We often look at the technicals of a chart after earnings surprises to see if there were any signs of weakness going in that would've warned us of a pending decline. What is the NVIDIA (NVDA) chart telling us right now?
The technicals don't look too bad. We do have a bull flag formation, but the flag is moving sideways so they don't always resolve with a big swing higher. The RSI is positive and not overbought which is good. The PMO is rising on a Crossover BUY Signal above the zero line.
Stochastics are a bit of a problem here given they are angling lower, but we do note that they turned up today. The Semiconductor industry group is underperforming the market right now and NVDA is also underperforming. Although it is clearly the leader within the group as relative strength is rising against the group. It will likely take the group whichever direction it decides to go.
The picture is unfortunately not that clear as to whether to hold through earnings or not. Erin opted to sell and not go through earnings as the market is showing weakness overall. Add underperformance and Stochastics in a declining trend and she decided it wasn't for her. At the same time there is some strength on this chart so holding through earnings is really a personal choice more than a technical choice right now.
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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 continues to bide its time waiting for NVDA earnings. It moved mostly sideways today with a little midday chop.
SPY Daily Chart: The market was up but it formed a lower low and a lower high so price is topping out before reaching all-time highs. The PMO and RSI are both positively configured so we may not see a big decline yet.
The VIX didn't change much today. It continues to hold above its moving average on the inverted scale which is bullish. Stochastics are still firmly above 80 so we don't see much weakness here.
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S&P 500 New 52-Week Highs/Lows: New Highs pared back on the rally and we did see a New Low. The High-Low Differential is clearly bullish.
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 UP and the condition is OVERBOUGHT.
The Swenlin Trading Oscillators (STOs) both declined today, but their descent has decelerated. This pause has been an excellent opportunity for these indicators to move out of overbought territory with very little price deterioration. We did see a small contraction in %Stocks > 20EMA and %PMOs Rising on a rally day which isn't good, but it was small.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
We've identified a positive divergence between the ITBM and ITVM tops (which are rising) and price tops which are technically falling as we haven't gotten all-time highs yet. We also have a positive divergence on %PMO Xover BUY Signals. This bodes well for the intermediate term.
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 of stocks above their 20/50-day EMAs remain overbought. However, this does mean that we have strong participation and prices could stay elevated. The Silver Cross Index is rising at a healthy 71% level and is above its moving average so the IT Bias is BULLISH. The Golden Cross Index is also reading at a high level and is rising. It is 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 market seems to be waiting for the upcoming results of NVDA's earnings. It is crazy that one stock could be the lynchpin of the market, but it is. Results could be received either way. The market itself is showing a rounding off on price so we do still see some weakness there. STOs are still declining so we have weakness there too. Yet in the intermediate-term picture, we have new positive divergences and rising indicators so there isn't a need to get too bearish right now. The market is in pause mode and unfortunately it will take NVDA to help it pick a direction. We expect muted trading tomorrow going into after market earnings.
Erin is 35% long, 0% short.
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CALENDAR
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BITCOIN
Bitcoin has pulled back after its strong upward move. The rising trend is intact, but we do note that Stochastics have dropped below 80 so short-term weakness could continue. Ultimately the PMO is still rising and is above the zero line so we will look for this rising trend to hold.
BITCOIN ETFs
INTEREST RATES
Yields were mixed on the day. They are consolidating on top of strong support right now. We had been looking for them to bounce off this level but with a rate cut on the way, they will probably continue to be pressured lower.
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
Yesterday's comments still apply:
"We see a symmetrical triangle on $TNX. These are continuation patterns and the prior trend was down so we should look for the decline to 'continue'. The RSI and Stochastics are very negative so despite a flat PMO we are looking for a breakdown out of the triangle."
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 was up today and that caused TLT to lose its short-term rising trend. It did form a bullish hollow red candlestick so it could right itself quickly. However, this decline has the PMO nearing a Crossover SELL Signal so we will only stay mildly bullish on TLT for now.
We see a symmetrical triangle on the one-year daily chart. As noted previously, this is a continuation pattern so we should expect an upside breakout.
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 in decline and we see nothing on the chart to suggest we will see it turn back up. The decline has picked up momentum, pushing the PMO into negative territory. Stochastics are below 20 and the RSI is very negative."
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: The reverse correlation held true for the Dollar and Gold today. Gold was up about the same amount as the Dollar was down. It continues to flirt with all-time highs and based on the configuration of the indicators, we expect new all-time highs will be reached soon.
The inverse correlation is currently good for Gold as the Dollar is in free fall. We would like to see it have more of an effect as Gold is really trying our patience.
GOLD MINERS (GDX): Gold Miners have formed a bull flag that suggests we will see an upside breakout soon. The PMO is rising and the RSI is not overbought. Participation remains strong and today the Silver Cross Index turned back up. If Gold can get going again, this group should see plenty of upside.
CRUDE OIL (USO)
IT Trend Model: BUY as of 6/21/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: It wasn't a good day for Crude, but it hasn't really changed the bullish picture here. Price stayed above the declining tops trendline and we have a large bullish double bottom pattern. The PMO is on a new Crossover BUY Signal and Stochastics are rising in positive territory. We are looking for higher prices.
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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