After hours trading yesterday showed NVIDIA (NVDA) up about seven or eight percent, but the gains doubled overnight, and a huge tech-based rally ensued. It continues to gain in after hours trading, up +1.81% as of this writing.
The parabolic advance visible on the weekly chart extended, and we should keep in mind that parabolics beg for correction. The tricky part is picking a top, which hardly anyone does.
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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: Well it appears we did get a fifth fake out move. Price completely obliterated the small double top formation we saw developing. The PMO was yanked upward on today's move but still remains on a Crossover SELL Signal. We would note that the PMO has been flat all year. This is a sign of strength as price is marching higher and maintaining its steady rising trend.
Today's rally calmed investors as we saw the VIX move higher on our inverted scale. Stochastics reversed higher on the day. Notice the relative strength line popped higher between the SPY and its equal-weight counterpart RSP. This tells us the prime contributors to the rally were mega-caps.
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S&P 500 New 52-Week Highs/Lows: New Highs surged on today's rally, but we did see a New Low. The 10-DMA of the High-Low Differential is making its way higher but is still holding a declining trend.
Climax* Analysis: There were no climax readings today. The rally must not have been very broad to see volume ratios below climactic levels on a strong rally day.
*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.
The STOs not surprisingly continued their rise today. We saw marked improvement to our participation indicators, but not quite as much as we would expect on a day like today. The chart is still bullish minus the problem of the negative divergences.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM confirmed the rising short-term indicators today with a move higher on both. We now have half of the index holding PMO Crossover BUY Signals, but we need more. Still it has reached our bullish 50% threshold.
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.
Participation indicators are all reading above our bullish 50% threshold so we have a ST Bias of BULLISH. The Silver Cross Index turned down below its signal line; however, there is a possibility that it will continue to rise given it is below %Stocks > 20/50EMAs. At this point, it is below its signal line so the IT Bias is BEARISH. The Golden Cross Index topped, but it is above its signal line giving us a LT Bias of BULLISH. Now that we have more stocks above their 200-day EMA, it does have an opportunity to reverse course.
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: I doubt any of us were prepared for today's big rally that was fueled by NVIDIA. What needs to be understood is that NVIDIA is the main reason it was up; due to its capitalization, the market was higher on the day. Certainly other mega-caps contributed. Volume ratios suggest the rally may not have been a broad as the rally implied. Participation did improve today, but we would've expected better. This is more evidence the rally didn't broaden much. With primary indicators moving higher together, the rally should continue, but we would be alert for a hangover.
Erin is 40% long, 0% short. Erin was stopped out of some positions and opted not to chase today. Another sign the rally isn't as broad as we'd like.
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BITCOIN
The PMO has now topped on Bitcoin so we should be on guard for a decline ahead. The RSI has managed to leave overbought territory on this consolidation which is good. Other than the PMO, indicators are still positive, but they are deteriorating. We lean toward a possible pullback ahead.
BITCOIN ETFs
INTEREST RATES
Yields were up again today. Rising trends are holding up so we would expect higher interest rates near-term.
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
Overhead resistance has arrived, but given the strong indicators, we are looking for a breakout. The PMO is rising strongly above the zero line, the RSI is not overbought and Stochastics have taken up residence above 80.
BONDS (TLT)
IT Trend Model: SELL as of 2/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The 20-year yield was down on the day and that afforded TLT the opportunity to rally. It remains below overhead resistance and given our bullish outlook on yields, we expect support to be tested (likely unsuccessfully) at 90.00.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: Yesterday's comments still apply:
"The Dollar looks particularly vulnerable right now given the topping PMO and nearing Crossover SELL Signal. The rising trend is mostly intact, but we suspect that it won't hold it very much longer. Stochastics are falling in agreement with the PMO."
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold managed a small rally. We would like to see the PMO cross above its signal line, but it has been loathe to do so. Stochastics do look promising and the RSI popped above net neutral (50) so Gold has a slightly bullish bias.
We noted yesterday that sentiment has now hit extremely bearish levels and that adds to that bullish bias.
GOLD MINERS Golden and Silver Cross Indexes: GDX hit the skids today, tumbling almost 2.5%. Gold has yet to rally in a meaningful way and that is putting downside pressure on Gold Miners. If you didn't think the rally was led by tech, this chart tells you the rally wasn't broad. GDX usually benefits from strong market rallies and it didn't today. Participation is slipping further. Look for a test of 25.00.
CRUDE OIL (USO)
IT Trend Model: BUY as of 2/12/2024
LT Trend Model: SELL as of 12/18/2023
USO Daily Chart: It wasn't an exciting breakout, but it was a breakout nonetheless. We still like Crude Oil. It is nearing a golden cross of the 50/200-day EMAs. The PMO is still rising and while Stochastics did top, they remain comfortably above 80. The RSI is not overbought. We would look for upside follow-through.
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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