Today the Dow Transportation Average (IYT) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. We do not have much confidence in this signal because IYT has been in a trading range for about eight months, and it appears to be topping in preparation for another trip to the bottom of the range. This could reverse this new BUY signal.
On the weekly chart IYT is trending upward out of the 2022 low, but this does look like strong resistance at the 2023 tops.
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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 opened higher, but steadily fell all the way into the close.
SPY Daily Chart: Today formed a bearish engulfing candlestick that suggests we will see another day of decline tomorrow. The PMO is beginning to decelerate.
The VIX is topping out as investors get a bit more nervous about the rally lasting. Stochastics topped but remain above 80 so there is still some internal strength.
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S&P 500 New 52-Week Highs/Lows: New Highs expanded on the decline but remember this is an intraday reading, the highest it read for the day. Still, we didn't see any New Lows which is good. The High-Low Differential is rising strongly suggesting more upside.
Climax* Analysis: There were not enough climax readings to make a climax day, but there was one climax reading and one "almost." Since this is the first down thrust with some excess in the readings, we think there may be some downside follow through. SPX Total Volume was 88% of the one-year daily average volume, indicating a lack of conviction in the reversal.
*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.
Swenlin Trading Oscillators (STOs) continued to make their way lower so weakness is seeping in. Participation really didn't take much of hit today. Almost 3/4ths of the index hold rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM is reaching its highest reading of the year, but both indicators can still see more upside. %PMO Xover BUY Signals is getting overbought and is beginning to decelerate.
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 are getting overbought. However, the Silver Cross Index is not and it is still rising. It is above its signal line so the IT Bias is BULLISH. The Golden Cross Index was flat today, but it remains above its signal line so the LT Bias is also 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: Besides the new BUY Signal on the Transportation Average, Technology and Consumer Discretionary ETFs were poised to change to BUY Signals as well, but today's down draft sabotaged that effort. There is still the potential for new BUY signals to emerge, but we think that we've reached the top of this leg, and that we should prepare for some pullback. STOs are in agreement. This would generate a lot of whipsaw signals. Of course, Chairman Powell's remarks at Jackson Hole tomorrow could, and probably will, upset any projections investors may come up with.
Erin is 45% long, 0% short.
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CALENDAR
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BITCOIN
Yesterday's comments still apply:
"It appears Bitcoin is breaking out of the bull flag formation. The PMO clicked in a Crossover BUY Signal and Stochastics, while not rising strongly, are still in positive territory. We may finally get that rally back toward the July tops."
BITCOIN ETFs
INTEREST RATES
Interest rates were higher on the day, but prior short-term rising trends had already been compromised. This is a good place for an upside reversal, but with a likely rate cut in September, we believe they will be testing the next line of support.
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 rallied but it did nothing to erase the current declining trend. The PMO did turn up, but it remains well below the zero line and is on a Crossover SELL Signal so maybe we will just see some diminishing weakness rather than new strength. Stochastics are negative and don't imply a rally ahead.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: TLT had a bad day as the 20-year yield rallied. The yield remains in a declining trend but the PMO topped on today's decline. At this point we see this as diminishing strength, not an injection of weakness.
Price dropped below support, but remains in a rising trend.
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 saw an upside reversal, but we still see plenty of weakness on the chart. In particular the PMO is well below the zero line. Stochastics did turn up but are below 20 still signaling some internal weakness.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold was down on a rising Dollar, but it fell quite a bit further than the Dollar. That's a sign of relative weakness. The PMO has now topped as well as Stochastics. The rising trend remains intact, but deterioration on the chart tells us to expect more downside.
GOLD MINERS (GDX): Gold Miners pulled back on Gold's decline. Gold is showing weakness so we would expect to see the same from GDX. The rally has run hot and needs to cool. Participation is still very strong so we would expect another rally higher after a pullback.
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 stopped some of the bleeding with a nice rally today. Price is getting very close to support and that would be where we would look for an upside reversal. If this rally catches hold, it would form a bullish double bottom, but it's too early to get excited about that. We should expect a bit more downside based on the negative indicators but we'll be watching for a possible bottom soon.
We have strong support at the prior lows so this is a very good place for an upside reversal.
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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