Today the Dow Jones Industrial Average ETF (DIA) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. The Dow saw a better rally today, but under the hood it isn't quite as strong as the SPY. We do still have participation readings above our bullish 50% threshold with the exception of the Silver Cross Index. It should be able to get above its signal line soon if participation readings hold up.
The weekly PMO is decelerating, but is still holding a Crossover SELL Signal. This looks like a good rally, but expectations should be tempered based on the weekly chart.
Today the Russell 2000 ETF (IWM) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. It was not a good day for small-caps, but given price is above the 20/50-day EMAs, we still got the Silver Cross. The PMO has just reached above the zero line, but we don't like the weakness we are seeing already in price as it topped.
IWM has been mostly range bound and right now it is at the top of the range, making it vulnerable. The weekly PMO is on a relatively new Crossover SELL Signal. We would be careful with this group.
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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 barely finished in the green today, but it did set a lower high and a lower low. We noted enthusiasm waning based on Total Volume. The market is acting toppy.
The PMO is rising and is above the zero line again on a Crossover BUY Signal. Market participants are very complacent as the VIX has nearly reached the upper Bollinger Band on our inverted scale. Too much complacency is bad for the market as sentiment is considered contrarian. Stochastics topped but are still displaying internal strength as they are camped out above 80.
Here is the latest recording from Monday, 5/6:
S&P 500 New 52-Week Highs/Lows: New Highs were quite high for a near down day, but remember these are calculated intraday so the highest reading of the day is displayed. The High-Low Differential is looking quite bullish as it continues to rise after bouncing off the zero line. You'll note that market tops generally arrive when that indicator turns down with the exception of the strong rally out of the October low.
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.
Overbought levels have been reached by the Swenlin Trading Oscillators (STOs) and could warn of a near-term top. Participation didn't move much which isn't surprising given price didn't move much.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
We like our intermediate-term indicator chart. It tells us that a decline will most likely be limited to the short term. Both the ITBM and ITVM are rising in positive territory and we continue to see an expansion of PMO BUY Signals.
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.
Yesterday's comments still apply:
"%Stocks > 20/50EMAs are now above our 50% bullish threshold so the ST Bias is BULLISH. The Silver Cross Index is back to rising and given its percentage is below %Stocks > 20/50EMAs we should see it continue to rise. We are watching for a Bullish Shift across the signal line to change the IT Bias from BEARISH to bullish. The Golden Cross Index tipped over and remains below its signal line so the LT Bias remains BEARISH."
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: We saw another unenthusiastic rally today with Total Volume shrinking and very little price movement. While short-term indicators are rising, they are overbought and could signal a near-term decline ahead. Participation did not really increase which isn't a surprise given the flat close. Currently readings are above our bullish 50% threshold so we could see a bit more rally. We would just like to see some broadening and based on today's poor showing by IWM, it isn't broadening as we would like. Adding to your portfolio is dangerous business given the market rallies are dampening. We would employ stops so we can eke out more gains, but be protected should the market turn tail.
Erin is 30% long, 0% short.
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BITCOIN
We may have a bullish falling wedge, but price failed to extend the rally and has fallen back within the pattern. If we were to use the prior top to draw our declining tops trendline, it would likely be a declining trend channel. The RSI is negative and the PMO has topped below the signal line and below the zero line. While the pattern calls for a breakout, the failed breakout has us rethinking our original bullish stance.
BITCOIN ETFs
INTEREST RATES
Yields turned around today and could hold the current rising trends longer based on the location of the reversal.
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 reversed right off the rising trend channel and leads us to believe we could get an upside reversal here. The PMO is not in line with that postulation, but we do note that Stochastics have turned back up. $TNX has an opportunity here, we just aren't sure it will take advantage.
BONDS (TLT)
IT Trend Model: SELL as of 3/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The 20-year yield reversed today and that put downside pressure on TLT. This looks like a good rally, but it was turned away at overhead resistance. Still, the short-term rising trend is intact and the PMO is rising on a Crossover BUY Signal so there is upside potential. Stochastics did turn lower, but they are above 80 so internal strength is still visible.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: Price reversed higher before testing the bottom of the rising trend channel and that is bullish. The PMO isn't on board yet, but the RSI and Stochastics suggest price will move higher from here.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold showed weakness against the Dollar again today as it was down further than the Dollar was up. We adjusted the bullish falling wedge to incorporate the last price top. We could still see price continue lower toward the bottom of the wedge before we get a breakout given the PMO is still in decline.
Stochastics are rising and the RSI is currently positive so we could get that upside breakout. The PMO has us hesitating on getting too bullish here.
GOLD MINERS (GDX): Considering the PMO has been in decline since mid-April, price has fared well. Participation remains robust and Stochastics are rising again. Before entering this group, we would want the PMO to turn back up. It is still vulnerable to decline until that happens.
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 Oil rallied today and formed a bullish engulfing candlestick that implies another rally tomorrow. This is a promising reversal area, but the PMO has us cautious. Stochastics and the RSI are beginning to show a little strength, but as with Gold Miners, we don't favor the trade until the PMO turns back up.
Strongest horizontal support lies near the 200-day EMA. If it continues higher from here, that will mean support didn't have to be tested and that would be quite bullish.
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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