Today the Technology Sector (XLK) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. It looks toppy right now as the market digests the August rally. Participation is still strong but we do note that Stochastics have topped. We could see more turbulence as the digestion phase doesn't appear over just yet.
The long-term rising trend is intact and price appears ready to challenge all-time highs. The weekly PMO has decelerated and could turn up soon with more rally follow through.
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/SPX SECTOR/INDUSTRY GROUP INDEXES
Change Today: 
Change for the Week:
CLICK HERE for Carl's annotated Market Index, Sector, and Industry Group charts.
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: Trading was choppy today but positive. Prices headed out of the day's low to close near the high for the day.
SPY Daily Chart: Price is consolidating on top of support. Price is not overbought based on the RSI. We still see very positive momentum.
The VIX is above its moving average on the inverted scale, but is not overbought. Stochastics are holding above 80. Both of these suggest internal strength.
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SPY Weekly Chart: Price is back into the bearish rising wedge, but ultimately that pattern is stale as we already got the expected breakdown out of the wedge. Price is back into the steep rising trend. The weekly PMO has turned back up suggesting we should see more follow through on the recent rally.
New 52-Week Highs/Lows: New Highs popped higher suggesting the broad market is also participating. The High-Low Differential has been rising all week and is looking bullish.
Climax Analysis: Today there were strong, unanimous climax readings on the four relevant indicators, giving us another upside exhaustion climax -- the sixth since the upside initiation climax on August 6. SPX Total Volume was still light at 86% of the one-year daily average volume. The UP/DOWN Volume Ratios are very bullish, but price is at overhead resistance.
*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) are mixed today with the ITBM up and the ITVM down. This suggests to us that price is still likely to see more consolidation or churn. Participation remains strong, but maybe too strong as it is getting overbought. %PMOs Rising is also overbought.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM and ITVM are continuing to rise strongly, but they have now reached overbought territory. They could move higher, but we should be ready when they turn down. %PMO Xover BUY Signals is overbought, but we have seen higher readings. We still see the intermediate term as bullish.
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PARTICIPATION TABLES: The following tables summarize participation for the major market indexes and sectors. The 1-Week Change columns inject a dynamic aspect to the presentation. There are three groups: Major Market Indexes, Miscellaneous Industry Groups, and the 11 S&P 500 Sectors.
The highest IT Bias goes to Healthcare (XLV). This sector is continuing to see improvement to both the Silver and Golden Cross Indexes.
The lowest IT Bias belongs to Semiconductors (SMH). The culprit is a strong foundation in long term on the Golden Cross Index. It was boosted to that level on its previous rally and then in the IT it failed. The Silver Cross Index is coming back to life and that will eventually alleviate that negative IT Bias.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
Regional Banks (KRE) hold the highest SCI reading and it gained more points this week. We also see an improvement to the Golden Cross Index. This has proved to be a resilient group.
Semiconductors (SMH) have come out of their recent decline and should begin to see the SCI move higher still to move it out of last place. Energy (XLE) isn't too far above and also needs more help on its SCI.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
Consumer Staples (XLP) deepened the strength in its foundation by gaining the most GCI points this week alongside Transports (IYT). In the case of XLP we didn't see any improvement to the SCI so more work is needed.
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 has shot up on this rally but it is becoming overbought. We should note that overbought conditions can persist in a bull market move like we have now, just look back to late 2023 when they held at high levels for weeks. We have a feeling we are going to see something similar here. The Silver Cross Index and Golden Cross Index are above their signal lines so we have to read the IT and LT Biases as BULLISH. Both are healthy and are not overbought.
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 was happy to hear that a rate cut is on the table for next month and it did spur buying today. Readings were off the charts on volume ratios and that gave us an upside exhaustion climax. There was healthy volume, but less than we expected for such a 'good news' kind of day. The market still looks like it is in consolidation mode and mixed STOs suggest to us that we will continue to experience market churn. The ITBM and ITVM rising tells us that the bull market isn't likely in jeopardy, it just needs to work through the prior rally. Participation is also very strong and should keep the market elevated with only slight damage. Next week we expect more sideways movement. Let's see if this rate cut is priced in by taking our cue from market direction on Monday. Now we can look forward to all the speculation on getting additional rate cuts.
Erin is 45% long, 0% short.
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CALENDAR
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BITCOIN
Bitcoin Daily Chart: Bitcoin is headed up to test the longer-term declining tops trendline. The indicators have really firmed up so we do expect another go at that level with a good chance that we could see all-time highs again.
Bitcoin Weekly Chart: The high level consolidation out of the parabolic formation has basically formed a giant bull flag formation. This would suggest much much higher prices for Bitcoin. We aren't on board for that kind of gain yet as that declining tops trendline does need to be tested.
BITCOIN ETFs
Today:
This Week:
INTEREST RATES
Yields headed back down today on news of an upcoming rate cut. We suspect that they will continue to fall in sympathy and could test the next level 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
We have a symmetrical triangle on $TNX. These are continuation patterns so we should look for a break that would continue the prior trend. In this case the prior trend was down so we should expect a breakdown from the triangle not a breakout.
MORTGAGE INTEREST RATES (30-Yr)**
**We watch the 30-Year Fixed Mortgage Interest Rate, because, for the most part, people buy homes based upon the maximum monthly payment they can afford. As rates rise, a fixed monthly payment will carry a smaller mortgage amount, which shuts many buyers out of the market, and potential sellers will experience pressure to lower prices (to no effect so far).
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This week the 30-Year Fixed Rate changed from 6.49 to 6.46.
Here is a 50-year chart for better perspective.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: TLT was up almost 1% this week as the 20-year yield trended lower. We expect Bond funds will continue to shine given the high likelihood interest rates will make their way lower. The PMO has flattened out due to the steady rising trend out of the August low. Stochastics are positive so we would look for higher prices.
TLT Weekly Chart: We've identified a bullish reverse head and shoulders on the weekly chart and price has broken above the down sloping neckline. The weekly PMO is on the rise and the weekly RSI is positive. The intermediate-term picture is quite bullish for TLT.
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 suffered this week as it made its way down swiftly. Support is arriving and given the bearish indicators, we should expect it to test that level sooner rather than later. Today's candlestick was bearish engulfing which implies yet another decline on the horizon for the Dollar on Monday.
UUP Weekly Chart: As we would expect from a rising wedge, price broke down this week. The wedge doesn't tell us how far price will go down, only which way it will likely break. We see the strongest support lying at about 27.00. It could make its way down there given the broken rising trend and falling weekly PMO.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: New all-time highs were reached this week. Gold honestly hasn't taken advantage of the falling Dollar to the degree it could have in our opinion. It has been trending up, but rallies have been few. We do see a short-term rising trend and the PMO did surge (bottom) above the signal line so we will look for more all-time highs.
Ultimately we do see a rising relative strength line to the Dollar and the correlation is negative so a continued decline in the Dollar should help Gold reach those all-time highs.
GLD Weekly Chart: The breakout from the prior consolidation zone suggests we will establish a new trading range. The weekly PMO is also on the rise. The weekly RSI is overbought, but we note it can hold that condition for weeks.
GOLD MINERS: Gold Miners (GDX) are forming a bull flag. We like Gold so we have to like Gold Miners. We should see another leg up after the flag finishes forming. Participation is robust and the Silver Cross Index is rising strongly. Granted we do have overbought conditions in participation, but if you look back to March you can see those conditions can persist.
CRUDE OIL (USO)
IT Trend Model: BUY as of 6/21/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: We suspected that when Crude reached close to support that we would get an upside reversal. This is beginning to form a bullish double bottom pattern. The PMO has turned back up and Stochastics are also rising. We would look for some more upside follow through on the strong rallies we saw to end the week.
USO/$WTIC Weekly Chart: We see flat tops and rising bottoms. That forms a bullish ascending triangle. It tells us to expect a breakout. Maybe we will see it on this new rally. Unfortunately indicators are about as neutral as you can get with the weekly PMO flat and unresponsive and the weekly RSI sitting near net neutral (50).
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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