It was good to see small- and mid-caps outperform the SPY today. We were beginning to wonder if they would see some action. Unfortunately, it hasn't done much to improve the picture for either.
We did see some improvement to %Stocks > 20EMA but very little. The Silver Cross Index remains below its signal line so there is still a Bearish Bias in the intermediate term. We do note that the PMO did turn up. We are still monitoring a possible bearish double top.
The double top is more pronounced on the weekly chart, but we do see a breakout from the prior trading range. This could be consolidation in preparation for another upside breakout. It just seems to early to consider this given the declining weekly PMO.
IJR is in a rising trend, but it is still vulnerable to a possible bearish triple top. In the case of IJR, we did see a new PMO Crossover BUY Signal, but as with MDY, participation was not impacted by the rally. It is clinging to a bullish bias in the intermediate term as the Silver Cross Index is still above its signal line, but it is declining.
The triple top is quite visible on the weekly chart. It is still stuck in a long-term trading range. The weekly PMO is declining.
While we saw excellent rallies in IJR and MDY today, it did little to improve the technical picture. It does, however, imply that maybe we will start seeing the rest of the market attempt to chase the mega-caps.
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: The market surged higher compounding the already overbought conditions as expressed by the RSI. The PMO is still on the rise and we did see the OBV breakout with price.
Volatility has left the market given the tightly squeezed Bollinger Bands on the VIX. Readings are still overbought. Stochastics are flashing internal price strength as they camp out above 80. Relative strength continues to favor the mega-caps.
Here is the latest recording from July 8th:
S&P 500 New 52-Week Highs/Lows: New Highs did expand again today, but not enough to clear the negative divergence with price. The negative divergence persists on the High-Low Differential.
Climax* Analysis: There were unanimous climax readings on the four relevant indicators. Since the market is already in an up trend, it seems unlikely that this climax day is an upside initiation. It has been five weeks since the last climax day, which initiated the current up leg, so we're going to designate this as an upside exhaustion climax. If we are correct, we expect to see the start of the correction many have been looking for. Nevertheless, if the market opens tomorrow strongly to the upside, then "never mind."
*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) both rose again and are both in positive territory. We did see a decent expansion in participation today with more stocks vaulting their 20-day EMAs and gaining rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM are now traveling higher in concert which does confirm our already rising short-term STOs. We still have less than half of the index holding PMO BUY Signals.
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 intermediate-term and long-term biases are BEARISH.
Short-term we are starting to see more than 50% of stocks above both their 20/50-day EMAs. Given these readings are higher than the Silver Cross Index, there is an opportunity for it to begin rising and possibly overcome its signal line to give us a Bullish Shift. The Golden Cross Index is beginning to turn back up, but percentages of stocks above their 50/200EMAs is reading lower than it. This leaves the GCI vulnerable to another decline.
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: Small- and mid-caps got on board today with nice rallies. It didn't improve the picture much for either but it does indicate that we may be seeing the rest of the market waking up. Participation expanded well today and STOs are rising with the ITBM and ITVM. While all of this has a bullish note, today's upside exhaustion climax tells us that we could be ready for a downside reversal. If we get a strong open, that likely won't occur. The jobs report is released tomorrow with CPI. If we have good news there, we would expect we will see an upside continuation. If not, stay alert for a possible decline that could lead to much more.
Erin is 40% long, 0% short.
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CALENDAR
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BITCOIN
Bitcoin is still holding beneath the 200-day EMA and resistance. Stochastics are hinting that we would see price move higher, but the RSI and PMO don't look very healthy. We suspect more consolidation with a breakdown likely next.
BITCOIN ETFs
INTEREST RATES
Yields fell on the day. We expect them to fall further in the short 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
Yesterday's comments still apply:
"Currently we have a declining trend channel and $TNX is headed to test the bottom of the channel. The PMO has topped below the zero line suggesting we will see more downside. If it travels to the bottom of the channel it would put the yield close to 4%."
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We see a small short-term bull flag on TLT coming out of the July low. Yields still hold a bearish bias so we are expecting TLT to continue to make its way higher. The PMO isn't particularly enlightening, but Stochastics are still rising in positive territory.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: We've identified a bearish rising wedge on the daily chart that implies we will see a break in the rising trend. The PMO is declining on a Crossover SELL Signal so we'll lean bearish on the Dollar.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Yesterday's comments still apply:
"The short-term double bottom is bullish for Gold. The pattern won't be busted unless we lose support at the bottom of the chart pattern. So far so good. The RSI is positive and the PMO is rising on a Crossover BUY Signal. Stochastics are suspect, but we will rely on the RSI and PMO and stay bullish."
GOLD MINERS (GDX): Gold Miners are looking very bullish right now. Participation is robust and the Silver Cross Index is at a high percentage and rising. Gold is very flat, but Gold Miners are soaring. If we are right about a falling Dollar, we should see this group break out above overhead resistance.
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 are still bearish on Crude Oil, but we do have to say that we could be forming a bull flag right now. Stochastics are very negative and the PMO has topped so even with today's bullish engulfing candlestick, we could see lower prices in the short term.
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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