We have heard discussion that the rally has broadened out and that rotation will move to small-caps as mega-caps weaken. We're not so sure. Looking at the participation readings for the SP600 (IJR), while they are above our 50% bullish threshold, they are weaker than the SPY (which are reading over 80%) and we haven't seen any broadening since February. Price has yet to hit all-time highs like the SPY. Both the Silver Cross Index and Golden Cross Index have topped beneath their signal lines. You'll also notice that relative strength is even with the SPY not rising. While we could see more rally, we think it is vulnerable.
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
CLICK HERE for Carl's annotated Market Index, Sector, and Industry Group charts.
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: We've had six fake out breakdowns although this last one has been followed by some consolidation. Today finished relatively unchanged. The PMO is on a Crossover SELL Signal, but it is floating above the zero line and flat. This is a sign of strength.
The VIX penetrated the lower Bollinger Band on the inverted scale. Many times these punctures lead to a rally. Stochastics are still holding above 80 and that is a sign of internal price strength. While all of this is good, we do have a large bearish rising wedge on the chart.
Here is the latest recording from 3/11:
S&P 500 New 52-Week Highs/Lows: We annotated a negative divergence on New Highs last week. Considering today finished in the red, we didn't see any New Lows. The 10-DMA of the High-Low Differential topped last week and continues lower in bearish fashion.
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) were mixed today with the STO-B falling and the STO-V continuing its advance. Remember in the opening, IJR held %Stocks > 20EMA around 60%, we have the SPY at 82%. A big difference in participation. This reading is robust, although lower than it was at the end of 2023, setting up a negative divergence. Given this rally we would expect more PMOs to be rising. At this point it is 59% which is mildly bullish. The negative divergence is stark.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT.
Both the IT Breadth Momentum (ITBM) and IT Volume Momentum (ITVM) are rising strongly. They are beginning to get somewhat overbought. This tells us that any decline would likely be reserved for the short term. Negative divergences remain and likely will remain for some time--at least until they begin challenging prior readings.
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.
We have robust readings for %Stocks > 20/50EMAs so we are listing the ST Bias as BULLISH. The Silver Cross Index looks very strong as it rises. Given %Stocks > 20/50EMAs are reading higher than the Silver Cross Index, it could continue to rise further. It is above its signal line so the IT Bias is BULLISH. The Golden Cross Index is angling up above its signal line so the LT Bias is also 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: There's not too much to complain about on the charts except for the strong negative divergences that still tell us to stay cautious. Participation numbers are robust and the Silver Cross Index is rising strongly. STOs are mixed so we could see more consolidation or further decline. We reviewed the Magnificent 7 in this morning's trading room and the charts are looking bearish for the most part. They will likely drag on the market as we aren't seeing strong participation from smaller-caps yet. Expanding your portfolio is more risky than usual given mixed indicators and negative divergences. Stop should be placed for protection should we see follow through on today's decline this week.
Erin is 60% long, 0% short.
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BITCOIN
Bitcoin is traveling every higher and with 'halving' coming up next month (miners receive half what they do now for mining a Bitcoin), Bitcoins could be considered more scarce at that time and that will only keep price moving higher. It continues to make new all-time highs and we suspect that will continue. A little consolidation or pullback would go a long way in clearing the overbought RSI.
BITCOIN ETFs
INTEREST RATES
Yields mixed today. Most remain in declining trends. We expect them to continue lower down toward support at 3.75%.
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
Most yields ticked lower, but $TNX moved higher. It is a good place to see a small advance as it comes off support, but given the nearing "Dark Cross" of the 20/50-day EMAs, we expect a breakdown.
BONDS (TLT)
IT Trend Model: BUY as of 3/6/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Bond funds have seen a resurgence with yields in declining trends. TLT is stumbling at overhead resistance, but we are bearish on yields and are looking for more rally from TLT. The PMO is rising, the RSI is not overbought and Stochastics are holding above 80. You could make a case that we have a bull flag in the short term. This is a good set up for Bonds.
We do see a large double bottom formation on the 1-year chart that also suggests we will see higher prices for TLT.
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 rebounding somewhat. It hasn't helped the indicators much, but it's only been two days. The PMO is keeping us bearish on UUP, but we do note that Stochastics have reversed higher. They are deeply negative territory, but this could mean we have a little more upside ahead.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: A rise in the Dollar did not harm Gold today as it continues to show relative strength against the Dollar. The RSI has gotten very overbought so it is time for a cooling off period. However, both the PMO and Stochastics are very strong so cooling off may just mean a slower advance.
Even with this nearly vertical rally, PHYS is still selling at a discount. Not everyone is on board with the Gold trade, but this could work in Gold's favor as sentiment is contrarian. We haven't seen premiums in years, but if Gold continues to make new all-time highs, that may change.
GOLD MINERS Golden and Silver Cross Indexes: GDX enjoyed another strong rally day. Gold wasn't up that much and the market finished lower so this strength belongs almost completely to Gold Miners. We have incredible participation of stocks above their 20/50-day EMAs and a strongly rising Silver Cross Index. As with Gold they are due for a cooling off period, but they seem to be one of the hottest trades in town for now. A pullback would likely entice latecomers to the table so we are expecting to see a challenge of overhead resistance near 32.00.
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 finished higher, but is beginning to look a bit weak. We are thinking that USO may form an handle on the saucer/cup shaped basing pattern. The PMO is nearing a Crossover SELL Signal and Stochastics are dropping. A test of the 200-day EMA may be ahead.
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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