After yesterday's upside exhaustion climax, today was relatively quiet as the market digested the week's advance.
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SIGNAL CHANGES
We'll discuss the SPY's Signal Change in its section.
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The Materials Sector ETF (XLB) 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. Support has been reached so we could see an upside reversal here. Participation is still very weak so it isn't a given that the support level will hold.
The weekly chart shows XLB consolidating above long-term horizontal support, so in that regard it is still bullish; however, the weekly PMO is below the signal line and falling, hinting at internal weakness confirmed by low participation readings.
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/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 11/14/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: While this rally does look encouraging, we note that we have a reverse pennant which is a bearish formation. It implies that we will get a decline the height of the flagpole should the bottom of the pennant be violated.
Today the S&P 500 ETF (SPY) 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. A nine-month rising trend line has been violated, and the PMO is falling below the zero line. The VIX remains below its moving average on the inverted scale and that implies internal weakness. In the very short term we do have rising Stochastics so it does make sense to us that with this dichotomy between indicators that we will see some chop and churn.
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SPY Weekly Chart: The break below the intermediate-term rising trend is sobering. We may've close near the top, but it didn't preserve that rising trend. The weekly chart shows the next horizontal support at about 490, and the next rising trend line support at about 450. The weekly PMO is below the signal line and falling.
New 52-Week Highs/Lows: New Highs and New Lows were muted on today's rally. We note that the High-Low Differential has been falling all month confirming the current downtrend.
Climax Analysis: There were no climax readings today. We saw three climaxes this week: Monday's downside exhaustion climax, Tuesday's upside initiation climax and yesterday's upside exhaustion climax which didn't completely play out. We think it was signaling upcoming 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 NEUTRAL.
The Swenlin Trading Oscillators (STOs) reversed higher yesterday and have already left oversold territory. They do imply we will see some upside, but as we noted earlier, we are looking for churn not necessarily rally followthrough. We saw very little improvement to participation or rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM did turn back up today but almost imperceptibly. We saw a percentage point increase in PMO BUY Signals, but the reading is still low, but nearly as low as it could go should the decline resume.
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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 Consumer Staples (XLP) which is seeing a powerful gain on the Silver Cross Index. It improved 15 percentage points!
The lowest IT Bias belongs to Semiconductors (SMH) which have taken it on the chin. They lost a huge 32 percentage points on the Silver Cross Index. This area is still showing a great deal of weakness.
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) holds the highest Silver Cross Index reading, but we see it is beginning to deteriorate. It also lost a percentage point on the Golden Cross Index. Internals are still strong, but we don't look on this group that favorably based on the chart.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
Energy (XLE) lost the most percentage points on the Golden Cross Index and it lost an amazing 50 points on the Silver Cross Index. We have to say that it is starting to look up a bit with the Crude Oil trade looking more bullish.
Biotechnology (IBB) holds the lowest Golden Cross Index reading and it is continuing to deteriorate in the long and intermediate terms. It lost a large 15 points on the Silver Cross Index. Be careful with this area of the market. It may be part of defensive Healthcare, but it is always the most aggressive group within.
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 intermediate term.
The market bias is BULLISH in the long term.
The Silver Cross Index did turn up today but it isn't likely to continue to given we have fewer stocks above their 50-day EMAs. It is below its signal line so the IT Bias is BEARISH. The Golden Cross Index is in decline and nearing a Bearish Shift across the signal line. For now it is above its signal line so the LT Bias is BULLISH. We did see some expansion in participation this week. It barely pushed percentages above 50% so we still see internal weakness.
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 began the week with a strong decline. It spent the rest of the week attempting to recuperate which it ultimately did. We have mixed indicators right now with STOs and ITBM rising and ITVM declining with weak participation. We've identified a bearish reverse pennant as well. If you look at mega-cap charts, you'll see bearish biases and still declining trends. They need to wake up to get the index roaring again. We also need the broad market to pick it up as well. We don't see that as likely with cooling AI expectations and ridiculous valuations. The mixed messages on the indicators suggest to us that we have some churn coming as the market decides what to do. We would stay cautious.
Next week is options expiration, and we should expect low volatility Thursday and Friday.
Erin is 20% long, 0% short.
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CALENDAR
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BITCOIN
Bitcoin Daily Chart: Bitcoin fell back today, but still looks very bullish to us. The PMO has turned back up and Stochastics are rising nicely. We are looking for a test of the declining tops trendline. We'll see how it trades over the weekend.
Bitcoin Weekly Chart: Bitcoin did drop below the consolidation area that marked the end of the parabolic formation. While that is dangerous, we note that support held well above 50,000.
BITCOIN ETFs
Today:
This Week:
INTEREST RATES
Yields were mixed today, but most were down. They are currently bouncing off support and we expect them to continue to trend 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
$TNX had found its way back into the bullish falling wedge but it is already trying to fail again. We do believe it will make its way higher. The PMO has flattened in anticipation and Stochastics are rising.
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 6.73 to 6.47.
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: The 20-year yield was down significantly today and that afforded TLT the opportunity to rally off support. We think this is a temporary rally as yields do look ready to recover from their current downtrend. Yet we can't ignore the PMO bottom above the signal line. Stochastics don't seem to be confirming a new rally however.
TLT Weekly Chart: A reverse head and shoulders has executed as well as the bullish falling wedge. The longer-term view of Bonds is very bullish. The weekly PMO is rising suggesting we will eventually see TLT test overhead resistance.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 8/5/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The filled black candlestick executed as expected with a decline today. The PMO is in decline and the RSI is negative. Stochastics are looking toppy so we will look for the Dollar to go back down and test the 200-day EMA.
This was a good place to see a reversal as it coordinates with horizontal support and the 200-day EMA. We just aren't looking for a rally yet.
UUP Weekly Chart: The longer-term picture for the Dollar is not encouraging. We have a large bearish rising wedge and price is just now touching the bottom. There is a good chance the Dollar will fail at this level. The weekly PMO is in agreement as it continues to decline on a Crossover BUY Signal.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: We do see a short-term bearish double top, but Gold is making a comeback and could very well bust the pattern with a new all-time high. The Dollar has bearish characteristics right now and that will also help Gold. We note a large spike in discounts which throws bearish sentiment. It could be bearish enough to get more upside out of Gold. Remember sentiment is contrarian.
The PMO is going in for a Crossover BUY Signal and Stochastics are rising so Gold is setup to move to all-time highs.
GLD Weekly Chart: Gold continues to work through all-time highs being hit. The weekly RSI is positive and the weekly PMO is currently on a Crossover BUY Signal. We may see more chop, likely with a melt higher.
GOLD MINERS: Gold Miners enjoyed a rally today but it has done nothing to alleviate the declining trend. Gold does look more bullish and that will help GDX. At this point it will need that help as participation is quite dismal. The Silver Cross Index and Golden Cross Index stopped declining which is somewhat bullish.
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 is about to overcome its short-term declining trend. There is discussion of replenishing our strategic oil reserves and that could be what is getting this rally clicking. The technicals are very encouraging with the rising RSI, PMO bottom and Stochastics hitting positive territory. We are looking for a breakout.
USO/$WTIC Weekly Chart: We have mixed signals on the weekly chart. We see a bullish ascending triangle (flat top, rising bottoms), but we also see a large double top developing. For now given the bullish daily chart, we will go with the ascending triangle. It implies we'll see a breakout. The weekly RSI just hit positive territory and the weekly PMO is back on the rise.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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