We were looking for a bounce, and it came after some initial selling, but it failed about midday. The second half of the day brought more selling, with the market closing down.
SPY 10-Minute Chart:
The Mag 7 were in the thick of the selling, and only TSLA closed up.
The charts show prices falling steeply.
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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: We saw an initial snapback this morning after yesterday's deep selling, but it ultimately failed to hold up and price slid, dropping beneath the 50-day EMA. The PMO is falling quickly on a Crossover SELL Signal. The OBV is confirming the decline as it slides lower with price.
The bearish rising wedge executed as we would expect with a break of the rising bottoms trendline. The VIX continues to puncture the lower Bollinger Band on our inverted scale which does tell us to look for an upside reversal, but with sentiment bearish now, we don't think the decline is over. Stochastics have now dropped below 20 which suggests internal weakness.
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S&P 500 New 52-Week Highs/Lows: New Highs are calculated intraday so the expansion we saw today was likely erased by day's end. Still, it could be telling us that the broader market isn't done participating. The High-Low Differential is toppy.
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 with the STO-B rising and the STO-V falling. This could mean that decline is overdone in the short term, but until both are rising we aren't going to get bullish. We didn't see many losses to participation and we actually saw an uptick in %PMOs Rising. Still, less than 50% hold rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The decline of the ITBM and ITVM continue. Negative divergences led us into this decline. %PMO Xover BUY Signals dropped beneath the signal line today, but it is a relatively healthy reading above 50%.
PARTICIPATION CHART (S&P 500): The following chart objectively shows the depth and trend of participation for the SPX 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 intermediate term.
The market bias is BULLISH in the long term.
The Silver Cross Index is still moving lower and given their are fewer above their 20/50-day EMAs, it should continue to decline. It is above its signal line so the IT Bias is BULLISH. The Golden Cross Index is on the rise but given the deterioration of stocks above their 50/200-day EMAs, we are expecting it to turn lower momentarily. It is above its signal line so for now the LT 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: Yesterday's downside exhaustion climax didn't play out exactly as expected, but we did see an initial snapback during trading today. Ultimately that didn't hold and now we have another decline on our hands. The STO-B did turn up today so this decline may be getting overdone. However, with the slide of mega-caps, the index will likely continue to close in negative territory. Participation is not what we would call robust, but it is holding up. Unfortunately, momentum seems to be building to the downside and we wonder if the broad market will be swept away by mega-cap failure. So far, not so much. We would continue to exercise caution and suggest stops be tightened in case we don't get the snapback we're looking for after this deep decline.
Erin is 45% long, 3% short.
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CALENDAR
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BITCOIN
Bitcoin spent much of the week pulling back, but today's rally looks pretty good particularly given the long tail on the OHLC bar which indicates a hammer candlestick. The expectation is a rally. The PMO is still technically rising, but we do note Stochastics look bearish. Bitcoin is vulnerable to decline right now, but with a positive PMO we will look for sideways movement.
BITCOIN ETFs
INTEREST RATES
Yields were lower on the day staying in their declining trends as they move toward support. Based on the 10-year yield chart, we are looking for rates to rise a bit 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
$TNX is sitting in the middle of a declining trend channel. The last bottom came before a test at the bottom of the trend channel. This does suggest we will at least see movement to the declining tops trendline. The PMO is on a new Crossover BUY Signal and Stochastics are rising so we will continue to look for that test.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: TLT reversed the decline as the 20-year yield took a breather. This could mean a bounce before the rising bottoms trendline was tested which would be bullish for TLT. We do see flat tops and rising bottoms which is a bullish ascending triangle. Ultimately we should get a breakout on 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 going nowhere, but it does have a rising trend. Stochastics are the only revealing indicator and they are rising so we expect the Dollar will continue to. The PMO and RSI are flat and neutral. We'd like to see some directional change to at least hint at where the Dollar will go.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold lost a lot of ground today on its breakdown. It did manage to hold the 50-day EMA as support, but given today's new PMO Crossover SELL Signal and diving Stochastics, we would look for a test of support at the prior double bottom.
Gold had already been weakening against the Dollar. The reverse correlation is in force with the Dollar. The Dollar is in a rising trend so that will work against Gold as well.
GOLD MINERS (GDX): Gold is in trouble and that is killing Gold Miners right now. Gold doesn't look bullish so we expect headwinds to continue for GDX. The PMO is nearing a Crossover SELL Signal and look at the deep dive participation took on stocks above their 20-day EMAs. The 50-day EMA is near for support, but we aren't optimistic that it will hold.
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 Oil is keeping hope alive as it continues to form a flag on a flagpole. Today saw a bullish engulfing candlestick which does suggest we will see more rally tomorrow. The PMO still looks bearish, but Stochastics are beginning to tip upward so we could be looking at a healthy reversal off the 200-day EMA. We are cautiously optimistic about Crude Oil.
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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