This week Regional Banks (KRE) were up +7.49%! This far outpaced the next biggest winner, the SP600 (IJR) which was up +2.19%. Participation has really shot to the sky with nearly all stocks holding above key moving averages. Additionally, they are configured bullishly with 98% having a 20-day EMA above the 50-day EMA based on the Silver Cross Index. We could see further upside, but KRE has run very hot as exemplified by the overbought RSI.
This week's breakout was spectacular bringing price above strong overhead resistance and into a new trading range. The weekly PMO looks especially bullish right now. This rally is nearly straight up so we wouldn't be surprised if we see price back off and meander above new support.
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/SPX SECTOR/INDUSTRY GROUP INDEXES
Change Today:
Change for the Week:
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: We normally expect low volatility on the last two days of options expiration week, but Thursday and Friday were anything but that. This week we had a new PMO Crossover SELL Signal. The RSI is gratefully out of overbought territory, but it could move much lower. We can't ignore what could be a bull flag developing, but with new weakness in mega-caps, we don't think we'll pull out of this flag at this point. The flag could extend lower.
The VIX was all over the place today but finally settled well below its lower Bollinger Band. This will often times lead to an upside reversal, but we saw multiple punctures this week with no positive result. Stochastics have dropped below 50 and are headed vertically lower so we now see internal weakness.
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SPY Weekly Chart: Now that we have a market top, we have annotated a large rising wedge formation. These are bearish and imply a breakdown will eventually occur. Big news, the weekly PMO topped this week.
New 52-Week Highs/Lows: We lost several New Highs on today's decline and we saw the High-Low Differential top.
Climax Analysis: There were no climax readings today. Tuesday's upside exhaustion climax played out as expected with a market 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 DOWN and the condition is NEUTRAL.
The decline has been punctuated by declining Swenlin Trading Oscillators (STOs). Both STOs began declining this week and are still in decline, confirming the current declining trend. We lost participation under the hood, but we still have 2/3rds of the index holding above their 20-day EMAs. Rising PMOs took a hit this week and are sliding lower. Damage is now being done to smaller-caps within the index.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
We now have confirmation on our declining STOs as both the ITBM and ITVM topped today. We still have 73% holding PMO Crossover BUY Signals, but we know that will continue to fade given only 58% hold rising PMOs.
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PARTICIPATION TABLES: The following tables summarize participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation. There are three groups: Major Market Indexes, Miscellaneous Industry Groups, and the 11 S&P 500 Sectors.
Real Estate (XLRE) holds the highest IT Bias and it is still improving based on the gains in both the Silver Cross Index and Golden Cross Index.
The lowest IT Bias belongs to Materials (XLB), but that could improve given the big gain of seven percentage point gain on the Silver Cross Index.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
Considering it was an almost 2% loss on the SPY this week, we saw incredible improvements to all but one Silver Cross Index. This is a testament to the return of the broad market as mega-caps bow out.
Utilities were the biggest gainers while Gold Miners saw no improvement.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
Not surprisingly, given the week they had, Regional Banks (KRE) saw an incredible gain on the Golden Cross Index as well as to the Silver Cross Index, but as we mentioned in the opening, they have run very hot and could need a cooling off period.
Biotechnology (IBB) is weakest in the long term given the low GCI value, but we do see it did manage to make some gains and with the big gain on the SCI, this may be an up and coming group to watch.
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 term.
The market bias is BULLISH in the long term.
Participation is starting to lag. The Silver Cross Index (SCI) is not going to be able to rise much further given it is only slightly below the participation readings of stocks above their 20/50-day EMAs. The Golden Cross Index (GCI) topped today after pausing yesterday. There is still an outside chance the GCI could rise again given a higher percentage of stocks are above their 200-day EMA, but overall participation is leaking. Both the SCI and GCI 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: It was an interesting week as mega-cap names finally saw weakness. However, the broad market stepped in and prevented more losses. Internals are now starting to fail with both STOs and the ITBM and ITVM moving lower. We have a new PMO Crossover SELL Signal and very negative Stochastics. Participation is shrinking suggesting smaller-cap names may not be able to hold the bag much longer and let's face it, they haven't prevented the index from declining. This appears to be the start of a longer-term decline for the index and if the broad market starts to fail, it will see the SPY move much lower and quickly. The market is overdue for a correction. Consider tightening stops for protection.
Erin is 42% long, 0% short.
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CALENDAR
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BITCOIN
Bitcoin Daily Chart: Bitcoin had a great week after rebounding off support. It looks very bullish right now and it isn't overbought based on the RSI. The PMO is nearing the zero line on a Crossover BUY Signal and Stochastics are holding above 80. We think new all-time highs are possible.
Bitcoin Weekly Chart: Bitcoin saw a parabolic rise that needed correction. It did that and formed a bearish double top. At this point, that bearish pattern hasn't been negated and we see a declining trend channel. The weekly PMO is starting to rise though. The weekly chart tells us we should temper our enthusiasm. We'll be looking for a confirming breakout from this declining trend channel.
BITCOIN ETFs
Today:
This Week:
INTEREST RATES
Yields rebounded this week and are looking more bullish than they have in some time. The declining trends are still intact but we could see some more upside so bond funds are likely to experience downward pressure.
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
We have been saying all week that a reversal here for $TNX would be especially bullish as it didn't have to test the bottom of the declining trend channel before reversing. The declining trend is still intact so we don't want to get too bullish. We do see a possible rise to test that declining tops trendline.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount, which shuts many buyers out of the market, and potential sellers will experience pressure to lower prices (to no effect so far).
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This week the 30-Year Fixed Rate changed from 6.89 to 6.77.
Here is a 50-year chart for better perspective.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: TLT topped at overhead resistance and appears ready to pull back further given the declining PMO. Yields are looking bullish in the short term so we do expect to see Bond funds move lower. It isn't the most bearish chart we've seen as TLT did see a Golden Cross this week of the 50/200-day EMAs. Still with a bullish spin on yields, it is likely we will see lower prices or some more churn above the 200-day EMA.
TLT Weekly Chart: TLT is tapping at the top of a bullish falling wedge so the longer-term picture is bullish for TLT. The weekly PMO is still on the rise. A breakout is likely, but it could certainly move slightly lower or sideways before that happens.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: Last week the Dollar fulfilled the bearish rising wedge pattern with a breakdown. We expected to see more decline, but it is trying to reverse the declining trend instead. The PMO has decelerated above the zero line and Stochastics are turning up. We're not wild about the Dollar right now but we are seeing some positive aspects to the chart. For now we would look for more choppy behavior above support.
UUP Weekly Chart: Ultimately we should look for the Dollar to decline as it is traveling within a bearish rising wedge on the weekly chart. We also see a shorter-term double top. The weekly PMO has just given us a Crossover SELL Signal. We may be seeing some positive characteristics on the daily chart, but we shouldn't expect a strong rally based on this weekly chart.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold dropped precipitously on a day that the Dollar was only mildly higher. It is losing relative strength against the Dollar. The PMO topped today suggesting we may see Gold test support at the prior double bottom. Stochastics have also topped and have moved below 80 suggesting internal weakness.
Discounts expanded this week as investors are bearish on the metal. We seen higher discounts, but they are elevated enough to consider a reversal on sentiment. With the rest of the chart showing weakness however, we would expect them to expand further before we get an upside reversal.
GLD Weekly Chart: Despite a weak finish to the week, we did see new all-time highs set this week. We do expect Gold to eventually rise again based on the strong breakout. The weekly PMO is on a Crossover BUY Signal, but it did top this week taking the shine off the breakout. We see more near-term weakness for Gold, but intermediate-term it does look good on the breakout to all-time highs.
GOLD MINERS: With Gold and the market pulling back, Gold Miners got hit pretty hard. The PMO has now topped as support was lost today. We still have good participation, but it is weakening. Stochastics have dropped below 80. Gold doesn't look good near-term and really, neither does the market. These will be strong headwinds.
CRUDE OIL (USO)
IT Trend Model: BUY as of 6/21/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: Crude Oil had a terrible day, but we are encouraged by the bull flag on the chart. This isn't to say that we'll get an immediate breakout, likely not given the PMO Crossover SELL Signal. Ultimately the flag should resolve to the upside as the pattern implies.
USO/$WTIC Weekly Chart: We have a bullish ascending triangle on the weekly chart that does imply an eventual upside breakout. Currently we have a weekly PMO Crossover BUY Signal, but there is a chance that price may need to test the bottom of the pattern once again. So while we have a bullish pattern, it may not be done developing and that would mean more decline. We're cautiously optimistic based on the bull flag on the daily chart.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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