Today was kind of a mirror image of yesterday, with SPY closing around yesterday's highs. The rally was attributed to favorable employment numbers.
SIGNAL CHANGES
Today the S&P 100 ETF (OEF) 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. We did see a pick up in participation, but not very much. Less than half are above their 20-day EMAs.
On the weekly chart we can see that price has broken down from the steepest rising trend line. The weekly PMO is in decline and on a Crossover SELL Signal.
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: We saw a huge rally today, but unless price can get above the 50-day EMA, we will see a Dark Cross of the 20/50-day EMAs tomorrow. It's already happened on $SPX. The PMO decelerated its decline.
Despite the rally, the VIX remains below its moving average on our inverted scale which implies weakness. Stochastics however have turned back up but remain in negative territory. We note that the relative strength line to equal-weight RSP is flattening out as mega-caps find their legs.
Here is the latest recording from 8/5:
S&P 500 New 52-Week Highs/Lows: New Highs did not expand as we would've expected and New Lows were still visible. The High-Low Differential is accelerating lower.
Climax* Analysis: Today there were strong, unanimous climax readings on the four relevant indicators, giving us an upside exhaustion climax. To clarify, Tuesday had an upside initiation climax, so the next climax needs to be identified as exhaustion. SPX Total Volume was not at blowoff levels, so there may be more upside coming, but for now let's look for some churn.
*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 OVERSOLD.
Both of the Swenlin Trading Oscillators (STOs) reversed higher on the day. Participation did improve so that we have 50% of the index above their 20-day EMAs. We saw more rising PMOs, but the percentage is still below our 50% bullish threshold.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM and ITVM were not impressed by today's rally. Both continued to decline, although not by a lot. %PMO Xover BUY Signals also turned up today, but remain at a very low 38%.
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 now BEARISH in the intermediate term.
The market bias is BULLISH in the long term.
The Silver Cross Index continues to lose ground. It is below its signal line so the IT Bias is BEARISH. The Golden Cross Index has stalled, but it is above its signal line so the LT Bias is BULLISH. Participation overall did gain, but percentages are still fairly low.
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: Is this the beginning of a new up leg? It could be, but internals aren't very strong right now as participation percentages, while improving, are still fairly low. We also need to see more rising PMOs. Today's upside exhaustion climax could be signaling an upcoming decline, but STOs did turn back up so we can't discount more upside. At this point we are likely to see some churn or consolidation of today's strong rally. It needs to be digested. We suspect we are experiencing a snapback after heavy selling. We do not believe we are out of the bear market woods yet so make sure stops are placed.
Erin is 20% long, 0% short.
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CALENDAR
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BITCOIN
Bitcoin is back on its way toward prior highs after forming yet another level of support on this week's low. The PMO has decelerated quite a bit but it remains below the zero line so this is diminishing weakness not new strength yet. Stochastics do look very bullish right now so we are looking for more upside here.
BITCOIN ETFs
INTEREST RATES
Yields were higher on the day as the bounce back off support. We expect them to continue moving higher from here.
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've now annotated a bullish falling wedge. $TNX did drop out of it, but it is back inside now. The pattern calls for an upside breakout. The PMO has flattened likely in preparation for a rise toward a BUY Signal. Stochastics are rising strongly. We should expect more upside on yields in general.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: The PMO has now topped on TLT suggesting it will have a hard time maintaining support. Stochastics are also falling adding to the bearish picture for Bonds. It was a bullish hollow red candlestick today so we could see some consolidation before a drop below support.
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 formed a bearish filled black candlestick on today's rally so we could see it back off tomorrow. It is in a sharp rising trend right now but the PMO hasn't quite turned up yet. Stochastics are rising. We expect the rally will likely continue, but it needs to find a less steep rising trend.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold was off to the races today in spite of a rising Dollar. This could explain why we are seeing very low discounts or more bullish gold traders. The bearish double top is still in force, but indicators are already tipping back up on just one day of rally. More than likely we will continue to see Gold oscillate in its current trading range.
The correlation with the Dollar is easing so Gold is decoupling from the Dollar. This will offer it the opportunity to follow the Dollar up like it did today. Conversely, it could follow the Dollar down.
GOLD MINERS (GDX): Gold Miners not surprising rallied strongly on Gold's terrific rally. The declining trend is still in force and participation was barely affected by the rally so we aren't expecting a strong upside reversal yet. We think they will continue to churn lower.
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 continued its rally. We're going to see what this rally is made of soon as it prepares to challenge the declining trend. The PMO has flattened but still isn't really confirming the current rally. Stochastics are rising again. This looks pretty good for a breakout, but indicators are still somewhat weak so we won't be surprised if price fails at this level.
We did note yesterday that this could be a good reversal point. We will be monitoring this current rally closely as the bearish double top (April top, July top) is still going to be in play until we see a breakout above that level.
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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