Microsoft (MSFT) will be reporting earnings tomorrow after the bell. We decided it was a good time to view the chart and see how it is set up on the eve of its earnings call. As with most of the Magnificent Seven, MSFT is in a declining trend. Currently it is trading beneath overhead resistance at the May top. The PMO is about to hit negative territory and the OBV is confirming the declining trend with a declining trend of its own. The daily chart doesn't look very appetizing.
Unfortunately the picture does not get any brighter in the intermediate term when we view the weekly chart. Currently price is traveling within a bearish rising wedge. These patterns generally execute 70% of the time with a breakdown. The weekly PMO doesn't look any better. While MSFT could report good earnings, there is downside pressure given the gravity of the technicals working against it.
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: Today we have a bearish filled black candlestick as price closed higher, but closed below its open. We are monitoring a short-term declining tops trendline which could mean the decline is not over yet. This bearish candlestick is arriving right as price is supposed to test that trendline.
The PMO continues to decline. There is a bearish rising wedge on the daily chart that did execute with a decline as expected. The VIX is well below its moving average so we do not detect internal strength. Stochastics are also below 80 which means internal weakness.
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S&P 500 New 52-Week Highs/Lows: New Highs were visible today so the broad market does appear to be holding up even as mega-cap names are headed lower. However, the High-Low Differential is in decline still so it isn't what we would call a bullish chart.
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 DOWN and the condition is NEUTRAL.
The Swenlin Trading Oscillators (STOs) were mixed as the STO-V turned down slightly today. They were looking fairly bullish prior to this, but they do suggest there may be a problem or two under the surface. Participation was mostly static today. Both %Stocks > 20EMA and %PMOs Rising are both in declining trends, but do offer room for improvement.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT.
The ITBM and ITVM were also mixed today with the ITBM moving higher and the ITVM moving lower. Both are somewhat overbought and could use more decline. %PMO Xover BUY Signals did turn up, but remain below the signal line.
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 and long terms.
Both the Silver Cross Index (SCI) and Golden Cross Index (GCI) turned up. The SCI has a bit more room to move higher based on the higher percentage of stocks above the 50-day EMA. We have a similar situation with the GCI which is reading below the percentage of stocks above the 200-day EMA. Both are 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: The market will likely see muted trading until Wednesday's Fed rate decision. It is the general consensus that the Fed will announce an upcoming rate cut and that could boost the market. Indicators are mixed right now with breadth components (STO-B and ITBM) moving higher and volume components (STO-V and ITVM) moving lower. Mixed results tell us that we should use caution moving forward. At the same time, participation is holding up with both the Silver Cross Index (SCI) and Golden Cross Index (GCI) looking bullish. While we are vulnerable to a big decline, we may not see it yet based on the bullish biases in the IT and LT and a likely rate cut. We do note that both the SCI and GCI could stagnate soon unless participation broadens. It seems we may be at tipping point.
Erin is 45% long, 3% short.
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CALENDAR
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BITCOIN
Bitcoin is working its way higher in a rising trend and we expect this to continue as the RSI is positive and the PMO continues to advance higher. Stochastics are looking slightly bearish in their declining trend so we may see more pushing and pulling as price moves higher.
BITCOIN ETFs
INTEREST RATES
Yields were mixed today. Overall they remain in a declining trend so we will continue to look for them to fall in the shorter term.
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 moved down today. It topped before testing the top of the declining trend channel and that does suggest that the yield will continue to move lower within the channel. Stochastics topped and the PMO is nearing a Crossover SELL Signal. We do note it is sitting on support at the prior low, but that level doesn't look very sturdy.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: Yields are looking bearish and that will help Bond funds move higher. TLT is set up well given the indicators. The RSI just entered positive territory and the PMO is back on the rise. Stochastics look very encouraging. We are looking for a successful test of overhead resistance.
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 continues to melt upward, but today saw a bearish filled black candlestick that does imply we will see price move lower tomorrow. The PMO is finally beginning to angle higher toward a Crossover BUY Signal and Stochastics are looking more bullish so while we may see a decline off this candlestick, overall we should expect the Dollar to continue to trend higher.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: We're starting to see a cup with handle pattern developing on the Gold chart, but given the Dollar is likely to melt up, we are likely to see Gold sag below the 50-day EMA. The PMO is falling on a Crossover SELL Signal and Stochastics are continuing to make their way lower.
The reverse correlation is strong with the Dollar so again a bullish Dollar will make Gold's attempt at a rally very difficult.
GOLD MINERS (GDX): Gold Miners managed a rally today, but the declining trend is still intact. Today's rally did improve participation. The Silver Cross Index is below its signal line so the IT Bias is BEARISH. However, it is reading at a robust 89%. This is a good place to look for an upside reversal, we just hesitate to get too bullish given the recent PMO Crossover SELL Signal. GDX is still very vulnerable given Gold's mediocre outlook.
CRUDE OIL (USO)
IT Trend Model: BUY as of 6/21/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: The bull flag on Crude Oil is disintegrating. It was a nice setup, but it looks suspect now. Price is sitting on support, but the PMO is about to move into negative territory and Stochastics are holding below 20. We are nearing a "Dark Cross" of the 20/50-day EMAs which would give us a bearish bias. This is a good place to see a reversal, but we wouldn't go all in here as it also looks very vulnerable to a breakdown below 74.00.
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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