Alphabet Inc (GOOGL) will be reporting earnings after the bell tomorrow so we thought it a good time to review the chart and get an update on the technicals. Holding through earnings is always dicey, but in many cases if you have buy and hold or long-term positions or dividend payers, you may be stuck holding through them. It's always a good idea to know the technicals regardless.
GOOGL has formed a bullish reverse head and shoulders pattern that implies we will see a rally that could extend to prior all-time highs. Today saw a bearish filled black candlestick and that portends a decline tomorrow, but with earnings it's really anybody's guess.
We like what is happening technically on the chart. The RSI is positive above net neutral (50) and is not overbought. The PMO is flat right now due to the lack of a rising trend this month, but it is above the zero line on a Crossover BUY Signal which bodes well. We can also see Stochastics rising in positive territory. Relative strength is improving somewhat for the group. GOOGL holds a leadership role within the group given its rising relative performance against the group. It is starting to show a little outperformance against the SPY. We have marked a 6.3% stop if you want to take a chance here, but it could be set thinner and closer to the 200-day EMA.
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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 10-Minute Chart: The market gapped up on the open taking out Friday's declining trend, but it failed to move from there, moving mostly sideways. Earnings could get things going again.
SPY Daily Chart: Price formed a bearish filled black candlestick today that does imply that we'll see a decline tomorrow. Price is essentially moving sideways, churning around. The PMO is still in decline on a Crossover SELL Signal.
Stochastics did tip upward today in positive territory above net neutral (50). Low volatility has caused the VIX to be squeezed tightly by its Bollinger Bands. It's not very enlightening right now. It is interesting to note that the current readings are higher than the two previous times we saw thin Bollinger Bands suggesting there is some trepidation about this market.
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S&P 500 New 52-Week Highs/Lows: New Highs pared back on the rally which we don't really want to see on a rally day. The High-Low Differential looks especially bearish right now.
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 OVERSOLD.
A sign of possible health within the market is the upside reversal of both Swenlin Trading Oscillators (STOs). The reversal occurred in oversold territory as well. Participation is still rather thin but %Stocks > 20EMA is at our bullish 50% threshold. We finally saw some new rising PMOs within the index, but less than a third carry positive momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The IT Breadth Momentum (ITBM) and IT Volume Momentum (ITVM) are continuing to move lower so we still see some problems intermediate-term. We currently have a negative divergence on both the ITBM and %PMO Xover 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 BEARISH in the intermediate term.
The market bias is BULLISH in the long term.
Both the Silver Cross Index and Golden Cross Index are in decline. The Silver Cross Index is below its signal line (10EMA) so the IT Bias is BEARISH. The Golden Cross Index is above its signal line (20EMA) so the LT Bias is BULLISH, but it is getting close to a Bearish Shift across the signal line.
The real problem on the chart are the negative divergences on %Stocks > 20/50/200EMAs. We are near all-time highs, but we do not have a large amount of stocks above their key moving averages as we did previously.
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 managed a rally today on the gap up at the open, but price really didn't do anything after that. It seems investors are in pause mode as they contemplate the election and numerous earnings reports on the horizon. For this reason we aren't expecting a big move in either direction at this point, but good earnings on some of the mega-caps could spark something. The STOs turned up today in oversold territory and that is definitely bullish, but we aren't seeing much confirmation given the declining PMO and negative divergences. We would look for more churn or sideways trading barring a blow out earnings day.
Erin is __% long, __% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
Bitcoin pulled back to support, but essentially held above the declining tops trendline. It is headed higher now and we think this may take price to all-time highs again. The PMO has surged above the signal line and Stochastics are rising again. Best part is that the RSI is not overbought yet and can accommodate more upside.
BITCOIN ETFs
INTEREST RATES
Nearly all yields were higher on the day. They are in strong rising trends so we do expect them to rise further from here.
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
We have a bearish rising wedge on $TNX that would imply an eventual breakdown. This isn't surprising given the nearly vertical rally it has been enjoying. That pace will be tough to keep up with and we do see some resistance here at 4.3% so it could be time for $TNX to take a breather.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: With yields on the rise Bond funds are suffering. Yields could see a pause which would offer TLT an opportunity move higher, but we are expecting yields to hit 2024 highs again. The PMO is headed lower and Stochastics have topped below 20 which tells us there is extreme weakness here.
The next level of support doesn't arrive until price gets to about 89.00. We also see that the longer-term rising bottoms trendline has been compromised.
DOLLAR (UUP)
IT Trend Model: BUY as of 10/9/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar is still holding a steep rising trend. The RSI is overbought which is no surprise given the rally. It indicates a possible pause ahead. The PMO is very strong so any decline will likely be temporary. Stochastics are very strong above 80.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold is in a holding pattern. Its personality right now is to rally to all-time highs, then pullback or consolidate. We are in the consolidation phase right now but we believe it will break to new all-time highs again. The PMO is flat above the zero line indicating pure strength and Stochastics are rising well above 80.
Despite being at all-time highs, discounts have not let up so there is more bullish sentiment to be had out there.
GOLD MINERS (GDX) Daily Chart: Gold Miners are in pullback mode while Gold consolidates. This group is still very strong based on the extremely high readings on the Silver Cross Index and Golden Cross Index. We also have pretty good participation of stocks above key moving averages. Stochastics do suggest we have more downside to absorb before an upside reversal.
CRUDE OIL (USO)
IT Trend Model: BUY as of 8/10/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: Israel's attacks did not target energy particularly Crude so fears were assuaged. Fear is what was keeping prices moving higher. The rising trend has now been compromised and indicators are falling apart. $OVX saw a penetration of the upper Bollinger Band on the inverted scale and that will many times lead to decline. We would look for support to be tested at 66.00.
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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