One way we can measure broad market participation in a market move is to compare the cap-weighted SPY to equally-weighted RSP. The performance chart below shows the underperformance of RSP versus the SPY. Also note the strongly rising relative strength line. This tells us that the mega-caps are leading the market higher and we aren't seeing broader market contributions. This is fine for now as most of Magnificent Seven are bullish enough to hold things together, but what becomes of the index when these big guys begin to feel the stress of a market decline?
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.
Watch the latest episode of DecisionPoint on our YouTube channel here!
MARKET/SPX SECTOR/INDUSTRY GROUP INDEXES
Change Today: 
Change for the Week:
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 rally pulled the PMO back up, giving it a 'surge' above the signal line or a bottom above the signal line. We saw an inside trading day. It was 'inside' yesterday's candlestick. These often result in a change of the primary trend, which is up right now.
Stochastics dropped below 80 as weakness begins seeping in. The VIX is still very overbought and is primed for a reversal. Price is still managing to stay above support. If mega-caps continue to hold sway, this condition could continue a bit longer.
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SPY Weekly Chart: Last week, the weekly PMO crossed above its signal line. Price was nearly unchanged for the week so we didn't see the signal compromised. A new all-time high was set. The weekly RSI is only a hair away from being overbought. This would be a good time to see a pullback to bring it out of overbought territory.
New 52-Week Highs/Lows: New Highs continued to contract even as price was higher. Another sign that the broader market is not participating as it should. The High-Low Differential has topped and also suggests a decline ahead.
Climax Analysis: There were no climax readings today. SPX Total Volume was only 72% of the one-year average daily volume, and was the lowest volume for the week. This could be due to a lack of conviction but we suspect it had more to do with holiday trading given the three day weekend ahead.
*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 Swenlin Trading Oscillators (STOs) moved further into negative territory. We did see a small tick up in participation and %PMOs Rising. Nothing that great considering the size of the rally. We still see weakness. The negative divergences don't help.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Both the ITBM and ITVM continued their decline that began this week. We've also identified negative divergences on both. %PMO Xover BUY Signals is quickly moving downward. More signs that the internals are under distress.
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PARTICIPATION: The following tables summarize participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation. There are three groups: Major Market Indexes, Miscellaneous Industry Groups, and the 11 S&P 500 Sectors.
Utilities (XLU) continue to show strength as they hold the highest IT Bias. The foundation is getting stronger as the Golden Cross Index (GCI) gained the most percentage points of all that we cover.
Energy (XLE) holds the lowest IT Bias as it continues to struggle for a breakout. It continues to show weakness as the Silver Cross Index (SCI) lost the most points of all that we cover.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
The percentage points gained on the SCI is Communications Services (XLC) which gained nine percentage points. We aren't fans of the chart and underlying participation yet. Tread carefully.
Biotechs (IBB) hold the lowest SCI reading, but did see a tiny improvement this week. Not enough to bring it out of the basement, but at least it isn't falling anymore.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
Energy (XLE) may be sinking lower, but it holds the strongest foundation with the highest GCI reading. If this sector finally turns around, it has a foundation to keep it strong.
IBB is also in last place as far as the GCI and no points were gained (but no points were lost either). This group needs work.
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 BEARISH in the short term.
The market bias is BULLISH in the intermediate term.
The market bias is BEARISH in the long term.
We did see some improvement to %Stocks > 20/50EMAs and we do have %Stocks > 50EMA reading above our bullish 50% threshold, but we are leaving the short-term bias as BEARISH. We have negative divergences to contend with and other internal problems. The only reason the market bias is BULLISH in the intermediate term is that the Silver Cross Index is above its signal line. It did tick up today, but continues in a declining trend. The Golden Cross Index is below its signal line so the long-term bias is 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: The rally did little to impress the indicators with the exception of a now rising PMO. We are noticing deterioration throughout our charts. Of primary concern are the negative divergences that are now visible on nearly every indicator chart. It doesn't help that the STOs and ITBM/ITVM are in decline. The bias is bearish in the short term. We could go on. The one thing that could spoil a decline would be the leadership of mega-caps which could keep the market from dropping precipitously. We saw this when the AI craze began. The broader market was failing but indexes were held up by the Magnificent Seven and its brethren. The index may hold up, but your positions within will be under pressure if they aren't of the mega-cap variety. Even those aren't immune. We believe that hedges could be employed. It isn't a bad idea to drop positions showing signs of distress already. Honor your stops!
Erin is 30% long, 5% short.
Calendar: The markets will be closed Monday, May 27, 2024 for Memorial Day.
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BITCOIN
Bitcoin Daily Chart: We've identified what could be a quadruple top formation. At minimum this suggests we will see the confirmation line around 60,000 tested. The PMO is still rising and the RSI is positive, but Stochastics which are more sensitive are falling. We'd be careful with Bitcoin here.
Bitcoin Weekly Chart: The weekly PMO has dropped below the signal line for a Crossover SELL Signal which could mean we'll see more downside pressure.
BITCOIN ETFs
Today:
This Week:
INTEREST RATES
Yields were mixed today. They do look like they want to recuperate and go back to their prior highs. If the Fed continues to put off rate cuts, we should see them rise further.
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 10-year yield backed off slightly today as it avoids reentering its prior rising trend channel. Still it is on a short-term rising trend and the PMO is trying to turn back up. Stochastics certainly suggest we'll see higher rates.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount, which shuts many buyers out of the market, and potential sellers will experience pressure to lower prices (to no effect so far).
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This week the 30-Year Fixed Rate changed from 7.02 to 6.94.
Here is a 50-year chart for better perspective.
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 was down on the day giving TLT an opportunity to rally. It has yet to break its declining trend and with the 20-year yield angling higher, it isn't likely to. So far it is holding above support, but the PMO sure looks toppy. Stochastics are also falling putting a bearish spin on the chart.
TLT Weekly Chart: The price reversal that occurred before touching the bottom of the bullish falling wedge is positive and the weekly PMO wants to turn back up. The rising trend in the 20-year yield is still going strong so we do expect price to fall when it hits the top of this formation.
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 spent most of the week rallying but fell back slightly today. It is easily holding onto its rising trend. However, the PMO turned down on today's small decline so we will have to watch for weakness in price. Given Stochastics are still rising, we do expect this rising trend to continue.
UUP Weekly Chart: The weekly chart has a bearish look given the large bearish rising wedge on the chart. The weekly PMO is technically falling. It isn't out of the question that the current rally could fail given the negative weekly chart.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: We annotated a double top on the Gold chart that certainly suggests Gold will be running cold. The PMO confirms this as do Stochastics. Notice that discounts jumped higher and that implies investors are getting more bearish on the metal. Currently sentiment is not bearish enough to look for an upside reversal.
The Bollinger Bands have shrunk on $GVZ so expect more volatility to be injected soon.
GLD Weekly Chart: After testing all-time highs, price fell back. The weekly PMO is still rising and while the weekly RSI is falling it is still positive. The short-term picture is bearish, but we still have some strength in the intermediate term.
GOLD MINERS: Gold Miners recovered somewhat today, but we still detect problems. Partipation has thinned and the PMO is falling on a Crossover SELL Signal. Gold looks bearish in the short term so we expect this group will struggle for awhile.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 5/20/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: Crude finished the week with a rally despite the decline the other four days. It is at a decision point as it squeezes further into the symmetrical triangle. We've been looking for an upside breakout, but the PMO and Stochastics are not cooperating and suggest it will likely be a break down instead of a break out. The Bollinger Bands have be squeezing tightly together so we do expect more volatility to arrive.
This is a good place to see a rally off the 200-day EMA, but indicators just don't support that conclusion.
USO/$WTIC Weekly Chart: Another reason why we could see a breakdown is the large double top forming on the weekly chart for both USO and $WTIC. The weekly PMO is holding above its signal line, but has topped and could drop beneath as early as next week.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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