Yesterday's climax activity resulted in some churn.
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Today the S&P 500 SPDR (SPY) 20-day EMA crossed back up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. This is a whipsaw signal generated by a snapback rally, and SPY finds itself hitting overhead resistance at the intersection of a rising trend line and a declining tops line.
The weekly chart shows SPY hitting the bottom of the rising trend line. The weekly PMO continues to decline.
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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 Daily Chart: Yesterday we were working with a reverse pennant that was drawn pretty tight. Today we decided that the mechanics of a rising wedge still apply, especially since price is encountering resistance at a declining tops line. The expectation of a rising wedge is a breakdown so we aren't out of the woods yet.
As with yesterday, we note 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. Mega-caps are clearly in charge of this rally as the relative strength line is rising against equal-weight RSP.
Here is the latest recording from 8/12:
S&P 500 New 52-Week Highs/Lows: New Highs expanded well on the rally, but the High-Low Differential is very negatively configured on its accelerating decline.
Climax* Analysis: There were no climax readings today. Yesterday's upside exhaustion climax brought some churn 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 DOWN and the condition is OVERBOUGHT.
We are now listing the Swenlin Trading Oscillators (STOs) as overbought. They have certainly seen much higher readings, but we do need to be aware they are near-term overbought. Participation did expand, but is still rather low at 59%. 60% now have rising PMOs, that could support a rally.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM and ITVM are back to rising, but we do see that %PMO Xover BUY Signals are below our 50% bullish threshold and below the signal line. This needs to pick up.
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 reversed higher today, but remain beneath their signal lines so the IT and LT Biases are BEARISH. Participation is expanding, but readings are still fairly low so the broad market hasn't caught up yet.
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 did finish higher today but it wasn't a forceful rally, more churn than anything else. It is now at a decision point as it has reached the intersection of the rising trend and the declining trend. The STOs are still rising, but are getting overbought. They are confirmed by rising intermediate-term indicators so we wouldn't be surprised if the rally keeps up a bit longer, but ultimately we still have to advise caution. The broad market isn't quite participating in this move, it is mostly mega-caps. We need to see higher participation numbers. It is good news that the Silver and Golden Cross Indexes have turned up, but participation is reading below the Silver and Golden Cross Indexes so this could be short-lived. We would continue to use stops given the market is still vulnerable based on the rising wedge.
Erin is 20% long, 0% short.
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CALENDAR
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BITCOIN
Bitcoin is vulnerable to another test of support as the PMO has topped beneath the signal line. We still see this as a bull flag formation and Stochastics are still rising so for now we will look for more sideways movement.
BITCOIN ETFs
INTEREST RATES
Interest rates were mixed today with many turning up and others staying in decline. We have been looking for a new leg up after the test of the first support line, but now we see the possibility of a drop to 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
$TNX looks very bearish. The RSI is negative and the PMO topped beneath the signal line. Stochastics are also declining. As noted in the interest rates section, we are looking for another possible decline to the next support level which is not visible on the daily chart.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: Yesterday's comments still apply:
"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 formed a bullish hammer candlestick today and that implies we'll see another rally tomorrow. The indicators were unimpressed with today's rally so we are still expecting the Dollar to display weakness not strength.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold was stymied and was unable to make new all-time highs. This has set up a bearish triple top formation. The indicators are still positive and we do see a rising trend of the July/August lows so maybe this will act like a bullish ascending triangle and not a bearish triple top. We will look for the rising trend line to hold for the time being.
The correlation to the Dollar has eased so Gold and the Dollar are decoupling. This means they can travel in the same direction instead of the usual strong reverse correlation. With the Dollar still looking weak, this may not be good news for Gold.
GOLD MINERS (GDX): The declining trend is holding for now. Despite today's decline we notice that participation wasn't really affected. This bodes well. However, Gold does look ready to decline a bit more and that will put downside pressure on Gold Miners. A continued rally in the market could prevent it from pulling back too far as they are not only affected by Gold, but also the winds of the market.
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 is dropping again, preserving the declining trend. Given the new PMO Crossover BUY Signal, we are looking for an upside reversal. Stochastics have topped however, so we are tempering our bullish expectations.
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
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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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