While we cover this further down in the report, we thought it was worth leading with the significant change in market bias today. Of the major market indexes only the Nasdaq Composite retains a bullish bias.
To clarify, the bias shift is due to a Silver Cross Index crossing down through its 10-day EMA, which means that some stocks within the given market index are experiencing 20/50-day EMA downside crossovers. The chart below is one that we use daily to track bias shifts. Clearly most indexes still have a high percentage of stocks that still have a Silver Cross, but their bias is now bearish because of the shift below the moving average.
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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 seems unperturbed by the loss of PMO BUY Signals within the index. The rally did not get the PMO to turn back up. The RSI is on its way to overbought territory which we believe will be a problem where it wasn't in December.
Investors remain complacent as the VIX is now above its moving average on the inverted scale. Stochastics look strong, but without a rising PMO we still remain cautious. Note that relative strength is picking up for the SPY versus the equal-weight RSP. We will be on alert to see if the Magnificent 7 can prevent a serious decline.
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S&P 500 New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential continues lower. We did see a nice spike in New Highs and again no New Lows were detected.
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 NEUTRAL.
Swenlin Trading Oscillators (STOs) turned back up which does bode well for the market in the short term. Our concern remains that we have so few rising PMOs within the index. Today's rally did not improve %PMOs Rising.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
We are happy to see our IT indicators continuing to decompress in the face of more rally. Their decline does temper our expectations in the intermediate term. No gains were made on %PMO Xover BUY Signals on the rally.
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 term.
The market bias is BULLISH in the long term.
We still see more than 50% of stocks above key moving averages so we are keeping the short-term bias as bullish. As noted in the opening, the SPY lost its bullish intermediate-term bias as the SCI dropped beneath its signal line. It is doubtful we will see the same out of the GCI for some time.
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.
(We have changed the background colors on this table to minimize confusion with the Signal Table above.)
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CONCLUSION: Today was all about the new bearish intermediate-term bias changes within the markets. PMO internals have deteriorated a great deal as we have lost many rising PMOs and PMO BUY Signals. This is part of the reason why we need to monitor the mega-caps which could lead the market higher despite internal weakness. We still have strong participation, but the PMOs are the problem. Watch the PMOs carefully on your current positions. With so many BUY Signals having been lost, some of your positions may be vulnerable. Be honest in your evaluation. Stops should be placed. We continue to advise caution.
Erin is 75% long, 0% short.
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BITCOIN
The way has been paved for new Bitcoin ETFs that should begin trading as soon as tomorrow. This is likely to keep Bitcoin prices elevated. The technicals look good with a rising PMO on a Crossover BUY Signal and a positive RSI. We also see Stochastics above 80 implying internal strength.
INTEREST RATES
Long-term yields inched slightly higher.
We do see rates rising in the short term, but ultimately when they are ready to decline again, we will be watching 2023 lows as support. The yield curve is still highly inverted given short-term rates are so much higher than longer-term rates.
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
Yesterday's comments still apply:
"The yield is still stuck beneath strong resistance at the 200-day EMA and March/July tops, but given the PMO is rising on a Crossover BUY Signal, we do expect a breakout here. Stochastics did tip over, but didn't move much otherwise so we don't take it as an overly bearish condition."
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT is moving sideways, but given the rising trend in the 20-year yield, we expect a breakdown. The RSI just moved into negative territory and the PMO continues to decline out of overbought territory. Stochastics topped below 20. We could be seeing the development of a flag formation, but we just aren't ready to get bullish on Bonds right now.
This is a very strong area of support so we could see more sideways movement as it attempts to hold on to it.
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 broke from its bullish falling wedge, but marginally. It 'drifted' sideways and out of the pattern. We should see the Dollar get going based on the PMO and Stochastics above 80, but for now the 50-day EMA is posing a problem. We are still bullish on the Dollar, but suspect we won't see a tremendous amount of upside.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold is in a short-term declining trend and based on our indicators that trend is likely to continue. Support is arriving at the 50-day EMA and October high so price could meander atop that level before ultimately succumbing to more downside.
GOLD Daily Chart: The RSI has now moved out of positive territory. Stochastics look terrible and the PMO is declining on a Crossover SELL Signal. The only piece of good news is the paring back of discounts which implies investors may be getting more bullish on Gold.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners dropped below the 200-day EMA and the prior tops from August to October. The short-term rising trend has also been compromised. The SCI is in decline after a negative crossover its signal line. Participation is weak at best. Look for Miners to test 27.00.
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 took back much of yesterday's gains and formed a bearish engulfing candlestick. The PMO is flat, the RSI is negative and Stochastics are nearing 20. We have to believe that Crude will fail to hold support and go down to test 64.00, we could see more choppy sideways action first.
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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