SPY 10-Minute Chart: The market has been sluggish for more than a week, and we were kind of looking for prices to break down; however, market indexes were up strongly before the open, although it was not clear what it might be in response to, possibly the mild jobs report. After the initial gap up, prices began to deteriorate, losing all the gains just past midday. It then bounced and recaptured about half of earlier gains. The picture leaves us with a neutral impression.
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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: While we did see a new all-time high, price formed a bearish filled black candlestick. These one-day patterns suggest a decline the following day. The PMO is still rising, but is near-term overbought now.
Stochastics did top but remain firmly above 80. The VIX is meandering upward on our inverted scale. It is above its moving average so it is still reflecting bullish market participants.
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S&P 500 New 52-Week Highs/Lows: We saw slightly more New Highs today, but also logged a few New Lows. We do see a declining trend on New Highs and that is a negative divergence with price. The High-Low Differential looks very healthy as it rises, but it is nearing overbought territory.
Climax* Analysis: There was only one climax reading today. Notably, the last climax day was an upside exhaustion last week. This could be follow-on.
*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 NEUTRAL.
The Swenlin Trading Oscillators (STOs) are now both falling in concert again. Admittedly the falling STO-B hasn't resulted in any downside price action, but it is getting close to negative territory. Participation saw a slight increase. %Stocks > 20EMA are still reading at a healthy level. Our concern is the declining trend in %PMOs Rising. That sets up a negative divergence.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
We still see the ITBM in decline, but the ITVM surged upward today. It is attempting to dispel a possible negative divergence with a move above the prior ITVM high. Unfortunately we do have negative divergences on the ITBM and %PMO Xover BUY Signals. There are still more than 50% with PMO Crossover BUY Signals, but given we have hit new all-time highs, we should be seeing far more 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 terms.
The Silver Cross Index turned back up today and given there are more stocks above their 50-day EMA versus the Silver Cross Index, it could continue to make its way higher. The Golden Cross Index did decelerate somewhat but we do see there are more stocks above their 200-day EMA versus those with Golden Crosses so it should continue to rise a bit further. Both the Silver Cross Index and Golden Cross Index are above their signal lines which is why we read the IT and LT Biases as 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: The market logged a new all-time high but at the same time set up a bearish filled black candlestick. This is inline with our overall sense of neutrality within the market, bullish on the one hand and bearish on the other. We still favor a near-term decline based on falling STOs and the negative divergences that are beginning to appear on the indicators. As we noted yesterday, our primary concern is the rising momentum in stocks is slowly getting sucked out of the market. %PMO Xover BUY Signals has stagnated around 50%. Momentum is key to keep the rally going and it is deteriorating. We aren't looking for a deep decline at present given the strength of the Silver Cross Index.
Erin is 60% long, 0% short.
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CALENDAR
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BITCOIN
We've been waiting for the breakout and today we saw a small one. However, price closed back below that resistance level. The indicators are still robust. Stochastics even turned up today. Price is not overbought yet based on the location of the RSI below 70. We are looking for more upside.
BITCOIN ETFs
INTEREST RATES
Yields are reversing higher in most cases at strong support levels. It implies that we are going to see them rise further from here. Bond funds are already feeling the pressure.
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:
"$TNX is in a rising trend and did ultimately break above its declining trend in the short term. Longer-term it is still in a decline, but we must admit that the indicators are bullish enough to expect more upside here. Momentum looks good, but the PMO is still well below the zero line so the yield could see this rally fail. Stochastics do look very bullish and the RSI did move above net neutral (50) so for now we will look for $TNX to rise a bit more."
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: TLT managed a small gain as the 20-year yield was slightly lower on the day. The PMO is no longer flat above the zero line and is headed lower, putting margin between it and its signal line. We see this as a sign of weakness not diminishing strength, meaning it isn't likely to reverse higher here.
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 is trading seeing sloppy trading within a trading range. We suspect this will continue with a likely trip to test support based on falling Stochastics. The flat PMO is below the zero line so while it is rising, it is only diminishing weakness not new strength. The RSI is negative. We expect more choppy trading within the current range.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: The falling Dollar meant higher Gold prices today. Gold just keeps on hitting new all-time highs and we expect that to continue. It is due for a breather as the overbought RSI implies, but we would look for a pause rather than a big decline. The indicators are just too bullish.
We continue to be surprised by the somewhat elevated discounts given Gold is making new all-time highs. There is still bearish sentiment out there. That should work in Gold's favor as more investors get bullish on the metal.
GOLD MINERS (GDX): Gold Miners continue to move higher and given the bullish outlook on Gold, this should continue. Participation is excellent, in some cases, it couldn't be better given 100% are above their 20/50-day EMAs. While these readings are overbought, we can see that overbought participation isn't always a problem and it can persist. We want to see a pullback to get an opportunity for entry into this high flying group.
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 tanked today (pun not intended), gapping down and dropping below the next level of support. This will put downside pressure on the Energy sector. With the PMO topping well below the zero line, we should expect more decline. This PMO configuration is a sign of pure weakness.
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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