The SP600 (IJR) has been this week's darling yet again. They are outpacing the SPY and its large-cap peers. One thing does bother us, not a lot, but still something to consider. We keep hearing about the move into small-caps and yet, we still see a declining trend on %Stocks > 20/50EMAs. It seems to us that it should be rising given all the rotation discussion. These readings are still very healthy so we don't want to take away from that. Additionally, the Silver and Golden Cross Indexes are rising well above their signal lines.
We just thought it was worth pointing out that participation isn't fully expanding as we would expect given the news.
We have a breakout to new all-time highs this week that certainly suggests follow through ahead. The weekly PMO is also rising on a Crossover BUY Signal. We are still leery of how they will respond should mega-caps continue to slide. For now we are seeing rotation not desertion, but if it gets bad enough for other indexes, investors will start taking their chips off the table.
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: It was a nice rally today in a snapback move after three days of dreadful selling. The rally was not strong enough to break the declining trendline. That will be watched closely next week. We do still see the possibility of a flag formation. We'll need a breakout from the declining trend to confirm that bullish pattern.
We can definitely see how the mega-caps have been weakening given the relative strength line with equal-weight RSP. The bearish rising wedge resolved as expected this week with a breakdown below the rising bottoms trendline. The VIX was mostly inside the lower Bollinger Band today. The VIX moved into deeply oversold territory this week, but is now back within the Bollinger Bands, but below its moving average so we still detect weakness. More weakness is visible on Stochastics which are below 20 right now.
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SPY Weekly Chart: The bearish rising wedge was nearly confirmed with this week's negative finish. It did manage to close within the pattern. It does suggest we should see a more pronounced breakdown particularly given the topping weekly PMO which is nearing a Crossover SELL Signal.
New 52-Week Highs/Lows: New Highs were visible but were lower than yesterday's on a decline. This week the High-Low Differential topped which does suggest more downside.
Climax Analysis: There were unanimous climax readings on the four relevant indicators today, giving us an upside initiation climax. We had one other climax this week, a downside exhaustion climax on Wednesday that led to a morning snapback the next day.
*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 of the Swenlin Trading Oscillators (STOs) rose today which does go hand in hand with today's upside initiation climax. Participation did expand today and we saw a number of new rising PMOs today.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT.
The ITBM surprised us today with an upside reversal. This could be confirming the STOs which are both rising now. %PMO Xover BUY Signals dropped beneath the signal line this week, but it is already looking like it is ready to reverse.
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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.
The strongest IT Bias goes to Biotechnology (IBB) which saw an incredible increase to its Silver Cross Index. This is a group on the move higher given the improvement in the intermediate term.
The lowest IT Bias goes to Semiconductors (SMH). They have a strong foundation as far as the Golden Cross Index, but it is the giant deterioration of the Silver Cross Index that was the culprit.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
As noted above SMH lost a huge amount of Silver Crosses within the group. It is stretching downward and is likely going to struggle a bit longer given the major deterioration of the SCI.
Regional Banks (KRE) have been kicking it and now holds the top spot. It is only getting better based on the increase to the Golden Cross Index.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
Regional Banks (KRE) had the biggest increase in the Golden Cross Index which propelled it to the top spot. This group is showing incredible internal strength.
Communication Services (XLC) lost the most GCI points as the sector feels downward pressure on mega-cap failure. Growth areas of the market are distressed and this loss to the GCI is evidence.
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.
Today the Silver Cross Index turned back up. It had topped earlier in the week but managed to stay above its signal line to keep the IT Bias BULLISH. The Golden Cross Index in contrast topped today. It has a good chance of rising again given the higher percentage on %Stocks > 200EMAs. It is above its signal line so the LT Bias remains BULLISH. Participation did expand today as we would expect on a rally day. Percentages are all above our 50% bullish threshold so it looks fairly positive in the short term as well.
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 slumped mid-week but today saw a healthy snapback. The question is whether it can take this rally and break the short-term declining trend. Rising STOs and the ITBM suggest this as does the upside initiation climax. We have Magnificent 7 stocks weakening and many report earnings next week. It isn't a lock that they will all come in positive and even if they do, they are very overvalued and investors are sensing this. They were able to drag the index up, now they could continue to drag it lower. For now we see rotation not desertion so the broad market is the glue right now. We would look for more rally to start the week based on today's climax. The Fed announcement is Wednesday and language that infers a September rate cut could keep a rally going. We are cautiously optimistic about next week.
Erin is 45% long, 3% short.
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CALENDAR
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BITCOIN
Bitcoin Daily Chart: Bitcoin is back on the rise as the PMO has been suggesting it would do. The RSI is positive and not overbought and Stochastics tipped upward. We continue to look for all-time highs to be tested.
Bitcoin Weekly Chart: We saw wide consolidation that resolved the parabolic rise. Now we are looking for it to break out from this declining trend channel. The weekly PMO is still declining but it has definitely decelerated. We do want to see the declining trend broken or Bitcoin could be in for another test of the bottom of that declining trend channel. For now we look for a breakout.
BITCOIN ETFs
Today:
This Week:
INTEREST RATES
Yields are making their way lower again and are likely to continue to fall particularly if the Fed hints at a rate cut in September. Bond funds should be see tailwinds.
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
It was bullish that $TNX reversed before testing the bottom of the declining trend channel. Now it has topped before reaching the top of the channel and that is bearish. The RSI has dropped into negative territory and Stochastics are topping already. Yet we have a PMO Crossover BUY Signal. Given mixed indicators we will look for more churn here.
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).
--
This week the 30-Year Fixed Rate changed from 6.77 to 6.78.
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: We got the bounce off the rising bottoms trendline. We have a flat tops and rising bottoms which forms a bullish ascending triangle. We should expect an upside breakout. The RSI just entered positive territory and Stochastics have turned up. The PMO is attempting to bottom so a breakout does seem plausible.
TLT Weekly Chart: We are still waiting for a breakout from the bullish falling wedge. Given the bullish daily chart and the weekly PMO rising above the zero line on a Crossover BUY Signal, we think this time we'll get that breakout.
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 is churning around and moved mostly sideways this week. Both the RSI and PMO have been totally unhelpful on deciphering what is going on with the Dollar. Even Stochastics are flat. We would look for more churn.
UUP Weekly Chart: Based on the weekly chart, the Dollar is overdue for a breakdown. There is a large bearish rising wedge and the weekly PMO has dropped beneath its signal line.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold managed a nice rally today but it didn't break the short-term declining trend. The RSI is no help, but the PMO did give us a Crossover SELL Signal. Stochastics are falling and Gold's relative strength is diminishing.
The correlation between Gold and the Dollar is almost perfect. The Dollar is looking neutral but with a longer-term bearish spin. If the Dollar is neutral then Gold should be considered neutral.
GLD Weekly Chart: Last week Gold broke to new all-time highs, but this week has been disappointing. The weekly chart is mixed as the RSI is in positive territory but the weekly PMO is nearing a Crossover SELL Signal. Given the breakout, it appeared that Gold was ready to push out of this trading range. At this point it seems likely that it will travel back down to support given the weekly PMO.
GOLD MINERS: A somewhat bearish outlook on Gold has us less enamored with Gold Miners (GDX) which will face headwinds if Gold continues to drift lower. The new PMO Crossover SELL Signal also does not inspire confidence. While it did rally today it did nothing to improve %Stocks > 20EMA. %Stocks > 50EMA is continuing to drift lower. Price may be on support, but it doesn't look like it will hold.
CRUDE OIL (USO)
IT Trend Model: BUY as of 6/21/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: USO is barely holding up the bull flag and the flag is starting to get long in the tooth. However, we do have support at the 200-day EMA that could see a reversal. The main problem is that indicators are bearish. We had Stochastics angling up yesterday, but now they are topping. The Crude volatility index ($OVX) is oversold and that could lead to an upside reversal, but we are getting less and less enthusiastic about the Crude trade.
USO/$WTIC Weekly Chart: Ultimately we should look for a breakout. We have flat tops and rising bottoms. That is a bullish ascending triangle. The rising bottoms trendline was not tested on the last bottom and that led us to believe we'd see a breakout this time around. Unfortunately it looks like we will see another test of the rising bottoms trendline before we get the breakout. The weekly PMO is declining on a Crossover SELL Signal.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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