The market hit new intraday all-time highs today early in the day, but ultimately price retreated into negative territory. A little buying to finish the day got it back in positive territory.
It is clear that rate cuts have been priced in with the latest rally so we have to wonder what the reaction will be to tomorrow's likely rate cut announcement. Should we see a 50 bps cut, the market is likely to cheer and hit all-time highs easily. If not, we could see more muted trading as price inches toward those all-time highs again. The 10-minute PMO is moving higher again so all-time highs do seem likely.
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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: Price formed a bearish filled black candlestick today that would imply a down day ahead tomorrow. However, with rate cuts likely to hit the airwaves tomorrow, we do expect to see all-time highs.
The double top was officially busted with the trip to intraday all-time highs today. Now we concentrate on the rising trend. The VIX is right on its moving average and is telling us very little. Stochastics are still rising above 80 which implies internal strength.
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S&P 500 New 52-Week Highs/Lows: SPX New Highs contracted today, even though SPY made intraday all-time highs. No New Lows were detected despite seeing lower prices during much of the afternoon. The High-Low Differential had turned up yesterday but today resumed its decline.
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.
Both STOs are still on the rise, but have reached overbought territory. They can certainly accommodate higher prices, but we do need to monitor this closely. Given it was a day where there was little change in price, it isn't surprising to see very little expansion in %Stocks > 20-day EMAs. We do note that %PMOs Rising topped out today.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM and ITVM are rising in overbought territory. Like the STOs they can accommodate more upside price action. We should point out the positive divergences on this chart with all three indicators. This does suggest another leg up. %PMO Xover BUY Signals moved above the signal line today and is now reading above our bullish 50% threshold.
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 continues to expand overall and is reading at very healthy levels. As with the intermediate-term indicators, we have bullish positive divergences leading into this next leg up. Both the Silver Cross Index and Golden Cross Index are above their signal lines so the IT and LT Biases are read as BULLISH. They are not overbought and are holding at healthy levels.
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: Biases are moving bullish again on the Bias Table above. All of the indexes hold IT Trend Model Silver Cross BUY Signals. Price did manage to make an all-time high intraday but couldn't hold onto it. With the large amount of positive divergences on our intermediate and long-term charts, we should look for a rally continuation. STOs and the ITBM/ITVM are rising in confirmation. The market is waiting for the FOMC announcement tomorrow and typically we see quiet trading leading into it. With overhead resistance slowly being chipped away, we suspect a close at all-time highs isn't far off and a 50bps rate cut could propel the market much higher tomorrow. A smaller 25bps cut may not have a similar reaction as that does seem to be priced in already. We remain cautiously bullish.
Erin is 30% long, 0% short.
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CALENDAR
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BITCOIN
Bitcoin found support and has now rallied to the declining tops trendline. The PMO has accelerated higher on today's big rally and suggests we will see a break in this shorter-term declining trend. We are looking for a move to challenge the August high.
BITCOIN ETFs
INTEREST RATES
Yields were up on the day, but the declining trends are still very steep suggesting we will see them continue to trend lower. Support is about to be reached, but with rate cuts on the horizon, we aren't so sure they will hold at that 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
Yesterday's comments still apply:
"The declining trend is steep and it doesn't appear that $TNX will break free from it. The PMO is flat beneath the zero line and that implies pure weakness. Stochastics are also below 20 and the RSI is negative. We aren't looking for 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 was down as the 20-year yield saw a gain today. The chart is still very bullish. Price is not overbought based on the RSI and the PMO continues to rise. The PMO is also flat above the signal line which implies pure strength in this move.
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 reversed before confirming the bearish double top. The pattern will remain in force until price breaks above the resistance at those two tops. We do see that the PMO is turning up already, but with Stochastics still in decline, we are going to look for the double top to be confirmed soon.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold is cooling after hitting new all-time highs. This seems to be the typical reaction. The Dollar still has a somewhat bearish bias so as we noted yesterday we're looking for more consolidation with a 'melt up'.
Gold is still showing a rising trend in relative strength to the Dollar which also falls in line with our melt up conclusion.
GOLD MINERS (GDX): Yesterday's comments still apply:
"Gold may be cooling after hitting all-time highs so it may be time for Gold Miners to cool as well. This would likely offer a great opportunity to get involved with a very strong industry group. Participation is incredibly strong and there is a new PMO Crossover BUY Signal. Stochastics just popped above 80. We still see higher prices for GDX, it just may require a small pullback or pause in line with Gold."
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 8/1/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: Crude Oil is advancing again after setting up a new support level at 66.00. This looks like a good rally and should see continuation, but the PMO and Stochastics are still looking lukewarm. The PMO is also well below the zero line. Price is now at an important line of resistance. This could mean we will see a pause in the rally here. If indicators were stronger we would definitely be looking for a breakout here, but they aren't, so we will say we are cautiously bullish.
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. It all comes down to how price handles this resistance level.
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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