As the market prepares for the earnings results from NVIDIA (NVDA), we thought it would be a good time to see how the industry group is holding up. We'll talk more about NVDA in tomorrow's report.
Price action is clearly rounding off and this doesn't look much like a flag formation given that rounded top. The PMO is below the zero line and trying to top. Stochastics have topped. The Silver Cross Index is only reading at 32%, far from healthy. You'll also notice that it isn't just price that is topping out, participation is too as more stocks lose support at the 20/50/200-day EMAs. This group looks far from healthy as we prepare for earnings.
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-Minute Chart: The market saw choppy trading today that set up a declining trend. Price looks shaky.
SPY Daily Chart: Price is getting very close to all-time highs again despite near-term weakness. The RSI remains positive and not overbought so we could see higher prices before the market reaches overbought conditions. The PMO is still on the rise.
The VIX has topped out on our inverted scale but remains above its moving average. Stochastics are in decline but remain above 80 so internal strength is still visible.
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S&P 500 New 52-Week Highs/Lows: New Highs expanded on the decline. They are plentiful and suggest broad market participation. The High-Low Differential looks very bullish right now.
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) continue their decline suggesting internal weakness in the short term. Participation hasn't been hurt yet, but %Stocks > 20EMA is overbought right now. We have plenty of rising momentum within the index to prevent a dastardly decline.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Both the ITBM and ITVM are rising, but they are also getting very overbought. Certainly we've seen higher readings, but it does tell us to be alert regarding weakness in the intermediate term. PMO Crossover BUY Signals are plentiful and also tell us the market could stay elevated.
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 is overbought. This isn't a good condition to observe when the market is showing weakness. Still, readings are robust and do imply further upside. The Silver Cross Index is rising at a healthy 70% 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 is finally going to get its rate cut, but clearly much of this is already priced in as the market struggled today. Friday's upside exhaustion climax finally played out with a decline. STOs are declining and that tells us that we should expect more weakness ahead. There is still internal strength visible on New Highs and Stochastics so we aren't expecting a deep decline at this juncture, but it is still a time to exercise caution (remember, declining STOs). We could still see more decline off yesterday's upside exhaustion climax. Prepare for more weakness and consider using stops if you aren't already.
Erin is 35% long, 0% short.
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CALENDAR
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BITCOIN
As we suspected, Bitcoin is on its way up after executing a bull flag formation. The flagpole of the pattern does suggest we will see all-time highs tested again. The PMO is rising above the zero line now and Stochastics are above 80. Resistance was hit today which could account for today's pullback.
BITCOIN ETFs
INTEREST RATES
Yields are settling in on support, but given upcoming the upcoming FOMC rate cut they could see some more downside 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
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 rising trend is holding true for Bonds and given the bearish outlook on yields, we should expect to see more upside out of Bond funds. The PMO is flattening out above the zero line and that speaks to strength as the rising trend holds steady. Stochastics are in positive territory. We expect more upside.
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: 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: Gold worked on getting another all-time high but was unsuccessful today. We do think it will very soon make new all-time highs given the negative outlook for the Dollar. The PMO is rising slightly above both the signal line and zero line which suggests we could see more upside. Stochastics are holding above 80.
The correlation with the Dollar is getting stronger as an inverse. This means a weak Dollar will help Gold moving forward. Of course, if the Dollar is up, Gold will be pressured downward. For now it looks weak and that is good for Gold.
GOLD MINERS (GDX): Gold Miners have formed a bull flag and with the outlook poor for the Dollar, they should see some upside movement. Participation is holding strong, but we do see that the Silver Cross Index has topped. Given a higher reading of stocks above their 50-day EMA, it should begin expanding again soon. Stochastics did top so we may see more 'flag' develop on the flagpole.
CRUDE OIL (USO)
IT Trend Model: BUY as of 6/21/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: Today the headline said: "Libya's Eastern Government Halts All Production." Geopolitical problems aside, this will and is affecting Crude Oil prices. Technically we've been looking for a reversal at support and boy did we get it. Now we have a bullish double bottom pattern that suggests far more upside ahead for Crude. The PMO just had a Crossover BUY Signal and Stochastics are rising. We would look for more upside here.
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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