Today Barclays downgraded Apple (AAPL) from Equal Weight to Underweight, and this caused a sharp price drop on a stock that hit all-time highs last month. It was down about -7.5% at today's low. The daily PMO is falling from overbought levels.
The weekly chart shows the double top and minimum downside target (if the neckline is broken) of 135. The weekly PMO has topped.
While this looks like just an AAPL story, we note that the Magnificent Seven, except for TSLA, were also hit hard.
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 market continued to make its way lower to begin 2024. On a bright note, today saw a hollow red candlestick and those usually precede an up day. We aren't so optimistic. Total Volume was back on track as holiday trading subsides.
Another possible bright spot is the downside penetration of the lower Bollinger Band by the VIX on our inverted scale. Many times these punctures will lead to some upside. Again, we aren't so optimistic. Stochastics have topped.
Here is the latest recording from 12/18 (no recording 12/25 or 1/1):
S&P 500 New 52-Week Highs/Lows: New Highs are paring back as we would expect. Notice that this top was preceded by a negative divergence on New Highs. The 10-DMA of the High-Low Differential is moving lower suggesting more downside to come. This looks a lot like the July top.
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.
Swenlin Trading Oscillators (STOs) can still be considered overbought. They are decline which is bad for the market. We have begun to run out of fuel for this rally based on the decline in rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is EXTREMELY OVERBOUGHT.
Even as price has been rising, we've been losing PMO BUY Signals. Based on only 42% showing rising PMOs, we will see %PMO Xover BUY Signals fall further. Both the ITBM and ITVM are in decline.
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.
We still see plenty of participation based on %Stocks > 20/50/200EMAs as well as the height of the SCI and GCI. In fact the SCI accelerated higher. The ceiling is about to be reached on the SCI. The highest it can go right now is 91% because that is how many are above their 50-day EMAs. The SCI can't move any higher as price must be above the 50-day EMA to hold a Silver Cross. The GCI has cleared its negative divergence. Both the SCI and GCI are above their signal lines so the bias is BULLISH in the intermediate and long terms.
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: While we saw a few bright spots with the oversold VIX and a hollow red candlestick, we aren't bullish. Indicators are in decline and are pretty clear about which direction the market will go. Participation is still holding up, but we are seeing only 42% holding rising momentum. Momentum is the first place we will see deterioration, next up will be participation. We should prepare for more downside. While we aren't ready to call for the end of the bull market, this does look like a precursor to a correction. Tighten stops for protection.
Erin is 75% long, 0% short.
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BITCOIN
Bitcoin began a strong reversal last weekend and it culminated with a breakout today. This looks like a flag on a flagpole and that means more upside to follow. The RSI remains positive and not overbought. The PMO has now turned up above the zero line and Stochastics are rising in positive territory. We would look for follow through.
INTEREST RATES
Yields reversed higher for the most part. We continue to look for support to be met at 2023 lows. Declining trends will need to be broken before we look for rates to rally meaningfully.
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 rallied strongly today, but the declining trend remains intact. We are seeing the PMO turning up so we could see more upside. We aren't looking for a long-term rally. We expect a move to test overhead resistance, but not necessarily follow through from there.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The 20-year yield was up again and it continued to put downside pressure on TLT. Support is near, but we do need to be on the lookout for a short-term decline. The PMO looks very bearish.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/27/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar rallied toward the top of a bullish falling wedge. The pattern suggests the rally will continue, as does the now rising PMO. Stochastics are rising strongly. This could just be an indication of diminishing weakness given the PMO is so far below the zero line, but overall it looks good for the Dollar.
This bounce is coming off very strong support so this is a good place to see a rally continuation.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: The Dollar looks more bullish and that is going to be bad news for Gold or at least it means there will be more gravity to thwart a strong rally. The PMO looks problematic and Stochastics did just drop below 80. We do see a Bull Flag formation so it isn't over for Gold.
GOLD Daily Chart: The correlation to the Dollar is back to its near perfect inverse correlation so a strong Dollar will pose problems. $GOLD has been flirting with new all-time highs and that could also be putting downside pressure on Gold. Discounts did pop on Friday so investors are bearish or getting more bearish on Gold.
GOLD MINERS Golden and Silver Cross Indexes: Gold and the market are struggling so we shouldn't expect much from Gold Miners. Participation has tumbled lower, particularly for stocks above their 20-day EMA. The SCI is doomed to decline based on these failing %Stocks indicators. We don't see much future for this group given the nearing PMO Crossover SELL Signal and dropping Stochastics.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/7/2023
LT Trend Model: SELL as of 12/18/2023
USO Daily Chart: Crude Oil is sliding fast and based on the PMO top well beneath the zero line, we should expect more of the same. Stochastics look very bearish as well. Short-term support is arriving, but we don't think it will hold based on the indicators.
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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