Investors are waiting with bated breath on the upcoming earnings announcement by NVIDIA (NVDA) tomorrow after the closing bell. We thought it would be a good time to look at the technical picture before tomorrow's announcement.
NVDA is coming up against overhead resistance so this would be an area that we could see a pullback. Indicators are still quite favorable which bolsters the case that we'll see a rally versus a pullback. The RSI is positive and not overbought. The PMO is rising above the zero line on a Crossover BUY Signal. Relative strength is interesting. We can see that NVDA is not technically showing leadership among the Semiconductors as its relative strength line is falling. Ultimately we don't see that as a big problem because NVDA is easily outperforming the market right now.
In conclusion, indicators do suggest we will see a rally versus a pullback, but overhead resistance could still pose a problem.
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: The market rallied today and formed a bullish engulfing candlestick which implies we'll see another rally tomorrow. We do notice a few problems. The RSI is now overbought and the PMO does appear to be decelerating its rise. Total Volume is still very low on this rally.
Investors got even more comfortable with the market as the VIX is at its lowest reading we've got on this chart. This tells us that sentiment is too bullish. However, Stochastics are still holding strong above 80. The rising trend on the relative strength line against equal-weight RSP is rising which tells us that mega-caps are primarily leading this rally.
Here is the latest recording from Monday, 5/20:
S&P 500 New 52-Week Highs/Lows: New Highs moved lower again setting up a negative divergence with price tops.
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) can be considered neutral versus overbought. They continue to decline despite the rally and both show negative divergences with price. What really caught our attention today was shrinking participation. We've had three rally days and yet %Stocks > 20EMA and %PMOs Rising have contracted.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM looks rather toppy right now, but ultimately it is still rising along with the ITVM. Considering we only have 60% of stocks with rising PMOs, %PMO BUY Signals is holding up well. It implies that many PMOs are well above their signal lines. The indicator appears to be topping nonetheless.
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.
Today the Golden Cross Index topped. It is above its moving average so the LT Bias is still BULLISH, but we would say it is beginning to deteriorate. Despite contraction today, we do have %Stocks > 20/50EMAs above our bullish 50% threshold so we are leaving the ST Bias as BULLISH. The Silver Cross Index did reverse higher and it is above its signal line so the IT Bias is 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: Sentiment could now be a burden in that it is too bullish based on the VIX. Sentiment is contrarian so this is bearish for the market. We have negative divergences on New Highs as well as on STOs (which are declining). Total Volume continues to imply a lack of conviction in the rally as it remains very low. As investors digest meeting minutes from the Fed tomorrow and anxiously await NVDA earnings, we sense we will see fairly low volatility. The cracks are now visible in the foundation. We need to exercise caution, we shouldn't be seeing a shrinking of participation during a rally. With so much uncertainty we may not want to increase our exposure.
Erin is 40% long, 0% short.
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BITCOIN
Bitcoin fell back after yesterday's forceful rally. It did hit overhead resistance so it isn't a surprise. Indicators have not been compromised so we are still looking for more upside.
BITCOIN ETFs
INTEREST RATES
Rates tipped over today cementing many of the short-term declining trends. Rising trends have been compromised in many cases leaving us bearish on yields in the short term. We seem to be establishing a new range that will be in effect for some time.
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
The declining tops trendline has not been broken in the short term. This suggests we will continue to see them drift lower. Stochastics decelerated, but are in negative territory. The PMO has decelerated, but is still in decline.
BONDS (TLT)
IT Trend Model: SELL as of 3/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Given the declining trend in the 20-year yield, we could see a possible upside breakout on TLT. Our problem is Stochastics which have begun to drop. We would look for consolidation for now given the RSI and PMO are still positive.
Price is now sitting on fairly strong support.
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:
"Short-term the Dollar is in a declining trend, however, it is still moving within a longer-term rising trend channel. We have seen a slight rally off the bottom of the channel that could portend the end of the short-term decline. Stochastics have tipped upward, but the RSI remains negative and the PMO is declining. The Dollar isn't out of the woods yet."
"Price is sitting atop of support zone so this is a good place to look for a rally."
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold cooled today but the PMO is still on the rise. The RSI is positive and not overbought and we are seeing good relative strength against the Dollar. We note that discounts are paring back somewhat as investors begin to get less bearish on the metal. We are looking for more upside.
A rally in the Dollar would not be good for Gold as we do see the negative correlation is back. However, Gold is showing rising strength against the Dollar right now. That will help.
GOLD MINERS (GDX): Gold Miners were lower on the day likely because Gold was down. The group is still showing incredible strength and we don't see any problems beneath the surface. We expect to see more rally.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 5/20/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: We are still patiently waiting for a break from the declining trend. We should see it if Stochastics are right. The PMO wants to turn back up.
Price hit the 200-day EMA and reversed higher. We should see an eventual 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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