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Today the Semiconductor (SMH) industry group was on fire and lifted the market out of its declining trend. The group is nearing a Dark Cross of the 20/50-day EMAs and that likely will occur soon unless price can vault the 50-day EMA. Today's strong rally did get the PMO to pause its decline. Participation was affected, but not by a lot. The Silver Cross Index does look ready to turn higher though. Stochastics were thoroughly unimpressive on the rally. They are rising, but remain in territory below 20 which implies internal weakness. The picture has certainly brightened, but we'll need to see some follow through before we get too excited.
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's rally pushed price out of the short-term declining trend indicating we could be at a turning point for this decline. The PMO has now paused its decline.
The VIX saw a lower reading, but it remains beneath its moving average on the inverted scale and still suggests internal weakness. Stochastics have turned up and have left territory below 20 which bodes well.
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S&P 500 New 52-Week Highs/Lows: New Highs fell slightly which was somewhat unexpected. They are still elevated so there is strength visible. We would like to see the High-Low Differential turn back up.
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.
Both Swenlin Trading Oscillators (STOs) are rising in positive territory. Surprisingly we didn't see the kind of expansion in participation we would expect to see on such a strong rally day. Readings are above our bullish 50% threshold and show 2/3rds of the index holding rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT.
The ITBM and ITVM are still traveling in opposite directions leaving us a bit more cautious in the intermediate term. We did see a few more PMO Crossover BUY Signals, but not to the degree we would expect after a rally of this magnitude.
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.
Right now both the Silver Cross Index (SCI) and Golden Cross Index (GCI) look very bullish as they rise higher. Delimiting factors are based on %Stocks > 50/200EMAs. Typically the SCI won't move past the percentage of stocks above their 50-day EMA and the GCI won't move past the percentage of stocks above their 200-day EMA. They are both close to these limits. As long as participation continues to expand they will keep on rising. Both are above their signal lines so the IT and LT Bias remain 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 rallied strongly on the back of Semiconductors with NVDA leading the charge, up almost 13% today. The one problem with today's rally was the fact that participation really didn't increase on the charge, we didn't even see many new rising PMOs. We could be seeing the mega-caps ready to resume their rallies and that would supercharge the index. META reported after the bell and is currently up over 7% in after hours trading. There is a good chance we will get followthrough on today's rally. The STOs certainly suggest so. We are bullish but cautiously so as the ITVM is still in decline.
Erin is 45% long, 0% short.
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CALENDAR
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BITCOIN
Bitcoin has hit overhead resistance at the declining tops trendline. We see a short-term double top on the chart right now that does suggest Bitcoin will see a pullback. The PMO is topping and Stochastics are diving lower. Ultimately we are looking for a breakout to new all-time highs, it just may be time for it to pull back toward the 200-day EMA first.
BITCOIN ETFs
INTEREST RATES
Yields dropped precipitously today on the Fed's decision to keep rates the same with a likely cut in September. We think this will keep interest lower for longer. Support is nearing.
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
The declining trend channel is in full force as $TNX makes its way lower. We are expecting a test of the bottom of the channel. With rate cuts on the horizon, we suspect yields in general to move lower over time. The PMO is flat beneath the zero line and that implies pure weakness. Stochastics are below 20, implying the same.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: TLT broke out today as the 20-year yield dove lower. We've been expecting this breakout as indicators have turned very favorable. Stochastics moved above 80 which implies strength and the PMO is on a new Crossover BUY Signal. Bond funds are likely going to move higher.
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 saw a big decline today. It took it out of a short-term rising trend and caused the PMO to top beneath the signal line. The RSI is negative and Stochastics have topped. It is time to start thinking bearishly about the Dollar. Support does look strong, but a PMO drop beneath the zero line would tell us that support level is tenuous.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: With the Dollar down Gold took advantage and blew it out. It was up much further than the Dollar was down implying internal strength. The indicators have moved into a bullish configuration. The Dollar looks weak right now so we expect Gold will move even higher toward all-time highs again.
We note that discounts are paring back suggesting investors are more bullish on the metal. The reverse correlation is strong and that will give Gold an advantage if the Dollar continues to weaken.
GOLD MINERS (GDX): The declining trend has been broken and Gold looks bullish. The market has a bullish bias as well and all of this will help Gold Miners. The PMO has turned back up and participation is back. This looks like a good rally that will see followthrough.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/30/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: With new Middle East unrest, Crude Oil jumped higher, breaking its declining trend. It narrowly missed a Dark Cross IT Trend Model Neutral Signal today. As long as price can get back above the 50-day EMA, that Dark Cross will be avoided. The PMO has turned back up, but it remains below the zero line. Stochastics turned back up which is encouraging. We don't want to get too bullish here as this could simply have been news driven, but this does look pretty good.
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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