The Semiconductor (SMH) industry group had an outstanding day and it firms up an already firm industry group when you look under the hood. After a pullback to the 20-day EMA, price reversed and headed higher. This group is not as overbought as you might think given the RSI is not yet in overbought territory, but it is close.
Participation has shot up as far as stocks above key moving averages. The Silver Cross Index has reversed and is giving us a Bullish Shift across the signal line. The indicators look very good with the PMO back on the rise and rising Stochastics. This group could amazingly see even higher prices.
The big problem is the parabolic advance out of the 2022 low. As we always say, parabolic formations beg for correction. The weekly PMO is still on the rise, but it is also overbought. What we would expect eventually would be a high level of consolidation that could resolve the issues stemming from this pattern.
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: Fresh all-time highs were again set today. We note that we have a doji candlestick today. These mark days of indecision and can sometimes lead to trend reversals. The RSI is very overbought, but given this bull market move that could persist. The PMO continues to rise.
Volatility has left the market based on the tight Bollinger Bands surrounding the VIX. Punctures usually lead to trend reversals, but given the Bands are so tight, that could happen quite easily and would be less meaningful. Stochastics are strong above 80.
Here is the latest recording from July 8th:
S&P 500 New 52-Week Highs/Lows: We still see a negative divergence on New Highs and we notice that we did see an expansion in New Lows. The High-Low Differential continues to make its way down with its own negative divergence.
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 UP and the condition is NEUTRAL.
The range of the Swenlin Trading Oscillators (STOs) are relatively tight in comparison to prior readings. They are seeing some whipsaw, but at this point they are rising which is bullish for the short term. We didn't see any major expansion in participation readings and we still show less than 50% of the index with rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
Both the ITBM and ITVM are rising together. Readings have been mixed so it is good to see both reading with advances. Less than 50% of the index hold 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.
The Silver Cross Index has now dropped below 50%. This is an anemic reading given the steady rally to new all-time highs. Both the Silver Cross Index and the Golden Cross Index are below their signal lines so the IT and LT Bias is considered BEARISH.
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: Not much has changed. We had another rally to all-time highs with little to no improvement in participation indicators. Less than 50% of the index hold rising PMOs, PMO BUY Signals or have a Silver Cross. This tells us that half of the index is likely experiencing pullbacks and corrections. Investors don't seem overly concerned about overbought conditions as groups like Semiconductors continue to impress. The index itself may be rising, but the internals are far from strong so we know that if mega-caps finally see downside pressure, there is no one there to pick up the slack. We will be hearing from Chairman Powell as he speaks before congress over the next two days. We could see volatility injected into the market.
Erin is 40% long, 0% short.
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CALENDAR
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BITCOIN
Bitcoin lost support at the May low, but it appears to have found more along the late February highs. While the PMO is moving lower, this is likely going to be a place for consolidation. Until the PMO turns up, we wouldn't look for a strong rally. It seems it is biding its time before going lower.
BITCOIN ETFs
INTEREST RATES
Yields ticked up today but are in intermediate-term declining trends that we believe will hold up a bit longer.
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
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: With yields in decline Bonds have a new lease on life. The PMO is still awfully flat given this rally, but the hefty decline that preceded it is the culprit. Stochastics are rising and the RSI just hit positive territory. We expect more upside for TLT.
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 rallied today but it is traveling in a large bearish rising wedge that implies we will see a breakdown. Also supporting the breakdown thesis is the new PMO Crossover SELL Signal and diving Stochastics. The Dollar is due for more decline but today's bullish engulfing candlestick suggests we will see another up day.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: We've now identified a short-term bullish double bottom pattern on Gold. It is still in consolidation mode, but it does suggest we'll get an upside breakout from this trading range.
Gold did not show relative strength against the Dollar as it was down much further than the Dollar was up. This didn't compromise the rising PMO so we are cautiously bullish on Gold.
GOLD MINERS (GDX): With the drop in Gold, Gold Miners pulled back, but not a lot. The internals are still very strong and we do have a bullish outlook on Gold right now. The Silver Cross Index saw a Bullish Shift across the signal line giving us a bullish bias in the intermediate term. The PMO is also rising nicely above the zero line.
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 is looking toppy to us and it is happening just below overhead resistance. Stochastics have dropped below 80. The Energy trade never really got going even with the Crude rally and now with Crude looking bearish those positions are likely in jeopardy so tighten stops. The PMO is still rising so this could only be a pause in the rally, but we would prepare for a possible decline.
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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