The market decline really heated up today as big tech stocks continued to unravel. The delightful magic of the recent cap-weighted rally has reversed into an equally horrific cap-weighted retreat. There is some sympathetic selling in other segments of the market, but we can see that the most severe losses are in groups in which the big tech and growth stocks are components.
Looking more closely, here we can see the carnage in the Mag 7.
Nevertheless, looking at the Dow 30 we can see that the decline has broadened somewhat.
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: Price slid quickly today but did close just short of the 50-day EMA which could provide support. We aren't enamored with that conclusion, but we also can't completely discount the formation of a flag yet.
The VIX has reached very oversold levels right now on the inverted scale which could lead to a possible upside move or snapback, but again this decline only appears to be gaining momentum. Stochastics are very weak as well.
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S&P 500 New 52-Week Highs/Lows: New Highs were still visible on today's decline so it wasn't a complete slaughter today. The High-Low Differential had just turned up, but today turned back down.
Climax* Analysis: There were three climax readings on the four relative indicators today, so we have a downside exhaustion climax. Notably, we haven't had a downside climax since the price top last week, so shouldn't this be an initiation climax? We think not because we are so far into this decline. We do not believe this exhaustion represents the end of the decline, just that there is potential for a pause or small bounce.
*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) saw a big decline today which has taken them into near-term oversold territory. Participation slipped, but we still see more than 50% above their 20-day EMA. Rising PMOs took a big hit and suggests negative momentum is building within the index.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Both the ITBM and ITVM continued to make their way lower out of overbought territory. We nearly saw a negative crossover on %PMO Xover BUY Signals.
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.
The Silver Cross Index topped today and should continue lower given %Stocks > 20/50-day EMAs have lower percentages than the Silver Cross Index. The whole index is showing weakness as participation continues to thin but given both the Silver Cross Index and Golden Cross Index are above their signal lines, we still must read the IT and LT Biases as 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: Looking at the table above we can see the damage to Technology and the NDX which lost their bullish biases today. We do not think that the decline is over but today's move does beg for a snapback as the downside exhaustion climax suggests. Overbought conditions on the mega-caps are starting to take their toll as investors worry about valuations and cool on AI. Indicators are decidedly bearish which is the main reason we aren't looking for more than a brief snapback rally tomorrow. Important economic reports are being released tomorrow and Friday, but we sense that the market has already priced in a September rate cut.
Erin is 45% long, 3% short.
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CALENDAR
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BITCOIN
Yesterday's comments still apply:
"Bitcoin is giving back some gains, but ultimately the rising trend is intact. It may need to soften the rising trend with more decline, but the chart still looks bullish enough to expect a test of all-time highs again. The RSI is not overbought and the PMO is still on the rise. Stochastics are holding above 80. The recent Silver Cross bolsters the bullish picture."
BITCOIN ETFs
INTEREST RATES
Yields were mixed again today with long-term rates moving higher. The declining trends are still intact.
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 popped higher today. The recent upside reversal took place above the bottom of the declining trend channel which does imply we'll see a breakout from the declining trend. The RSI just moved into positive territory and there is a new PMO Crossover BUY Signal. Stochastics are also rising strongly suggesting we will see the yield move even higher.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: TLT was slammed today as the 20-year yield jumped higher. The chart is very bearish and does suggest more downside ahead. With long-term yields looking bullish, downward pressure will continue to be applied to Bond funds. We think this is a temporary condition. We do see an ascending triangle (flat top, rising bottoms) and that tells us that eventually we should see an upside breakout. The moment of truth is arriving as price is about ready to test the rising bottoms trendline.
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 finished the day mostly unchanged and formed a bullish hollow red candlestick that suggests we will see higher prices tomorrow. We expect the Dollar will test the top of the trading range close to the June high. Stochastics are rising nicely as confirmation. We would like to see the PMO rise for more confirmation.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold struggled today but continues to hold onto support at the 20-day EMA. Stochastics suggest that level won't be held. Today's bearish engulfing candlestick implies a decline will come tomorrow and that would take out this support level. The PMO is flat and not enlightening.
Discounts are still elevated so investors are bearish on the metal. Not as bearish as they've been so we are looking for deeper discounts as that tends to be bullish for Gold when they hit very negative readings.
GOLD MINERS (GDX): Gold Miners are holding above the 20-day EMA but we do notice deterioration in participation. Stochastics are falling and the PMO is topping. Overall participation and the Silver Cross Index are bullish so we aren't looking for a collapse. Just know that they are vulnerable right now. Gold is stagnating and if the market continues lower, this group will have a tough time rallying.
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 rallied to stay within the bull flag. Stochastics turned back up on today's mild rally so we are still looking for an upside breakout from this formation.
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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