We were perusing the Advance-Decline Line charts that we have and noticed something that surprised us. The Nasdaq Advance-Decline Line is trending lower while prices continue higher. This is negative divergence we didn't expect to see.
What makes that negative divergence even more interesting is looking at the same Advance-Decline Lines for the SPX and NYSE. Notice there is no negative divergence at all, if anything we see confirmations of the rallies both are experiencing.
Conclusion: We haven't seen any issues with the Nasdaq rally, but this negative divergence could be signaling that the Nasdaq will be the first to show price weakness.
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: This is only the second time since the beginning of January that we've seen three down days in a row. Today saw a bearish engulfing candlestick. Yesterday saw the PMO drop beneath its signal line, but it doesn't look dangerous given the flat readings that we continue to see above the zero line. The PMO is still showing pure strength.
The VIX remains comfortably above its moving average which implies internal strength. Stochastics did just dip below 80, but barely. It does imply possible weakness coming in on this latest decline.
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S&P 500 New 52-Week Highs/Lows: New Highs were about the same as yesterday. Despite a third down day, we aren't really seeing any New Lows. The negative divergence on the High-Low Differential is a problem as is its direction which is down.
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) continued lower today which does tell us there is weakness in the current move. Of primary concern is the loss of rising PMOs. At the same time, %PMOs Rising is in near-term oversold territory.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT.
Both the ITBM and ITVM declined in concert today. The ITVM had been rising, but today it gave up to decline. %PMO Xover BUY Signals has now dropped below our bullish 50% threshold. If you look in the thumbnail, we have a near-term negative divergence with price as well as the longer-term negative divergence.
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 Silver Cross Index is nearing a Bearish Shift or drop beneath the signal line. That would move our IT Bias back to BEARISH. It is likely to decline given we have fewer stocks above their 20/50-day EMAs versus the Silver Cross Index percentage. We still have readings that are above our bullish 50% threshold so our ST Bias is BULLISH. The LT Bias is comfortably BULLISH as the Golden Cross Index is still rising above its signal line.
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: Participation is still strong with well over 50% of stocks above key moving averages. However, we are noticing slippage in the Silver Cross Index that could lead to a Bearish Bias tomorrow. STOs and the ITBM/ITVM are declining. And of course, there are the negative divergences that we keep harping on. We will see if tomorrow leads to a fourth down day which would be a first time we've seen it since the beginning of January. We and the market are waiting for some kind of catalyst that would break this rising trend. We don't know what that will be at this point, but it isn't likely to happen during this holiday trading week. Given holiday trading, we aren't expecting any volatile moves, more likely we will see sideways consolidation.
Erin is 60% long, 0% short.
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BITCOIN
Bitcoin is on the rebound but today it took a breather. The rising trend is intact and the PMO is beginning to flatten in preparation for a bottom. Stochastics seem to suggest we will see this rally off the 50-day EMA continue further.
BITCOIN ETFs
INTEREST RATES
We think that yields will remain in a broad trading range, as we have seen for the last year or so, for quite a while. Near-term we see weakness.
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 could be forming a bearish double top. Support is currently holding along the 50-day EMA, but given the nearing PMO Crossover SELL Signal, we aren't expecting it to hold. Stochastics also suggest this level will be broken.
BONDS (TLT)
IT Trend Model: SELL as of 3/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We've reevaluated the charts and we've decided that there is a bullish spin as we have a symmetrical triangle. These are continuation patterns and given the prior trend was up, we should expect an upside breakout. Yields are looking weak near-term.
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 rallied and formed a bullish engulfing candlestick. The indicators are favorable with the RSI not overbought and the PMO rising on a Crossover BUY Signal above the zero line. Stochastics are also above 80. We should see the rally continue further.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: A rally for the Dollar should spell disaster for Gold, but today it managed a rally even as the Dollar rose. Currently it is consolidating the breakout move. Stochastics suggest internal weakness but so far Gold is holding above support. $GVZ, the Gold Volatility Index is above its moving average and like the VIX that means there is internal strength available.
The inverse correlation with the Dollar is easing and that will also work in Gold's favor should the Dollar continue to rally higher.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners look toppy, but participation remains robust for the group. At this point it appears GDX is consolidating the breakout March move. Its holding above key moving averages and given the Silver and Golden Cross Indexes, we should see this rally resume in a more meaningful way.
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 see a small flag formation coming out of the handle to the cup. The rising trend established out of the flag confirms the pattern and suggests we will see upside follow through as Crude makes its way toward our target of about 84.00.
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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