We noticed a double top on the Semiconductor industry group (SMH) that looks very much like the NVIDIA (NVDA) chart. NVDA is clearly the bellwether for the group and it appears all of the Semiconductors are feeling the pain. The downside target of this pattern would take price to at least 239.00. That would be the "minimum" downside target.
Participation is lagging. You can see how many stocks have lost support at their 20/50-day EMAs. The Silver Cross Index is still at a very healthy level so while many have lost support, they still have their 20-day EMAs above the 50-day EMAs. All is not lost, but certainly the declining PMO suggests more downside.
SMH has been running hot since the 2022 low. It did see some corrections along the way and it appears we are going in for another correction. So far this correction is only a 9.9% decline. We would look for more given the topping weekly PMO.
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
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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: Because of options expiration this week, we normally expect low volatility on Thursday and Friday, however, that little rule of thumb doesn't seem to be working this week. Today the market began with a small rally, but slipped back into negative mode not long after the open. We have a new PMO Crossover SELL Signal.
Volatility has picked up with the VIX tumbling lower on our inverted scale. It is oversold now, but we can see the April decline took it far lower. We could see the same thing. Stochastics have dropped below 80 signaling weakness.
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S&P 500 New 52-Week Highs/Lows: We still saw quite a few New Highs so the broad market did not fall apart. The negative divergence on the High-Low Differential is slowly being negated.
Climax* Analysis: There was one climax reading today and one "almost," which would get us close to a downside initiation climax. While we can't make it official, it would be wise to be alert for some churn followed by more price decline.
*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 OVERBOUGHT.
Swenlin Trading Oscillators (STOs) are both declining now out of overbought territory. It portends lower prices. They looks particularly concerning lined up below a new PMO Crossover SELL Signal. Participation shrunk as we would expect, but we still have more than 2/3rds of the index holding rising PMOs and nearly 3/4ths are above their 20-day EMA.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Both the ITBM and ITVM continued their rise. It takes some time for these indicators to react. We expect them to turn down shortly should the decline continue. We still have a large number of PMO Crossover BUY Signals, but the indicator did top today.
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 intermediate-term market bias is BULLISH.
The long-term market bias is BULLISH.
The Silver Cross Index continued moving higher and based on participation percentages being higher than it, it could still conceivably rise. However, those percentages are in decline so we'll want to watch the Silver Cross Index closely. The Golden Cross Index topped today but it remains above its signal line just like the Silver Cross Index so the IT and LT Biases are 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: Over the years we have observed that market conditions cycle between "as good as it can get" to "as bad as it can get." Yesterday the signal table at the top of this report had unanimous intermediate-term and long-term BUY Signals for all 26 indexes we track. That's as good as it gets. The BIAS table immediately above is awash with bull bias readings -- not as good as it can get, but maybe this is as good as it will get this time around. Of course, it isn't easy to tell when either extreme has been reached, because every time is different. Currently, the market seems to be starting to drift back toward the bad side of the range. Either way we should remember that "this too shall pass."
The market is overdue for a correction. While recently it seems that money is rotating into more neglected areas of the market, today it was obvious that most areas are getting hit. Short-term indicators are overbought and have topped. Intermediate-term indicators are modestly overbought and should top soon. The Mag 7 appear to be topping, and even they will eventually succumb to the need for an extended correction.
Erin is 45% long, 0% short.
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CALENDAR
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BITCOIN
Yesterday's comments still apply:
"Bitcoin is now headed back toward all-time highs and it looks good to get there based on the improved indicators. The RSI is not overbought despite the strong rally and the PMO is rising on a Crossover BUY Signal. Stochastics also look very favorable holding above 80."
BITCOIN ETFs
INTEREST RATES
Yields were higher on the day, but given rate cut discussions, we are still looking for support to be tested.
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
Yesterday's comments still apply:
"$TNX continues to move lower within a declining trend channel. It appears ready to test the bottom of the channel. A reversal here would be very bullish as it would mean price did not have to test the bottom of the channel and near-term support would be held. We don't favor this conclusion given the PMO decline beneath the signal line and zero line. Stochastics are also flashing weakness as they reside well below 20."
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: Bonds took a break today as yields moved higher. So far price is stuck beneath overhead resistance, but we are looking for a breakout here. The RSI is not overbought and the PMO is on a Crossover BUY Signal above the zero line. Stochastics, while not rising strongly, are still holding above 80. It isn't the best set up we've seen, but it is still bullish nonetheless.
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 rebounded today, but it remains in a declining trend. This is a good place to see a reversal as it is coming off support. Stochastics are turning up, but the RSI is still negative and most of all, the PMO is still in decline and could hit negative territory shortly. We'll keep an eye out for an upside reversal here, but we suspect the decline will continue.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: The Dollar rallied and Gold declined as the reverse correlation suggests it should do. This looks like a consolidation after a breakout to new all-time highs. The PMO has yet to be compromised so we would expect the rally will resume.
Discounts are elevated meaning investors are bearish on the metal. While not at extremes we still see this as a positive for Gold given sentiment is contrarian. Stochastics did top, but remain above 80 so little damage was done over the two days of decline.
GOLD MINERS (GDX): Gold Miners had another terrible day with Gold down. It also didn't help that the market as whole was down. They are subject to the winds of Gold, but as companies, they are also subject to the market's trend as well. Support is still holding and participation is still robust albeit losing some ground today. Stochastics also topped, but they are still above 80. This group has run very hot and could use a pullback. Indicators however are still positive enough so we will look for some churn.
CRUDE OIL (USO)
IT Trend Model: BUY as of 6/21/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: We see a bull flag on the Crude Oil chart and that suggests we will see a breakout and more rally. It may need to wander around within the flag first given the indicators are not very positive right now. We'll be on the lookout for a 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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