Today we really need to lead with the Signal Table. Last week the picture was dimming and getting darker. There were 11 IT Trend Model NEUTRAL signals, and many of the remaining indexes were setting up to lose their BUY signals as well. Yesterday SPY went from NEUTRAL back to BUY, and today the S&P 100 ETF (OEF) did the same. After we reviewed the charts, we found that of the remaining nine NEUTRAL signals, seven have their price above both the 20-day and 50-day EMAs, which will most likely result in seven new BUY signals within the next few trading days. The remaining two will be favorably configured very shortly. This assumes that the broad upward market momentum continues, which seems to be a safe assumption. As a result, we should cancel our bear market assumptions.
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Today the S&P 100 ETF (OEF) 20-day EMA crossed back up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. This was also a breakout from the declining trend. The Silver Cross Index has moved above its signal line so we have a BULLISH IT Bias right now. The LT Bias is also BULLISH given the Golden Cross Index has moved back above its signal line.
The weekly chart shows OEF breaking above the rising trend line. The weekly PMO is decelerating, but continues to decline.
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 8/14/2024
LT Trend Model: BUY as of 3/29/2023
SPY 10-Min Chart: Retail Sales were up 1%, to which today's advance is attributed.
SPY Daily Chart: Today we saw an upside breakout from the declining trend. This is a bullish conclusion to the bearish rising wedge which is especially bullish. It hasn't happened yet but the PMO is close to a Crossover BUY Signal. We also note that price is not overbought based on the RSI.
The VIX is rising above its moving average and Stochastics are now above 80. There is internal strength here.
Here is the latest recording from 8/12:
S&P 500 New 52-Week Highs/Lows: New Highs as we would expect and there were no New Lows. The broad market is coming back to life. The High-Low Differential is still declining but we note it decelerated the decline slightly today.
Climax* Analysis: There were unanimous upside climaxes on the four relevant indicators today, giving us another upside exhaustion climax. In spite of today's monstrous gains, there still could be some churn to follow. It could be a blowoff, but we don't think that SPX Total Volume supports that.
*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 OVERBOUGHT.
As noted yesterday, both Swenlin Trading Oscillators (STOs) are in overbought territory. They can certainly accommodate more upside and we suspect they will continue to move further overbought. Participation has really shot up, another reason we are not bearish. The broad market is participating. Almost 3/4ths of the index hold rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM and ITVM rose strongly today confirming this new uptrend. We would like to see %PMO Xover BUY Signals get back above the 50% bullish threshold, but it did vault its signal line.
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 BEARISH in the intermediate term.
The market bias is BULLISH in the long term.
Today the Golden Cross Index jumped above its signal line and that has switched the long-term bias to BULLISH. The Silver Cross Index is rising, but because it is still below its signal line, the IT Bias remains BEARISH. The Silver Cross Index is at a healthy level and given we have more stocks above their 50-day EMAs than Silver Crosses, it should scoot above its signal line soon.
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: At the beginning of this month the unwinding of the yen carry trade resulted in some major dislocations in the U.S. markets, causing us to become bearish. Beginning last week our market seemed to digest and rationalize the problem and regain stability. Today the picture is much more favorable, so we have to ease back on our bearish outlook. Another reversal could change that, but at present we respect the charts. Indicators are rising and participation is back; however, based on today's upside exhaustion climax we think we could see a pause or small digestion phase.
Tomorrow will have some more economic reports with potential to move the market either way, but we are expecting low volatility because of options expiration.
Erin is 40% long, 0% short.
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CALENDAR
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BITCOIN
We said yesterday that based on the PMO top beneath the signal line that we could see a pullback toward support. That is occurring. We've been looking at this as a bullish flag formation, but the flag is getting too extended. It hasn't busted yet, but given weak indicators, we suspect it will.
BITCOIN ETFs
INTEREST RATES
Interest rates were on the rise today as most test support. That level was broken suggesting we should see more downside, but this is looking a lot like a recovery on short-term rising bottoms.
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
Today's rebound off support looks good. We also have a new short-term rising trend. The PMO has turned up so we may have gotten too bearish on yields with broken support. The PMO has turned back up and so have Stochastics. We're cautiously bullish as the major declining trends haven't been tested yet.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: TLT lost ground as the 20-year yield popped higher with other interest rates. We were looking for a test of overhead resistance at the August top, but it doesn't look like we're going to get it yet. The PMO is still on the rise, but Stochastics have topped suggesting we could see more downside.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 8/5/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The hammer candlestick did result in a rally today, but today's was a bearish filled black candlestick. We're now seeing a double bottom on UUP that could be pointing to a persistent leg up. This would not be good for gold. The confirmation line of the double top hasn't been broken so the pattern has yet to confirm.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: The possible double bottom on the Dollar has us worried about Gold. We have two possible patterns here, one bullish and one bearish. There is a bullish ascending triangle (rising bottoms, flat top) and a bearish triple top.
We noted yesterday that the correlation between Gold and the Dollar has eased so a bullish Dollar may not wreak its usual havoc. However, indicators are softening. The PMO is near a Crossover SELL Signal and Stochastics have topped. Given the weakness in those indicators, we do think Gold will contract soon, but we will still be monitoring that possible bullish ascending triangle.
GOLD MINERS (GDX): We saw a rally in GDX today, but price is situated below the May top and could pose a problem, particularly if the Dollar does begin a rally. Still, under the hood it looks healthy. The Silver Cross Index has stopped declining and participation is angling upward. The PMO is nearing a Crossover BUY Signal. They should break out here unless Gold gets beat down by a rising Dollar.
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 managed a rally, but it hasn't overtaken the declining tops trendline. The PMO tells us to look for a breakout. Stochastics aren't as optimistic so we may see some more churn.
The large double top formation (April top, July top) will be busted if price can break out above that level. Based on the PMO we should get an attempt at that resistance level.
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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