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NVIDIA (NVDA) broke down today in what looks like an echo of last month's pullback. There is a short-term double top with price resting on the confirmation line. This could just be a one day event, but assuming that a correction has begun, we see first support at about 118.00 -- a -17% decline. The next most obvious support is at about 97.00 -- a decline of about -32%.
The primary problem with NVDA is the steep parabolic advance from the 2022 low. Such advances beg for correction, and we can see three previous corrections on this chart.
As the title said, all the Magnificent 7 appear to entering corrections.
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Today the Russell 2000 ETF (IWM) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. Like so many other indexes, IWM is in a narrow trading range that generates whipsaw signal changes, but the strength of today's move implies a probable upside breakout from that range.
The weekly chart shows a PMO rising above the zero line, but we now see a lot of congestion in 2021 that will provide resistance to further advance. That is not to say further advance is not possible, but that it will possibly be more difficult.
Also today, the Retail ETF (XRT) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. Again we have the narrow trading range and potential for whipsaw. In fact XRT switched to NEUTRAL two days ago. Nevertheless, this seems to be an authentic change of direction, considering that it is a high-volume reversal on a day when part of the market was falling apart.
The weekly chart doesn't reflect much confirmation regarding this one-day change of direction, but the weekly PMO is flat above the zero line, which is encouraging.
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: We almost saw a bearish engulfing candlestick on today's decline. The SPY was down along with the Nasdaq, but we saw quite an advance from smaller-cap stocks with the SP600 and SP400 rallying strongly.
The VIX did expand on today's decline but we didn't get a puncture of the lower Bollinger Band yet on our inverted scale. Punctures often lead to reversals, but given the rest of the market performed well, it isn't surprising that the VIX is still at a relatively low number. Stochastics did top today but remain above 80. Internal strength may be starting to fade.
Here is the latest recording from July 8th:
S&P 500 New 52-Week Highs/Lows: New Highs popped higher on a day of decline. This is due to the smaller-cap stocks getting on board with the rally. This helped turn the High-Low Differential back up, but the negative divergence is still in play.
Climax* Analysis: Yesterday's upside exhaustion climax certainly proved to be prescient. There was only one climax reading today, and one very close. SPX Total Volume was heavy. We're not going to call it a climax day, but it is close enough that we should consider the possible consequences, which would be that it was close to a downside exhaustion climax. There could be a day or two of churn, then a continuation down. Again, tomorrow's open could obviate that conclusion, so we'll be watching.
*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) rose and are starting to look overbought near-term. We note the excellent expansion in %Stocks > 20EMA and %PMOs Rising. This occurred on a decline.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM hit positive territory today as both the ITBM and ITVM rose on the day. We saw a sharp uptick in the number of PMO Crossover 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 bias is BULLISH.
The long-term bias is BEARISH.
Today saw a Bullish Shift on the Silver Cross Index as it crossed above its signal line. It is now above its signal line so the IT Bias has switched to BULLISH. The Golden Cross Index is still angling lower below its signal line so the LT Bias is still BEARISH.
Participation shot up today on an index decline which tells us that the current rally is broadening out. We do still have negative divergences on all of these indicators.
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: It seems that the market did a flip-flop today -- everything that was losing started winning, and everything that was winning started losing. Unfortunately, the ones that started losing are the mega-cap stocks, so we're now getting the downside of cap-weighting. This broadening out of the rally is welcomed news, but we recall a similar situation a few weeks ago and the 'broadening' lasted only a day with participation numbers sinking right back down. Right now we see rotation not abandonment. We saw an 'almost' downside exhaustion climax which could imply this is going to be a one-off event, but those mega-caps look awfully weak and if they continue to fail, it would be unusual to see the rest of the market strongly rally.
Erin is 40% long, 0% short.
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CALENDAR
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BITCOIN
Bitcoin is consolidating on top of support. The indicators are mixed so we expect more consolidation ahead. Stochastics look alright, but the PMO is flat and the RSI is negative.
BITCOIN ETFs
INTEREST RATES
Yields continue to fall and we expect that they will continue to fall. We aren't sure whether the Fed will lower rates, but it appears the possibility is pushing yields lower.
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 dropped precipitously today and is now headed back to the bottom of the declining trend channel. The PMO has triggered a Crossover SELL Signal after topping below the zero line. Yields look very weak. A drop to the bottom of the channel would bring $TNX 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 have a gap up move from a bull flag formation. Bonds are looking very bullish. The PMO is going in for a Crossover BUY Signal so we do expect this level of resistance will be broken.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The bearish rising wedge is resolving as we would expect with a breakdown. This pattern suggests we will see even more downside. The PMO confirms this with its Crossover SELL Signal and decline.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold took full advantage of the Dollar's decline today with a strong rally. Overhead resistance is nearing. If we get a breakout here it would bust the longer-term double top formation. The upside target of the shorter-term double bottom has just about been met. The target is at overhead resistance essentially.
The PMO is rising on a Crossover BUY Signal and we see that relative strength is positive for Gold against the Dollar. We think a breakout is likely here.
GOLD MINERS (GDX): Gold Miners broke out today and look ready to move even higher, particularly given the Gold trade is looking up. We do note that price is overbought so it is overdue for a pause at least. Participation is about as good as you can get and the Silver Cross Index looks particularly bullish so we would expect to see them rise further.
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 engulfing candlestick did portend higher prices today. We have to say that Crude is already looking more healthy. This could be a bullish flag formation. The PMO isn't helping us, but we do see that Stochastics have paused. Maybe summer demand will get things going again.
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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