One of the problems we've encountered during the rally from the October lows, is the market's refusal to correct in any normal way. The circles on the chart below highlight the times when a pullback appeared to be starting, but there was no downside follow through at all. Is today's decline going to turn out to be the fifth head fake, or will we finally see some normal corrective action? A decline is certainly overdue, and we will see that the technicals continue to favor a decline. Using stops continues to be a rational coping mechanism.
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: Today's selloff was triggered by an unpopular CPI report. It brought on a gap down move, but support held at the 20-day EMA and horizontal support. This move yanked the PMO downward. Price is no longer overbought based on the RSI.
The VIX penetrated the lower Bollinger Band deeply. Typically these punctures lead to upside movement, but we aren't so sure that will happen this time around. More than likely we will get more punctures. Stochastics topped and moved below 80.
Here is the latest recording from 2/12:
S&P 500 New 52-Week Highs/Lows: The 10-DMA of the High-Low Differential turned down today and more New Lows were logged on the decline.
Climax* Analysis: Today there were unanimous and strong climax readings on the four relevant indicators, giving us a downside initiation climax. SPX Total Volume slightly above the one-year average daily volume, not even close to being a blowoff. The NYSE and SPX DOWN/UP Volume Ratios were above 9.0. For all the false alarms we have experienced since October, we think this time there is more decline ahead of us.
*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) moved lower but did hold in positive territory. We lost a significant amount of rising momentum internally. We now only have a quarter of the index holding rising PMOs. We also saw %Stocks > 20EMA contract below our 50% bullish threshold.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
As confirmation of the STOs, both the ITBM and ITVM reversed lower today. The negative divergences are still very strong.
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 NEUTRAL in the short term.
The market bias is BEARISH in the intermediate term.
The market bias is BULLISH in the long term.
We have moved the ST Bias to "Neutral" given %Stocks > 20EMA dropped beneath our bullish 50% threshold. %Stocks > 50EMA are currently above that threshold so a neutral bias seemed prudent. The Silver Cross Index accelerated lower. It is below its moving average so the IT Bias is Bearish. The Golden Cross Index is holding above its signal line so the LT 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: Yesterday small-caps outperformed in a big way. Today they were decimated. This broad weakness negates our bullish outlook from yesterday. Apparently mega-cap weakness will be met with overall market weakness not rotation into small-caps. The internals were decimated by today's decline. It pulled all of our indicators lower. Significant was the loss of rising PMOs within the index. Given today's downside initiation climax we are likely in for follow through to the downside. It seems too early to short the market. We would let the market stop you out. There is an outside chance that the rally will push on after this stumble and we don't want to be caught flat footed.
Erin is 70% long, 0% short.
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BITCOIN
Bitcoin took a breather today which makes sense given it is overbought on the RSI. The PMO looks incredibly strong and Stochastics are comfortable above 80 so we do expect more upside after this pause.
BITCOIN ETFs
INTEREST RATES
Yields are back on track to rise even further. With inflation gauges coming in hot, the Fed isn't likely to lower rates soon and that should lead to higher interest rates as we move forward.
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
We got the breakout we were expecting on the 10-year yield and given positive indicators, we are likely to see it rise further. The PMO has now entered positive territory and the RSI is positive and not overbought. We like the strong Stochastics as well.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We had a feeling support would be lost and it was today, opening the door for even lower prices. We don't see support until 90.00 and that doesn't look that sturdy. The PMO has now entered negative territory and Stochastics are below 20. The 20-year yield is on a nice rising trend and that will continue to apply downward pressure on TLT.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: We got the rally kickstart that we were looking for. The RSI has moved into overbought territory so this breakout may be met with consolidation rather than upside follow through. Ultimately we do expect the rising trend to continue with the Dollar likely to breakout above the November high.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: The Dollar's breakout affected Gold and then some. Short-term support gave way today. The next level of support looks fairly strong with both the 200-day EMA and horizontal support at the December low, but given the bearishly configured indicators, it is very vulnerable.
GOLD Daily Chart: Gold's relative strength to the Dollar dropped given Gold was down far further than the Dollar was up. Notice that the correlation was pulled lower telling us the Dollar is holding more sway than it was.
GOLD MINERS Golden and Silver Cross Indexes: Gold's terrible decline hurt GDX greatly. It didn't help that the market was down heavily too. We now have zero stocks holding above their 20-day EMA. The PMO is declining on a Crossover SELL Signal and Stochastics are below 20. We don't see where a rally could originate based on the current internals.
CRUDE OIL (USO)
IT Trend Model: BUY as of 2/12/2024
LT Trend Model: SELL as of 12/18/2023
USO Daily Chart: Crude Oil has reached overhead resistance and looks like it will breakout this time around. The RSI is positive and not overbought. The PMO is rising and putting margin between it and its signal line. Stochastics just popped above 80. We're looking for a breakout.
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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