The market spent the day digesting last week's advance, but the chart also looks as if upward momentum has dissipated. We'll discuss today's Bearish Shift on the Golden Cross Index in its section on Participation.
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Here is a long-term chart of the VIX, and we noticed that last week it had the third highest reading ever. High VIX readings usually, but not always, coincide with price bottoms. So, while we remain bearish, this chart should cheer up the bulls.
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: NEUTRAL as of 8/9/2024
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: We have a bearish filled black candlestick formation suggesting a decline for tomorrow. The bearish reverse pennant formation has appeared on many charts, and this one looks as if it will be resolving soon. The pennant is also a rising wedge, which will normally resolve downward. The PMO has flattened and the RSI is in negative territory, not the best foundation for a rally continuation.
While the VIX did spike last week, it is almost above its moving average now on the inverted scale bringing things closer to normal. Stochastics are rising so that is another indication that a rally isn't out of the question.
Here is the latest recording from 8/12:
S&P 500 New 52-Week Highs/Lows: New Lows are starting to expand and today they did so on a rally. The High-Low Differential is still in decline.
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.
The Swenlin Trading Oscillators (STOs) do look bullish as they are both rising. The STO-V has now hit positive territory again. Unfortunately this is tempered by the shrinking participation reading on %Stocks > 20EMA. We also lost some rising momentum internally that also suggests weakness under the surface.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM had turned up last week but today it resumed its decline alongside the ITVM. %PMO Xover BUY Signals topped beneath the signal line today in spite of a rally.
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 IT and LT timeframes.
The Silver Cross Index topped beneath its signal line. It is below its moving average so the IT Bias is BEARISH. 61% is not an entirely bearish reading, but it will soon deteriorate more given we have fewer stocks above their 50-day EMA.
The Golden Cross Index had a Bearish Shift across its signal line today giving us a BEARISH LT Bias. It dropped quickly and will likely continue to drop given we have fewer stocks above their 200-day EMAs. This signal is a backdrop to what could possibly be the start of a bear market. The percentage itself isn't really bad, but this shift should temper bullish expectations in the longer term.
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: In our DecisionPoint Trading Room today we were asked why we are assuming that we are in a bear market, since a bear market decline of -20% has not been reached. The reason is due to the extreme volatility we have recently experienced. We could be wrong, but for now we will assume that setups will favor bear market resolutions. If we see that continue to happen, it will strengthen our belief. If we, instead, see more bullish resolutions, we will change our minds. The next thing we expect to see is for the reverse pennant to break down. Soon.
Erin is 20% long, 0% short.
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CALENDAR
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BITCOIN
Bitcoin appears to be putting a bullish flag formation. Indicators aren't particularly helpful, but we do like how the PMO has been bottoming and Stochastics do appear ready to rise in positive territory. We may see the flag develop more before the expected upside breakout.
BITCOIN ETFs
INTEREST RATES
Interest rates took a header today dropping quite a bit. They still look ready to rally off this support level, but Fed speak is that we have a rate cut ahead and that could apply downward pressure. For now we do expect them to move higher. Economic reports particularly the PPI reports will arrive tomorrow. That will give us a better sense of where these rates might be headed.
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 dropped today, but it does remain in the prior bullish falling wedge pattern. The PMO is topping beneath the signal line and Stochastics are falling. We could see another test of support at 3.8%.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: Today TLT formed a bullish engulfing candlestick as the 20-year yield lost quite a bit of ground today. This reversal is coming right off support and with interest rates looking weak again, we could see more rally out of TLT. The PMO and Stochastics are flat so we don't want to get too bullish.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 8/5/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar isn't sure which way it wants to go and consequently the indicators aren't really enlightening either as they are all flat. It doesn't look ready for a breakdown nor does it look ready for a breakout. We will go with a neutral stance that calls for more chop and churn.
In the big picture, it is in an intermediate-term declining trend.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold is about to set new all-time highs and that would essentially bust the near-term bearish double top pattern. The PMO is on a new Crossover BUY Signal and Stochastics are rising. We expect all-time highs to be logged shortly.
Discounts are shifting higher so investors aren't all the bullish on Gold yet. That could work in its favor.
GOLD MINERS (GDX): A big rally in Gold translated to a big rally for Gold Miners. They haven't broken the declining trend yet, but we do see a resurgence in participation for the group. We like Gold right now so we have to like Gold Miners. Overhead resistance is already arriving, but we like its chances for a breakout here.
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 broke through two declining trendlines today as it is off to the races. Middle East tensions are building right now with Iran so we expect the rally in Crude will continue. The RSI just hit positive territory and the PMO is rising toward a Crossover BUY Signal. Stochastics are almost above 80 where we like them.
The large double top formation (April top, July top) will be busted if price can break out above that level. That's our expectation right now.
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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