The market gapped up on a high note at the beginning of the trading day likely led by the news of an AI conference hosted by NVIDIA (NVDA). However, this news cooled and traders were back to worrying about the Fed announcement on Wednesday which could delay its rate cuts due to sticky inflation readings last week. Because the SPY closed lower than its open, we have a bearish filled black candlestick formation on our daily chart.
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: As noted in the opening, the SPY formed a bearish filled black candlestick on today's trading. The PMO remains on a SELL Signal, but it does remain flat above the zero line flashing internal price strength. Still today's bearish candle could put a damper on this.
The Bollinger Bands on the VIX remain tight and are getting tighter as overall investors are comfortable with the rising trend. Stochastics however have dropped below 80 and continue to fall.
Here is the latest recording from 3/18:
S&P 500 New 52-Week Highs/Lows: The negative divergence continues with price and New Highs. The 10-DMA of the High-Low Differential is falling quickly out of overbought territory. We do note that there were no New Lows for the SPY...
The Nasdaq wasn't quite so lucky. It has been logging New Lows in the hundreds suggesting weaker internals.
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.
Both Swenlin Trading Oscillators (STOs) are reading in negative territory. We do note that near-term these readings are somewhat oversold. Participation has thinned but we did see a slight expansion in %Stocks > 20EMA. We still do not have enough rising PMOs to support prices moving much higher, but we've certainly seen lower readings than this. One major problem with this chart are the negative divergences on every indicator.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM and ITVM continue lower in bearish fashion. We do note that the last time this indicator fell precipitously it only led to some decline but mostly consolidation. One of the differences that last time around was a much higher reading on %PMO Xover BUY Signals. We now have less than half of the index with PMO BUY Signals. With only 35% holding rising PMOs, this indicator is going to move lower.
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.
The big news on the chart is the topping Silver Cross Index and given we have fewer stocks above their 20/50-day EMAs, it will continue to move lower. It remains above the signal line so the IT Bias is still considered BULLISH. The Golden Cross Index is still rising, but it is vulnerable to decline given we have fewer stocks above their 50/200-day EMAs. It is above its signal line so the LT Bias still reads as BULLISH. The ST Bias is deteriorating as we continue to see a slow bleed of stocks losing the 20/50-day EMAs as support, but readings are still above our bullish 50% threshold so the ST Bias remains 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: The first place we will see market vulnerability will be marked by a loss of rising PMOs and PMO BUY Signals. That is already occurring. However, we are reminded of the saying, "Weebles wobble, but they don't fall down" when describing current market conditions, but this time around weakness is punctuated by negative divergences and lost participation/momentum within the index. Current weakness seems different given the declining ITBM/ITVM so we need to be prepared for at least more "wobble" if not a pullback or correction. Prepare by tightening up stops to protect profits and consider dropping any losing positions where the chart is breaking down.
Calendar: The Fed interest rate announcement is due Wednesday. No change is expected.
Erin is 70% long, 0% short.
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BITCOIN
Bitcoin is in pullback mode and it may have a bit more downside to deal with given the PMO SELL Signal in overbought territory. Stochastics also suggest more downside or at least some sideways movement.
BITCOIN ETFs
INTEREST RATES
Interest rates continue to climb with some of them pushing through overhead resistance. We should see this rising trend to continue.
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 hasn't pushed through overhead resistance yet, but it is on the way. We have a new PMO Crossover BUY Signal and Stochastics are rising strongly above 80.
BONDS (TLT)
IT Trend Model: BUY as of 3/6/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The bullish double bottom chart pattern has nearly busted as price is about to move below the bottoms. With interest rates looking so bullish, we don't expect this pattern to hold up. There is a PMO SELL Signal and Stochastics are below 20.
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 back on the move higher and has put together a pretty nice short-term rally. The RSI is positive now and not overbought. The PMO is not responding as we would expect at this juncture of the rally and that does leave us less bullish. Still, with Stochastics rising strongly, we should see the Dollar eke out more rally.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: After a strong rally to the upside, Gold is beginning to cool. The rising Dollar is not helping matters. We are impressed that the PMO is still rising at this point. It suggests internal price strength. Stochastics did drop below 80 but aren't in free fall.
Working against Gold is its relative strength which is fading against the Dollar. Still we have a very clear bull flag on the chart that does imply follow through to the upside. Gold is taking a pause in our estimation, not on the cusp of a lengthy decline.
GOLD MINERS Golden and Silver Cross Indexes: With Gold not cooperating, Gold Miners are struggling a bit. Price is rounding off, but like Gold we see this as a possible bull flag formation developing. Participation remains robust with over 80% of stocks holding above their 20/50-day EMAs. Stochastics and the RSI are positive. The PMO is decelerating somewhat on this pause in the rally, but continues to move higher. The Silver Cross Index looks particularly bullish.
CRUDE OIL (USO)
IT Trend Model: BUY as of 2/12/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: We got the handle on the cup and away price went, rallying strongly. The PMO is still on the rise above the zero line and Stochastics have now moved above 80. The RSI is getting overbought, but we think there is more rally to be had.
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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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