Yesterday looked like topping, but today's PPI was well received, and the market took off again. The 10-minute PMO is turning up.
The Mag 7 was, of course, a driving force behind today's advance.
As part of this, the Semiconductors (SMH) industry group led the way with NVDA leading the charge. Participation has definitely improved, but readings are still below our 50% bullish threshold. The Silver Cross Index has turned back up but is at a very low reading. This looks like a good rally for this group, but remember participation is still not up to snuff. However, if the market is going to continue this rally, this group will likely lead the way higher.
This is a very nice bounce coming off strong support. We do have to be alert for a possible head and shoulders top.
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.
Watch the latest episode of DecisionPoint on our YouTube channel here!
MARKET/INDUSTRY GROUP/SECTOR INDEXES
CLICK HERE for Carl's annotated Market Index, Sector, and Industry Group charts.
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: Today saw a break above the pennant formation which is very bullish. However, we do note that the declining trend hasn't been broken yet. The PMO has turned back up and the RSI is back in positive territory.
The VIX is back above its moving average on our inverted scale and Stochastics are rising in positive territory suggesting internal strength is coming back in.
Here is the latest recording from 8/12:
S&P 500 New 52-Week Highs/Lows: New Highs did expand, but not as much as we would expect on such a strong rally. The High-Low Differential is very negatively configured on its decline which appears to be picking up speed.
Climax* Analysis: There were unanimous, strong climax readings on the four relevant indicators today, giving us an upside exhaustion climax. This is the second upside exhaustion climax since the August 6 low. After the first one the market decelerated for two days, and today looks a bit like upside initiation. Tomorrow let's be alert for anything.
*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 rising strongly now and both are in positive territory. This looks good combined with the rising PMO. Participation is inching up and has made it past our 50% bullish threshold. We now have more than half of the index holding rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
Both the ITBM and ITVM reversed higher today, confirming our already rising short-term indicators. %PMO Xover BUY Signals is rising again, but does remain below our 50% bullish threshold and below its signal line.
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 and Golden Cross Index are both still in decline. Since both are below their signal lines, the market bias in both the IT and LT remains BEARISH. New found participation is still not enough to reverse these indicators.
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.
****************************************************************************************************
CONCLUSION: The favorably received PPI report was behind today's rally, and tomorrow's CPI report will probably have a strong influence on tomorrow's market movement -- positive or negative. Participation is moving in the right direction but is still not as robust as we would like to see to push prices higher, but we do see the rising ITBM and ITVM as suggesting we could see more followthrough to the upside. In a bear market environment we would expect today's upside exhaustion climax to play out to the downside as it implies, but given we are seeing aggressive groups like Semiconductors and the Technology sector rallying strongly, there is a good chance this rally may not fizzle. We'll know more about its veracity tomorrow.
Erin is 20% long, 0% short.
****************************************************************************************************
CALENDAR
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact support@decisionpoint.com for more information!
BITCOIN
Yesterday's comments still apply:
"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 looked ready to move higher but with more evidence that the Fed will be lowering rates in September, yields are falling in sympathy. There is good chance we will see the next support level tested.
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 the bullish falling wedge yet again. The pattern is essentially busted and that suggests more downside will follow. This is a strong support level, but given the PMO top beneath the signal line, we think it is vulnerable to a breakdown.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: TLT is back on the rise now that we have yields headed back down. The PMO is accelerating higher and Stochastics turned up in positive territory. We are looking for this month's top to be tested.
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 fell below support for a second time and this time it did not form a bullish hollow red candlestick. The PMO is now accelerating downward and Stochastics topped in negative territory. The RSI is also negative. We will look for more decline.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold did not take advantage of the falling Dollar today likely because it is near all-time highs. The indicators are still bullish with Stochastics popping above 80 today. With the Dollar looking negative, we do expect all-time highs will be hit soon.
Discounts are shifting higher so investors aren't all the bullish on Gold yet. That could work in its favor given sentiment is contrarian.
GOLD MINERS (GDX): Gold's decline did not upset Gold Miners who took advantage of the market's overall rally. Participation continues to move higher. The PMO has turned up and Stochastics are rising strongly. Gold should find its way higher based on a weaker Dollar and that will keep GDX elevated. We suspect the declining trend will be broken soon.
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 pulled back today essentially keeping it below the declining trendline. We do like the new PMO Crossover BUY Signal and Stochastics just reached above 80. Middle East tensions are still building so we do expect the rally will continue. It just needed a pause.
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
(c) Copyright 2024 DecisionPoint.com
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.
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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)