Today the Nasdaq 100 ETF (QQQ) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. As with yesterday's Nasdaq Composite BUY Signal, the advance from the August low has been pretty much straight up, and we should be cautious of a potential pullback.
The weekly chart looks bullish with QQQ following a rising trend line. The weekly PMO is decelerating.
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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-Minute Chart: The market traded higher and saw a nice uptick after the release of the minutes from the last FOMC meeting.
SPY Daily Chart: Price held above support again today. The PMO is rising above the zero line on a Crossover BUY Signal and the OBV has been gaining as volume continues to come in strong.
The VIX is showing deterioration but remains above its moving average on the inverted scale signaling strength alongside Stochastics which are holding above 80. Mega-caps continue to hold sway as we see a rising relative strength line against equal-weight RSP. The broad market needs to contribute more.
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S&P 500 New 52-Week Highs/Lows: New Highs expanded well and there were no New Lows again today. The High-Low Differential looks very bullish on its rise above the zero line.
Climax* Analysis: There were two climax readings and two "almosts" on the four relevant indicators today, so we have another upside exhaustion climax. SPX Total Volume was only 81% of the one-year average daily volume.
*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.
Swenlin Trading Oscillators (STOs) reversed today moving up slightly. They are very overbought so we do expect them to turn down soon. Remember, oscillators must oscillate and if they get too overbought, they will revert back toward zero even if the market is clicking. Participation of stocks above their 20-day EMAs expanded but is overbought at this level. We have plenty of rising PMOs but that indicator is getting overbought as well.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM and ITVM continue their swift movement higher. The ITBM is definitely overbought with the ITVM getting there. %PMO Xover BUY Signals are healthy but are near-term overbought. Still we can see much higher readings if the bull market rally continues to strengthen.
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.
Participation is strong, but we do worry that %Stocks > 20EMA is getting overbought. The others are near-term overbought, but can accommodate more rally. The Silver Cross Index is rising nicely above its signal line so the IT Bias is BULLISH. The Golden Cross Index is rising strongly above its signal line so the LT Bias is 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 Bullish Biases continue to rack up on our Bias Table and we have seen all the indexes we cover move to IT Trend Model (Silver Cross) BUY Signals. The bull market doesn't appear in jeopardy. However, the market and this rally have gotten extended. Given today's upside exhaustion climax we should prepare for some decline or a pause. STOs did turn back up which bodes well, but they are getting very overbought. Participation is very healthy right now and that can keep the market elevated rather than seeing a correction. We will need to absorb some downside should the market stumble here so keep that in mind when setting your stops. There are economic reports due tomorrow that could sway the market.
Erin is 45% long, 0% short.
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CALENDAR
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BITCOIN
It appears Bitcoin is breaking out of the bull flag formation. The PMO clicked in a Crossover BUY Signal today and Stochastics, while not rising strongly, are still in positive territory. We may finally get that rally back toward the July tops.
BITCOIN ETFs
INTEREST RATES
Yields continued their decline today with nearly all of them taking out the short-term rising trend they were in the process of establishing. With a likely rate cut coming in September, we should be prepared for yields to make their way down toward the next support level.
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 below support and took out the small rising trend that was beginning to develop. It looks particularly weak given the recent PMO top beneath the signal line and topping Stochastics in negative territory. We should expect the yield to lose more ground.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: The 20-year yield is in decline and it is affording TLT the opportunity to rally. The indicators are all moving in the right direction and yields in general look quite bearish so we would look for more upside out of Bond funds.
This breakout looks good with price overcoming the 2023 top.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 8/5/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: Yesterday's comments still apply:
"The Dollar is dropping quickly and we don't see support coming for some time. The indicators are decidedly bearish so we suspect it will fall even further."
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Interestingly, Gold is not taking advantage of a weak Dollar. It was down even as the Dollar slid. We still like Gold here as a weak Dollar should eventually get it moving in the right direction. We also have bullish indicators. It should rally to new all-time highs again.
The correlation with the Dollar is moving back toward a perfect inverse. We want to get as close as we can if the Dollar is going to stay weak as we suspect it will.
GOLD MINERS (GDX): Gold Miners managed a rally despite a drop in Gold prices. The market's rally helped. We like what we are seeing on the chart and we are bullish on Gold. The PMO is rising nicely, the OBV broke out with price and the Silver Cross Index is back above its moving average indicating a bullish IT Bias.
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 lost more ground today as it heads toward support at the June low. We expect it to reach that level given the very bearish PMO which is declining below the zero line on a Crossover SELL Signal. Stochastics are also diving lower. We would look for more decline.
We have strong support at the prior lows so we will look for a deceleration in this decline as we get closer to it.
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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