It was a good market day for all of the indexes, but the small-caps rallied spectacularly. Many are attributing this to interest rate cuts in the future. Whatever the reason it does give us insight that the broader market is participating in this rally and that can keep things elevated.
There is a large double top still plaguing the chart, but a rally above those two tops would negate the pattern. This reversal is coming right off the 200-day EMA. The Silver Cross Index has turned back up and participation of stocks above key moving averages is gaining. Given the percentage of stocks above their 50-day EMA is above the Silver Cross Index, it should continue to rise. Relative strength shows that IJR has been underperforming the SPY but this new rally has pushed them toward outperformance.
The double top formation does look dangerous on the weekly chart as it formed just below resistance. The weekly PMO bottomed and we do have a rising trend. Still it will be a challenge to get to all-time highs given overhead resistance.
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.
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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 8/14/2024
LT Trend Model: BUY as of 3/29/2023
SPY 10-Minute Chart: Price rallied to start the day and was steady into the close.
SPY Daily Chart: The rally looks pretty good right now and we have a new PMO BUY Signal confirming it. Total volume was a bit low today so there wasn't that much conviction in the rally.
The double top continues to hang over the SPY, but it appears it will soon bust with a breakout above both of those previous tops. Stochastics look very strong and the VIX is holding above its moving average on the inverted scale. We do detect internal strength.
Here is the latest recording from 9/9. Click HERE to get the link to video library.
SPY Weekly Chart: The double top looks less daunting with this week's rally, but resistance is right here and could pose a problem. The weekly PMO is turning back up. Price is not overbought based on the weekly RSI.
New 52-Week Highs/Lows: New Highs expanded as we would expect on a rally day and New Lows were negligible. The High-Low Differential is usually good at predicting tops, but its decline hasn't really resulted in price deterioration. It is still something to keep in mind.
Climax Analysis: There were two climax readings on the four relevant indicators today, so we have an upside exhaustion climax. It is reasonable the conclude that the upside thrust could be over, but we'll be watching to see how the market opens on Monday. As noted earlier, we didn't see much volume on the rally.
*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) jumped up today confirming the rally. Participation is expanding again and we now have 60% of stocks showing rising momentum. These are good numbers.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
We are listing the ITBM and ITVM as 'overbought', but they can certainly accommodate more upside rally before hitting extremes. Both are now rising which confirms already rising short-term indicators. %PMO Xover BUY Signals has reversed higher this week but is still reading below our 50% bullish threshold.
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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 strongest IT Bias belongs to Consumer Staples (XLP) which have been enjoying a steady rally higher. However, we do notice that neither the Silver Cross Index (SCI) and Golden Cross Index (GCI) didn't see any gains this week.
The lowest IT Bias goes to Semiconductors (SMH) which is trying to rebound right now. Based on no gains on the SCI, the group is still vulnerable.
This table is sorted by SCI values. This gives a clear picture of strongest to weakest index/sector in terms of intermediate-term participation.
Real Estate (XLRE) holds the top spot on the SCI table. This defensive group has seen much success on the back of lower mortgage rates. It is continuing to build strength as the SCI gained three percentage points this week.
Energy (XLE) is very bearish right now and holds the lowest SCI percentage. It lost a huge 14 points to the SCI this week. While it looks like it is reversing, we aren't very bullish yet and this table is one of the reasons.
This table is sorted by GCI values. This gives a clear picture of strongest to weakest index/sector in terms of long-term participation.
Regional Banks (KRE) hold the top spot on the GCI table, but it did lose a percentage point. It also lost some ground on the SCI so we would use caution in this industry group. It may be beginning to deteriorate internally.
Semiconductors (SMH) lost a huge 12 percentage points on the GCI so while they may be reversing higher right now, the internals are still weak.
Biotechs (IBB) and the Nasdaq Composite (ONEQ) are in the basement but IBB does appear to be gaining again so that group is worth a watch. ONEQ is holding steady at this low level suggesting there is some internal weakness.
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 both the intermediate and long terms.
Today the Silver Cross Index saw a Bullish Shift across the signal line so the IT Bias has moved to BULLISH again. The reading itself is healthy at over 70% and given the percentage of stocks above their 50-day EMA is greater, the Silver Cross Index could continue to move higher.
The Golden Cross Index has ticked lower and is still somewhat vulnerable to decline as the percentage of stocks above the 200-day EMA is reading at about the same level. It is above its signal line so we continue to read the LT Bias 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: We saw a Bullish Shift by the Silver Cross Index today moving the IT Bias to "BULLISH". Participation is expanding nicely and both STOs as well as the ITBM and ITVM are rising. This all bodes well for next week, but we do have the problem of an upside exhaustion climax. Total volume also was not really behind this rally. Yet with burgeoning participation readings and broader participation by small-caps, the market is set up for follow through next week. The FOMC will give us its final decision on the rate cut Wednesday so the market could see muted trading until the announcement is made. Bullish indications are many right now so we have to look toward higher prices, but as we often say, we will take our cue from the open on Monday to see if there is anything to today's upside exhaustion climax. We also want to be on the lookout for a bull trap.
Erin is 30% long, 0% short.
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CALENDAR
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BITCOIN
Bitcoin Daily Chart: Bitcoin is bounded in a large trading range. It is now making its way back up toward resistance at the August top. The indicators have really firmed up with a new PMO Crossover BUY Signal and newly positive RSI. Price avoided a Death Cross as it moved back above the 50/200-day EMAs. We expect more upside.
Bitcoin Weekly Chart: We see high level consolidation after the parabolic breakdown. It has basically formed a very large bull flag. If nothing else, we should see the top of the declining trend channel tested. The weekly PMO is decelerating possibly in preparation.
BITCOIN ETFs
Today:
This Week:
INTEREST RATES
Yields lost initial support and are headed down to test the next support level. With a rate cut on the horizon we expect that the other yields will fall in sympathy so this next support level is suspect.
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 tried for a brief reversal this week, but ultimately it continues lower in a steep declining trend. The PMO is flat and unresponsive, but Stochastics are below 20 and the RSI is very negative. We expect it to move even lower.
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 6.35 to 6.20.
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: Bonds should continue to enjoy their time in the sun with yields looking weak. We saw a breakout this week and price is holding above new support. The PMO is on the rise and based on the RSI, price is not overbought. Stochastics are holding above 80 suggesting internal strength.
TLT Weekly Chart: We have a confirmed bullish reverse head and shoulders on the weekly chart. Price made its way above the down sloping neckline this summer which confirmed the pattern. Price will have strong overhead resistance to deal with soon, but given the rising weekly PMO and positive weekly RSI and the chart pattern, we should look for an upside breakout.
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 has formed a short-term double top which is bearish. A drop below the confirmation line (middle of the "M") would imply a drop below the August low. The PMO is still technically rising, but Stochastics have just dropped below 80 suggesting internal weakness.
Price is struggling to get back above the 200-day EMA, another sign of weakness.
UUP Weekly Chart: As we would expect, price has broken down from the bearish rising wedge. These patterns unfortunately don't list minimum downside targets, but we've often heard technicians look for a decline the height of the back of the pattern. That would be a deep decline. The weekly PMO is declining and does suggest more downside ahead for the Dollar in the intermediate term.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold set another fresh all-time high and appears off to the races, finally. There is a new PMO Crossover BUY Signal and Stochastics are back above 80. The RSI is getting overbought, but we've seen Gold rallies like the one in March/April hold overbought conditions for some time. That is what we are expecting this time.
We're very surprised by the spike in discounts which suggest traders are quite bearish on Gold still. Let's remember that sentiment is contrarian so a spike in bearish sentiment is actually good for Gold. We're not sure what this is about given Gold is at all-time highs, but we'll take bearish sentiment as being a positive right now.
GLD Weekly Chart: After spending time in a consolidation range, Gold finally broke out. The weekly PMO has surged (bottomed) above the signal line. The weekly RSI is overbought, but as we see, it can hold those conditions for a few weeks.
GOLD MINERS Daily Chart: Gold Miners are loving the rally in Gold. A market bounce hasn't hurt either. Gold looks ready to rally higher so this industry group should reap the rewards. The PMO is nearing a Crossover BUY Signal and the Silver Cross Index had a Bullish Shift across the signal line. Participation has shot to the sky and Stochastics are rising very strongly. The RSI is not overbought so it can accommodate even higher prices. There should be more upside.
GDX Weekly Chart: In general, GDX is in a very wide trading range and it is getting close to a resistance zone between the 2020 and 2022 highs. However, with a very bullish picture for Gold and the weekly PMO surge above the signal line, we don't think it will struggle too much against it. Still, we do need to understand that there is resistance ahead.
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 was down slightly today. This looks like a pretty good price bottom, but the PMO is currently flat below the zero line so we don't detect much strength behind this move. Overhead resistance is nearing again.
Price did rebound before testing support at 64.00 which is very bullish, but as noted above the PMO isn't getting behind this rally yet. Stochastics are rising so we do expect overhead resistance to be met soon. We just don't think the rally will have staying power. We may see another trading zone like we saw at the end of 2023 and into February of 2024.
USO/$WTIC Weekly Chart: The rising bottoms trendline has been compromised and this week's rally did not recapture it. The weekly PMO is falling and could hit negative territory soon. The trading range is likely to stay intact. Support has not been tested yet so there is certainly downside potential based on the weekly chart.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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