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The overdue weakness it tech stocks continued with the Magnificent 7 leading the way, and NVIDIA was the biggest loser. It is down about -17% from the June high, and is challenging the confirmation line of a double top formation.
Here is the Mag 7 overview:
And here is the CandleGlance view:
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We'll cover the Golden Cross BUY for bonds below in the bonds section. Otherwise, the Energy ETF (XLE) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. Note that the decline from the April top took back about half of the advance from the January low. That was a painful correction, but our expectation now is that XLE is on the next leg up to new highs.
The weekly chart looks especially bullish, showing a rising trend that has lasted over four years.
The Materials ETF (XLB) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. It remains within a narrow trading range. The Silver Cross Index had a recent Bullish Shift across the signal line, moving the IT Bias to BULLISH for the sector. Participation is very strong and Stochastics are holding above 80. Relative strength has definitely picked up for this sector.
The weekly chart shows that XLB has been consolidating above long-term support and is close to making new, all-time highs. The weekly PMO is above the zero line and rising. Very bullish.
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 PMO topped on today's decline. It did take the RSI out of overbought territory which is good, but this seems the beginning of something more.
Volatility was injected into the market today as seen by the VIX's deep decline on our inverted scale. It is now near-term oversold so we could see an upside reversal. We think churn is more likely.
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S&P 500 New 52-Week Highs/Lows: Despite a deep decline we didn't see a New Lows. Additionally, we had plenty of New Highs so while the mega-caps begin to decline, the broad market is holding its own.
Climax* Analysis: There were no climax readings today. Yesterday's upside exhaustion climax alerted us to the possibility that a downside reversal was about to begin. It looks as if it has.
*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.
Today the Swenlin Trading Oscillator for volume (STO-V) topped today in overbought territory. The Swenlin Trading Oscillator for breadth (STO-B) did rise but it has now hit a level not seen in over a year. We do note that some participation was lost on today's decline, but not that much considering the depth of the decline.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
We are now listing the IT indicators as overbought. They've certainly seen higher readings, but they are getting somewhat vulnerable now. PMO BUY Signals continued to expand on today's decline.
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.
Both the Silver Cross Index and Golden Cross Index are rising strongly above their signal lines 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: Yesterday's upside exhaustion climax was prescient as it led into today's decline. This appears to be the start of a more dastardly decline, but internals are still quite strong and in some cases improved on a heavy decline. So we do have enough internal strength to move the index higher. Mega-cap names instead of lifting the index could take it down further even with the broader participation. Today was a good example of that. Overall we think the market is vulnerable to more decline now so consider tightening up stops.
Erin is 45% long, 0% short.
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CALENDAR
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BITCOIN
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.
BITCOIN ETFs
INTEREST RATES
Yields were mixed today with a few ticking up and many falling lower. We are looking for a test of prior support.
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: Today the TLT 50-day EMA crossed up through the 200-day EMA (Golden Cross), generating a LT Trend Model BUY Signal. Bonds are enjoying their time in the sun as yields are headed lower toward support. We believe this will continue and we will see a breakout on TLT. The indicators certainly favor this conclusion.
TLT Weekly Chart: In this time frame we can see that TLT is challenging the top of a falling wedge formation from which a positive resolution is usually expected. Signs are pointing toward a continued rally.
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 dropped precipitously after yesterday's bearish filled black candlestick. Support is about to be reached but given the bearish configuration of the PMO, we don't think it will hold that level. However, we wouldn't be surprised if it decided to consolidate at that level first.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: It was not a good day for Gold and it should have been given the Dollar's big decline. Still we did see a higher high and a higher low. FYI the double top pattern has officially been busted with the break above those two tops. We still like Gold moving forward particularly given the bearish outlook for the Dollar. Indicators are bullish so we should get a resumption of the rally soon.
We notice an increase in bearish sentiment as discounts expand. They are at bearish extremes, but sentiment in general is contrarian so this could be a positive condition for Gold right now. The reverse correlation with the Dollar is getting stronger which is good given the bearish Dollar.
GOLD MINERS (GDX): Gold Miners fell on the double whammy of a market decline and a Gold decline. This did little to change the bullish picture under the hood. Stochastics did top but they remain above 80 signaling strength. It may be time for them pull back toward support as they have run very hot.
CRUDE OIL (USO)
IT Trend Model: BUY as of 6/21/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: Yesterday's bullish hollow red candlestick was right and a rally ensued. This is starting to look like a bull flag formation and that would imply we'll see a resumption of the rally. The PMO looks slightly less bearish as it is beginning to decelerate its decline already. Stochastics did tip upward too. This is not to say the flag won't need to lengthen, but today's rally was very encouraging.
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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