The Fed cut rates by half a percent, the most favorable outcome expected, and market spent the rest of the day chopping around in a fairly wide range. This was the market trying to decide what it is going to do next. It closed slightly down, but we don't think it has made up its mind yet. At tomorrow's open, it will probably have it figured out.
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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: The market did make intraday all-time highs and we would've expected them to stick given the good news out of the Fed. Instead price made its way lower. It's very early, but this could start to form a bearish double top if price continues to move lower. The PMO is flattening but making its way higher nonetheless.
The VIX has moved below its moving average on the inverted scale and does imply weakness. Stochastics are still displaying strength given they remain above 80.
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S&P 500 New 52-Week Highs/Lows: New Highs were visible but this is likely due to it being an intraday reading. We have feeling some of those new highs fell to the wayside by day's end. The High-Low Differential is accelerating lower.
Climax* Analysis: There were no climax readings 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 UP and the condition is OVERBOUGHT.
The big news today is that the Swenlin Trading Oscillator for Volume (STO-V) turned down today. The Swenlin Trading Oscillator for Breadth (STO-B) did continue to make its way higher and further into overbought territory. Participation thinned on the decline but still remains at a healthy 75%. We are seeing a deterioration in rising momentum, but %PMOs Rising is reading above our 50% bullish threshold.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The STO-V may've turned down, but both the ITBM and ITVM continue to make their way higher, getting further overbought. We saw a small gain in PMO BUY Signals.
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 term timeframes.
Participation did thin on today's decline but overall readings are robust. The Silver Cross Index (SCI) continues to make its way higher and given there are more stocks above their 50-day EMA with respect to the SCI, it could continue to rise further. It is above its signal line so the IT Bias is BULLISH. The Golden Cross Index continues to make its way higher too and given there are more stocks above their 200-day EMA, it should continue to expand. It is above its signal line so the LT Bias is 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: Investors have been speculating for months what kind of rate cut we would see going into the end of the year and finally the question was answered with a healthy 50bps cut. Clearly the rate cuts have been priced in given the decline today. Trading was very choppy and price was stopped by overhead resistance, which does cause some concern. Another concern is the topping STO-V. The STOs are generally good indicators in the short term and this decline is a problem. Participation is still healthy as are both the Golden Cross Index and Silver Cross Index so we would expect to see a closing all-time high soon. However, with a decline on 'good news', we would stay cautious going into trading tomorrow.
Erin is 30% long, 0% short.
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CALENDAR
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BITCOIN
Bitcoin is attempting to breakout of the shorter-term declining tops trendline. The PMO is making its way higher and should get above the zero line soon. Stochastics have turned up above 80 so we are still looking for a move to the August high.
BITCOIN ETFs
INTEREST RATES
Yields continued to rise. They haven't reached support yet and with the upcoming rate cut we are still looking for them to decline further.
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
$TNX has turned itself around and we do see that the PMO is turning back up toward a Crossover BUY Signal. Given Stochastics are below 20 and the PMO is well below the zero line, there is still quite a bit of weakness on the chart. We aren't ready to call a bottom here.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: TLT pulled back toward the breakout point and did hold above it. The PMO has topped so we could see more pullback, but ultimately the PMO is well above the zero line so this is seen more as diminishing strength not new weakness. With rate cuts coming down the line, we could see yields continue to make their way lower and that would benefit bond funds like TLT.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 8/5/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar had a wide trading range today and that helped it form a bullish engulfing candlestick. It is holding above support, but has been unable to break above resistance. We are looking for more trading within the current range rather than a breakout move.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: After hitting all-time highs, Gold is pulling back. It remains above support. The PMO is flat above the zero line so we detect strength. Stochastics have turned over. The Gold Volatility Index ($GVZ) spiked below the bottom Bollinger Band and many times that can lead to higher prices.
Discounts are elevated suggesting investors are on board with the metal. Stochastics did top as did the PMO. The Dollar is likely to chop around right now so we are expecting the same of Gold. We think it will hold this support level for now.
GOLD MINERS (GDX): Gold Miners were not helped by Gold today and the market decline also caused problems. We do note that participation is still very healthy and hasn't really been damaged by the recent decline. We think this pullback will offer an entry point, but we need the market to stay elevated since Gold doesn't look interested in doing much.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 8/1/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: Price was turned away at overhead resistance and we have a feeling this isn't the end of it. Indicators are still biased bullish, but not exceedingly so. We would look for a decline to the next level of support which is very close by. If indicators continue to move higher, this may just be a stumble on the way up.
As noted yesterday, this does look like a bullish "V" bottom on the one-year chart and that would imply a rally to test highs at 78.00. Price did reverse before having to test support at 64.00 and that is bullish too.
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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