Today the S&P 600 Small-Cap ETF (IJR) 20-day EMA crossed up through the 50-day EMA (a Silver Cross), generating an IT Trend Model BUY Signal. The rally is clicking and we notice good participation under the hood. Participation is also expanding. The Silver Cross Index has had a "Bullish Shift" across the signal line that gives us a Bullish Bias in the intermediate term.
The rally looks somewhat unimpressive on the weekly chart where we see a large trading range. It could be preparing for a breakout given the turn in the weekly PMO.
Also today, the Regional Banking ETF (KRE) 20-day EMA crossed up through the 50-day EMA (a Silver Cross), generating an IT Trend Model BUY Signal. We see very strong readings under the hood. Participation has shot upward and Stochastics are back above 80. The Golden Cross Index still has some work to do, but given percentages of stocks above their 50/200-day EMAs are higher than the Golden Cross Index, it should continue to climb.
Price is up against resistance on the weekly chart. A breakout should occur given the weekly PMO is nearing a Crossover BUY Signal.
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: The rounded top is beginning to resolve to the upside. There is a new PMO Crossover BUY Signal occurring right now. We would note that Total Volume was well below the annual average so while this was a healthy rally, it did lack enthusiasm.
The VIX barely moved on today's rally, but it does remain above its moving average on the inverted scale. Stochastics have now moved above 80 so we do have short-term internal price strength.
Here is the latest recording from Monday, 5/6:
S&P 500 New 52-Week Highs/Lows: New Highs expanded as we would expect on a 1%+ rally day. New Lows were imperceptible. The High-Low Differential is confirming the rising trend as it advances higher.
Climax* Analysis: Of the four relevant indicators there were two climax readings and an "almost," so we have an upside exhaustion climax today. SPX Total Volume contracted to 90% of the one-year daily average, which kind of confirms the exhaustion.
*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) were higher, but we didn't see the jump we would expect on such a strong rally. Still they are confirming the short-term rising trend. Participation is expanding further, returning to levels we haven't seen since the decline began in April. More than 2/3rds of the index hold rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
We have nearly 50% of the index holding PMO BUY Signals, but we'd like to see more to keep the rally cooking. The ITBM and ITVM are confirming short-term indicators as they continue to rise.
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.
Now that we have more than 50% of stocks above their 20/50-day EMAs, we can move the short-term bias to BULLISH. The bias remains BEARISH in the intermediate and long terms because both the Silver Cross Index and the Golden Cross Index are below their moving averages.
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 saw a strong 1%+ rally today, but it wasn't backed by enthusiastic volume. We also have an upside exhaustion climax to contend with. The ST Bias is bullish and STOs are rising so while we could experience some turbulence, rising IT indicators and expanding participation suggest that condition will be temporary. We would prepare for some downside movement tomorrow. Portfolio expansion could be considered on this possible pullback, but stops will need to be somewhat tight.
Erin is 30% long, 0% short.
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BITCOIN
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
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
We have a rising trend channel on the 10-year yield and it is getting very close to the bottom of the channel. The RSI has moved into negative territory and Stochastics are below 20. Worse is the PMO which is on a new Crossover SELL Signal. We are expecting a breakdown.
BONDS (TLT)
IT Trend Model: SELL as of 3/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT is benefiting from the decline in the 20-year yield. We think it will continue to climb based on the newly positive RSI, PMO Crossover BUY Signal and Stochastics above 80. Bond funds should continue to rise while yields are in distress.
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 has formed a rising trend channel and price could be ready to test the bottom of the channel given the negative PMO configuration. Stochastics also just dropped below 80. The Dollar could rebound from this level, but we are expecting a test of that rising trend first.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold has broken out of the bullish falling wedge and appears ready to rally again. The PMO is decelerating and Stochastics are rising again. The RSI remains positive. You'll note that Gold is beginning to outperform the Dollar. With the Dollar looking somewhat bearish this should give Gold an opportunity to resume its rally.
GOLD MINERS (GDX): Gold Miners enjoyed a rally as Gold was up and so was the market. Support looks safe. Participation is gaining again and the foundation is strong based on the high percentages on the Silver Cross Index and Golden Cross Index. This has the earmarks of a bull flag that would imply an upcoming upside breakout.
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 is trying to reverse, but we are looking for it to test the rising bottoms trendline first. The PMO is in decline and Stochastics, while rising, are well below 20 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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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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