Today the Nasdaq 100 ETF (QQQ) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. This looks like a credible rally based on the new PMO Crossover BUY Signal it saw yesterday. We would like to see more participation however. Readings are above our 50% bullish threshold, but barely. The Silver Cross Index is still in decline and the Golden Cross Index saw a Bear Shift across the signal line. The chart needs to mature more.
The weekly PMO is on a Crossover SELL Signal and it continues to decline.
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: We did get a small rally today and the PMO has now moved above the zero line. Total volume was low again today. Enthusiasm was tempered.
The VIX is coming close to the upper Bollinger Band on our inverted scale. A puncture will often lead to a downside reversal. Stochastics look very strong above 80 suggesting internal strength in the very short term.
Here is the latest recording from Monday, 5/6:
S&P 500 New 52-Week Highs/Lows: New Highs really popped today as more stocks are finding their way to new 52-week highs. The High-Low Differential looks very bullish as it continues to rise after a bounce off the zero line.
Climax* Analysis: There were no climax readings today. Today's soggy market action was appropriate after yesterday's upside exhaustion 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 OVERBOUGHT.
Swenlin Trading Oscillators (STOs) have zipped their way back into overbought territory. We could certainly see higher readings, but this should keep us a bit cautious given their overbought condition. Participation is expanding nicely. Almost 2/3rds have price above the 20-day EMA and nearly 3/4ths of the stocks with rising PMOs. We would note however that %PMOs Rising is overbought at this level.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
%PMO Xover BUY Signals has now moved above our bullish 50% threshold. Both the ITBM and ITVM are in positive territory now and rising suggesting we should be safe in the intermediate term.
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 and long terms.
%Stocks > 20/50EMAs are now above our 50% bullish threshold so the ST Bias is BULLISH. The Silver Cross Index is back to rising and given its percentage is below %Stocks > 20/50EMAs we should see it continue to rise. We are watching for a Bullish Shift across the signal line to change the IT Bias from BEARISH to bullish. The Golden Cross Index tipped over and remains below its signal line so the LT Bias remains BEARISH.
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: Trading was rather muted today so we believe our upside exhaustion climax from yesterday was on point. We are still vulnerable to the exhaustion playing out further and with STOs already overbought, it isn't out of the question. Still we can't ignore the expansion in participation which could provide some support to this rally. IT indicators are also bullish at this time so a big downside reversal doesn't seem very likely right now. Be careful expanding your portfolio. The use of hard stops still seems prudent.
Erin is 30% long, 0% short.
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BITCOIN
Yesterday's comments still apply:
"Going into the weekend we were bearish on Bitcoin, but it traded well and has now formed a bullish falling wedge. The PMO has turned back up. Stochastics are in positive territory but are stunted. The pattern tells us to watch for more rally out of the formation."
BITCOIN ETFs
INTEREST RATES
Yesterday's comments still apply:
"Yields are sliding lower but we believe the current range and support levels will hold. We aren't necessarily looking for a decline all the way down to support, but we should see them fall in the meantime."
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 now reached the bottom of its rising trend channel. It is vulnerable to even lower rates given the sliding RSI and PMO top and 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: Bond funds are enjoying a rally and we think it will continue further and likely test the longer-term declining tops trendline. We aren't particularly optimistic that it will break out of the declining trend, but certainly the indicators favor at least a test at that level. The RSI is now positive and the PMO is rising on a Crossover BUY Signal. Stochastics are staying above 80 and that implies internal strength.
Overhead resistance is nearing, but we are looking for a 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 is making its way higher after bouncing off the late March top. If the rally continues from here, that would be particularly bullish. Price would have reversed before testing the bottom of the rising trend channel. We wouldn't write the Dollar off yet.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold did not outperform the Dollar today, it was down further than the Dollar was up. We still like the small breakout from the bullish falling wedge. The pattern does imply that we will see more rally than this, but the PMO is sinking. Stochastics are rising again, but are still in negative territory. We are looking for Gold to rally, the indicators just aren't backing that up yet.
GOLD MINERS (GDX): Gold Miners have quite a complex structure above support. We are looking for them to break higher and away from this trading area. The PMO is turning back up and participation is still very strong. We're not sure if Gold will help them out at this point, but further market rally should keep them 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 was down again and looks bearish. The RSI is negative and the PMO is nearing the zero line. Stochastics are trying to turn up, but ultimately they are well below 20 and signaling weakness.
Strongest horizontal support lies near the 200-day EMA.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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