The market is inching higher, but overall we can see since the pop on news of the Fed rate cut, price has basically been meandering sideways. We aren't getting strong follow through. The falling Swenlin Trading Oscillators (STOs) seem to have been giving us notice that we would see this sideways action or a possible decline. We should remain vigilant.
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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: We logged a new all-time high on the SPY today, but as noted yesterday and even today, trading isn't inspired. Today we did see more volume but nothing out of the ordinary. The PMO continues to gently rise and so far the RSI isn't reading overbought yet.
The VIX has seen its Bollinger Bands slowly shrinking as we haven't seen much volatility of late. Stochastics are very bullish as they rise even higher above 80. We don't consider Stochastics an overbought/oversold indicator, we want them to hold above 80.
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S&P 500 New 52-Week Highs/Lows: New Highs did see a slight expansion and the High-Low Differential is rising bullishly. Very good news is no New Lows were detected.
Climax* Analysis: There were no climax readings today. Net Advances/Declines was nearly at zero so again, not a lot of conviction in the rally to new all-time highs.
*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.
Swenlin Trading Oscillators (STOs) are continuing to slide lower suggesting we do have more churn ahead or even a possible decline. We lost some participation on today's rally and we lost rising momentum. We should see these indicators picking up speed on a rally to all-time highs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM was stagnant today as was %PMO Xover BUY Signals. Again we would expect these indicators to be showing strength. The ITVM does look bullish but is definitely in overbought territory.
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 slipped today and given we hit all-time highs we believe participation should be expanding not contracting. However, the Silver Cross Index and Golden Cross Index are rising above their signal lines so the market bias is BULLISH in both the intermediate and long-term timeframes. We also have to add that all of these percentages are robust so we wouldn't expect a decline to be too harsh.
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 made new all-time highs again today, but our indicators are stagnating. Participation thinned only slightly, but it thinned nonetheless. STOs continue to decline, but we do have a positive PMO and very bullish Stochastics. Based on robust participation readings, but Erin's Diamond Scans are producing fewer results despite the rally which means there could be problems developing. The market is due for a decline, but we don't think it will be dastardly given positive intermediate-term indicators. We should be prepared nonetheless.
Erin is 60% long, 0% short.
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CALENDAR
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BITCOIN
Yesterday's comments still apply:
"Bitcoin has now hit overhead resistance as we suspected it will. The short-term declining trend was dispensed with and it looks ready to test the next level of resistance at the July top. Indicators are strong and the RSI is not overbought so we will look for more upside."
BITCOIN ETFs
INTEREST RATES
Yields pulled back today and appear to be headed back to support. This is still an area where we could see them turn back around. Notice with the Fed's rate cut, we are seeing very short-term yields dropping quickly. Maybe the inversions will ease.
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
The declining tops trendline has been broken, but $TNX is already pushing its way back into the declining trend. We do see the PMO acting bullish on a Crossover BUY Signal and Stochastics are also rising, but we still see this as diminishing weakness and not new strength that would carry it much higher.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: Today TLT formed a bullish hollow red candlestick. It was basically unchanged as the 20-year yield barely inched lower today. The rising trend out of the late July low has been broken. Yields are at important support and they are looking slightly more bullish so for now we are going to expect more decline on Bond funds.
The 50-day EMA is arriving as support so we will see if it can hold.
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 was down quite a bit today. The PMO is now beginning to top beneath the zero line and Stochastics sped up their decline today. It isn't looking good for the Dollar but for now we expect this trading range will hold up.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: A weak Dollar helped Gold move higher, but Gold was up much higher than the Dollar was down. You can see the relative strength to the Dollar is rising as Gold continues to make new all-time highs. The RSI is overbought, but we saw in April that it can hold those conditions in the midst of a strong rally like we have now. The PMO is rising nicely and Stochastics are holding above 80 so we should expect more upside. The overbought RSI could mean a pause ahead.
Surprisingly we still see bearish sentiment based on the discount of PHYS. If that sentiment begins turning more bullish, we think Gold could move even higher.
GOLD MINERS (GDX): Gold Miners took off today as Gold made new all-time highs. This group still looks extremely bullish right now given nearly perfect participation and the strongly rising Silver Cross Index. Gold also looks bullish moving forward so we expect this group will continue to impress.
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 managed a rally today but it did form a bearish filled black candlestick. Yesterday's bearish engulfing candlestick did not play out with lower prices so the same may happen with today's. Price is now arriving at key resistance at the 200-day EMA. We should see a breakout there but with the RSI looking somewhat weak along net neutral (50), we wouldn't be surprised if price stumbled at the 200-day EMA.
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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