Today the Semiconductor ETF (SMH) 20-day EMA crossed down through the 50-day ETF above the 200-day EMA (Dark Cross), generating an IT Trend Model NEUTRAL Signal. The sharp down move today was driven mostly by NVIDIA (NVDA), which was down over -7% today. Participation has slumped and the Silver Cross Index is declining in earnest.
The SMH weekly chart shows a parabolic advance from the 2022 low, a formation that virtually guarantees a correction of some kind. Since the arc was broken SMH has declined almost -20% from the all-time high. It is testing support at about 230.00, but given the weekly PMO SELL Signal, we don't think it will hold.
You'll notice that this is the first "Neutral" signal to arrive on our Signal Table below. The question is how many will follow.
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 11/14/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: Price closed below the declining trendline. Price is struggling to hold support at the 50-day EMA. The PMO had started to turn up on yesterday's rally, but it resumed its decline today.
The VIX came close to penetrating the lower Bollinger Band today; punctures of the lower Band often lead to upside reversals. No such luck today. Stochastics have turned down in negative territory.
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S&P 500 New 52-Week Highs/Lows: New Highs were still quite visible on a big down day. New Lows made themselves known today. The High-Low Differential continues to decline in bearish fashion.
Climax* Analysis: There were three climax readings on the four relevant indicators today, giving us a downside initiation climax. SPX Total Volume was 136% of the one-year daily average volume, emphasizing the conviction behind today's selloff.
*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) are back to being mixed, but interestingly this time it is the STO-B declining and not the STO-V. Most surprising was the increase in participation as we saw slightly more stock climb above their 20-day EMAs. We also saw a few new rising PMOs. Unexpected for a deep decline.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is SOMEWHAT OVERBOUGHT.
The ITBM has now joined the ITVM in a decline. They now confirm at least the STO-B which did decline today as well. We saw a slight increase in PMO BUY Signals. Another surprise given the decline today.
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.
As we have been expecting, the Silver Cross Index has topped. There are still more stocks above their 50-day EMAs so it could make its way back up, but its value is mostly limited to the amount of stocks above their 50-day EMAs. It is above its signal line so the IT Bias remains bullish. The Golden Cross Index is rising and could continue to given there are more stocks above their 200-day EMAs versus Golden Crosses. The GCI 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: It was an unusual day for our indicators. STOs are now mixed and both the ITBM and ITVM are falling. However, we didn't lose any participation today except to say that the Silver Cross Index has topped. We still see broad participation and that could hold things together for our portfolios, but given the slide of most mega-cap stocks (META had a good day on earnings, but all other Mag 7 stocks were lower), the index could continue to feel stress. Today's sell-off was strong and we have a downside initiation climax so we have to wonder whether the rest of the index can stave off more decline for the index. At this point, we do believe the index will fall lower on mega-cap weakness and we should prepare for the rest of the crowd to follow given the strong selling conviction today.
Erin is 20% long, 0% short.
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CALENDAR
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BITCOIN
Bitcoin has formed a bearish double top in the short term that does imply we will see another test of support. However, we have a bullish hammer candlestick and that could be denoting a price bottom. The PMO is flat but nearing a Crossover SELL signal nonetheless. Stochastics are sliding lower. Based on the candlestick we think we will see a bit of upside, but the overarching double top does tell us that it likely won't lead to a breakout to all-time highs yet.
BITCOIN ETFs
INTEREST RATES
Yields continue to drop lower in a hurry. With a rate cut on the table for September, we suspect we will continue to see them drop toward support. We have two lines of support ready to catch them.
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 tested the bottom of the declining trend channel quickly and it looks vulnerable to even more decline that could take it out of the pattern altogether. Stochastics are as negative as they can get and the PMO is in decline. We think there is more downside ahead for yields.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: TLT saw excellent followthrough on yesterday's breakout given the 20-year yield tanked today. One slight problem would be the bearish shooting star candlestick, but given how bearish yields look, we aren't expecting it to mark a top.
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 rallied and set up a less steep short-term rising trend. We see this as a likely bearish rising wedge that would imply an upcoming breakdown. The PMO is flat, the RSI is neutral, but Stochastics are falling. There is still weakness here, but it may take some more churn before this rising wedge is resolved.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: The Dollar's rally was a problem for Gold today, but we still detect weakness in the Dollar. Price is still holding above support despite the decline. The PMO is flat but above its signal line and Stochastics are rising, giving Gold a slightly bullish bias.
We note that discounts are paring back suggesting investors are more bullish on the metal. The reverse correlation is strong and that will give Gold an advantage if the Dollar continues to weaken.
GOLD MINERS (GDX): GDX was hurt today by both falling Gold prices and market prices. The short-term rising trend is still intact and while we lost some participation, we are slightly bullish on Gold and we think this rising trend could continue. The Silver Cross and Golden Cross Indexes are very strong. Participation did thin, but remains above our bullish 50% threshold for now. We like Gold Miner's chances, but if Gold doesn't get going, this group will struggle against the bearish market winds.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/30/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: Yesterday's gains were taken back today, but it didn't change Stochastics which are still rising. The PMO does look bearish given the top below the signal line and zero line so Crude is not out of the woods on this latest breakout. Summer demand has not resulted in a rally and it is about over.
We are struck by the large triple top that may be forming. If nothing else, we do have a bearish double top with the last two tops. We've been expecting a breakout from the declining trend, but this pattern has us rethinking any bullish stance on Crude Oil.
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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