index is moving swiftly higher which is bullish, it is above its moving average so the IT Bias is also BULLISH. The Golden Cross Index is moving higher again and given it is above its signal line, 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: We saw a rally to new all-time highs despite the rather unenthusiastic rally that preceded it. This should keep price elevated. STOs reversed higher and confirmed today's breakout move. IT indicators were already rising. Participation should have expanded more at this point, but we don't have any negative divergences to worry about yet. It does say that there is opportunity for improvement and broadening of the rally. Investors are hyper focused on the Fed and for now they are signaling rate cuts are a possibility still. This could also keep the market advancing. We believe we could see more rally from here, but adding to your portfolio should be done carefully. Avoid overbought conditions.
Erin is 40% long, 0% short.
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BITCOIN
The PMO signaled that a decline may not be in the cards for Bitcoin and it fulfilled that expectation today with a strong breakout move. The RSI is now positive and Stochastics are rising suggesting this rally could get legs.
BITCOIN ETFs
INTEREST RATES
With the CPI report regarded a positive, yields were down on the day. Rising trends are now vulnerable so Bond funds should see rising prices.
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 finally broke down today taking out its rising trend. We were already seeing problems with the indicators. They are getting even more bearish so we expect rates are going to see further decline.
BONDS (TLT)
IT Trend Model: SELL as of 3/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: With the 20-year yield dropping significantly today, TLT had a great opportunity to rally strongly and it did. The declining trend is now likely to be broken. Indicators are positive so we are looking for that breakout.
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 dropped today and closed beneath the 50-day EMA. The rising trend channel is now looking very vulnerable given the very negative indicators. The RSI has slipped into negative territory and the PMO is beginning to accelerate lower. Stochastics are in negative territory and are dropping.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold saw excellent follow through to the upside as it took advantage of the Dollar's demise and saw quite a few extra buyers putting it up much higher than the Dollar was down. We can see that the relative strength line is rising for Gold against the Dollar. The PMO is now rising and the RSI and Stochastics are bullish. We would look for more upside on Gold.
We can see a large bull flag formation on Gold's 1-year daily chart. This continuation pattern implies there is far more upside to go.
GOLD MINERS (GDX): Gold Miners loved the rally in both Gold and the market and pushed to new 52-week highs. Participation is about as good as it could be. The Silver Cross Index has now moved above its signal line so we have a new BULLISH IT Bias. We are looking for Gold Miners to continue even higher.
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 formed a bullish engulfing candlestick that suggests tomorrow we will see more rally. This is a good place for an upside reversal, but the RSI and PMO aren't on board yet. Stochastics did tip upward but are still in negative territory. We will look for more rally tomorrow based on the candlestick. If the PMO turns up at that point, we will be looking for a nice rebound.
This is actually a fairly strong level of support when we look back so this is definitely a good place to see a reversal.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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