Today the Materials Sector (XLB) 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. There is a double top formation with a confirmation line at about 87. Should that support be violated, the minimum downside target will be about 80.50.
On the weekly chart the double top confirmation line is actually a long-term support line, in which case it seems less likely that the support will be violated.
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We have added the Russell 2000 chart to our Market/SPX Sector/Industry Group Indexes list. Since we do not track the 2000 individual stocks in that index, we decided to use S&P 600 Small-Cap data for the Silver and Golden Cross Indexes, as well as the Percent Stocks Above 20/50/200EMAs. While this won't be 100 percent accurate, we think it is enormously better than nothing at all.
One of the reasons we added Russell 2000 to our list is to make it easier to follow Trend Model signals for that index. We missed a Russell 2000 signal change from BUY to NEUTRAL on Friday. The S&P 600 and Russell 2000 move in a very similar manner, but signal changes are not always exactly the same -- the S&P 600 changed to NEUTRAL on June 18.
Another departure from the format for the indexes on this list is that the Relative Strength calculation is against the S&P 600 (IJR) instead of SPY. This helps us see which of these small-cap indexes is performing the best.
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/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 PMO decided to turn up today on the rally. We do see a flag formation on the SPY in the short term. The RSI is overbought again, what's new?
Stochastics slowed their decline and remain above 80. Notice that the relative strength line to equal-weight RSP ticked up today as the mega-caps held sway today.
Here is the latest recording from 6/24:
S&P 500 New 52-Week Highs/Lows: New Highs pared back as we would expect on a decline. The High-Low Differential is continuing its slow rise higher.
Climax* Analysis: There were no climax readings today, but it is interesting to see that SPX Net A-D and SPX Net A-D Volume were negative!
*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) decided to pull back today on the rally. Most significant is the loss of participation that brought %Stocks > 20EMA back down below our bullish 50% threshold. We also lost a lot of rising PMOs to today's decline.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
Both the ITBM and ITVM lost ground today. The ITBM had been rising, but on today's rally, it opted to turn lower. A little over half of the index hold PMO BUY Signals, but given only 51% have rising PMOs now, that number could turn lower tomorrow.
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 have moved our ST Bias to BEARISH as we have less than 50% above their 20-day EMAs. While the IT Bias is BULLISH due to the Silver Cross Index being above its signal line, it is reading very low particularly given the strength of this rally out of the October lows. The Golden Cross Index is vulnerable to more decline given we have less stocks above their 200-day EMA versus Golden Crosses. It is below its signal line so the LT 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: Mega-caps were at it again, pushing the market higher. Internals had improved a great deal yesterday, enough that we had the ST Bias as bullish. However, today the broad market did not come through and participation was slashed even on a market rally. Mega-caps are vulnerable right now and if the broad market isn't going to participate, a serious market decline could ensue. STOs turned down with the ITBM/ITVM on a rally day. There are problems with market internals already so despite a rising PMO, we remain very cautious right now.
Erin is 45% long, 0% short.
CALENDAR
Wednesday: 8:30 am Initial Jobless Claims
Thursday: 10:00 am Pending Home Sales
Friday: 8:30 am PCE Index
10:00 am Consumer Sentiment
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BITCOIN
Bitcoin rallied today but it did nothing to improve the chart. The large double top dominates the chart. The confirmation line is at the May low. If this pattern is confirmed with a drop below that level, the minimum downside target would take price below 50,000. We're not sure it will fall to that level, but it does look destined to fall further from this level.
BITCOIN ETFs
INTEREST RATES
Yields are consolidating in the very short term. We expect the current declining trends to hold up longer.
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 bullish falling wedge does suggest we will eventually get a breakout above the declining tops trendline. However, we believe it will fall lower before it breaks out. Stochastics topped today and the PMO is still decline so we do expect the bottom of the wedge to be tested.
BONDS (TLT)
IT Trend Model: SELL as of 3/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: Yesterday's comments still apply:
"As the 20-year yield consolidates so too is TLT. We are expecting and upside breakout based on the rising PMO and Stochastics holding above 80. There is also a clear declining trend on the 20-year yield."
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 inched higher today as it rallies begrudgingly. We do expect more upside given the rising PMO and Stochastics above 80.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold is melting upward. Given we are bullish on the Dollar, we have to be bearish on Gold. However, Gold is not breaking down as we would expect on a rising Dollar. Stochastics have turned down, but the PMO is flat. We suspect Gold will continue to move sideways, but the bearish double top does suggest a breakdown isn't out of the question.
GOLD MINERS (GDX): Gold Miners are topping again and with Gold looking lackluster, we would expect this industry group will face some headwinds. Participation has slumped and the PMO is moving lower so we would look for more downside. This is starting to look like a bearish head and shoulders pattern is developing.
CRUDE OIL (USO)
IT Trend Model: BUY as of 6/21/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: Crude is now beginning to consolidate the recent rally. This is constructive. The RSI is positive and the PMO is rising. Stochastics are comfortably above 80 so we do expect the rally to resume after a short period of consolidation.
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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