Today the SPY rallied nearly +1.00% today, but we noticed that not everyone saw a big rally and improved participation. You'll notice below that the NYSE, Mid-Caps (MID) and S&P 600 (IJR) did not rally strongly. In fact, IJR was down -0.11% today while the NYSE and MID were basically unchanged. Another point that needs to be made is that all of them lost participation of stocks above their 20-day EMAs. So it was a great rally today but we didn't see the broad market tag along.
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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: Price gapped up on the open and made its way higher almost the entire day. The 10-min PMO is still rising so we could see some follow through tomorrow. Although Stochastics did top.
SPY Daily Chart: The rally likely prevented the PMO Crossover SELL Signal that was on tap for today. Price is basically moving sideways and still does look toppy to us.
The VIX is still flirting with the lower Bollinger Band on the inverted scale as the VIX readings move into 'nervous' territory. Stochastics did turn back up on the day and remain in positive territory so there is some price strength. Total Volume was rather low today suggesting there wasn't a lot of conviction behind the rally.
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S&P 500 New 52-Week Highs/Lows: New Highs contracted on the rally today which is a negative divergence. The High-Low Differential continues to make its way lower.
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 NEUTRAL.
We did get a piece of good news today and that is that both the Swenlin Trading Oscillators (STOs) turned up. The STO-B is still in negative territory though. We saw very little improvement to our participation indicators. We only saw a few more stocks above their 20-day EMA and rising momentum ticked upward.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
The ITBM and ITVM did not reverse upward today and we saw fewer PMO BUY Signals. At the very least we would've expected more PMO BUY Signals. Of course, with so few PMOs rising right now, it isn't a big surprise.
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 is very near a Bearish Shift that will change the IT Bias to Bearish. Very little ground was made on %Stocks indicators. The Golden Cross Index is flat for now, but given we have fewer stocks above their 200-day EMA it should begin inching lower soon. At this point both the Silver Cross Index and Golden Cross Index are above their signal lines so the IT and LT Biases remain BULLISH for now.
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: It was an excellent rally today for the large-caps. The rest of the market didn't really participate and we need to see everyone on board if we're going to see a rally continuation. Of course we've seen in the past that the large-cap indexes can continue to rise even as the broad market doesn't participate, but it will be an uphill battle. The STOs did turn up on today's rally, but we saw very little expansion in our participation indicators. The ITBM and ITVM continue lower alongside %PMO Buy Signals. It was a great rally, but not much conviction based on lower Total Volume. We don't believe that we are out of the woods yet. The internals still suggest we are at a market top. We have numerous Fed speakers tomorrow and that could mean we'll see some volatile price action.
Erin is 55% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
Bitcoin indicators are not bullish right now and that could mean downside pressure as price tries to make its way back up to resistance. We could be in for some churn as resistance is very near.
BITCOIN ETFs
INTEREST RATES
Yields backed off today, taking a pause in the strong rising trends. We are still looking for them to rise further. Declining tops trendlines are in many cases being tested or overcome.
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:
"Overhead resistance is nearing at the 200-day EMA but given the rocket higher, we would expect to see it overcome. The PMO is rising strongly and should get above the zero line soon. Stochastics can't get much higher. The RSI is not yet overbought so $TNX could continue to rise."
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 rally as the 20-year yield took a breather in its power move upward. Support is arriving at the 200-day EMA and the rising bottoms trendline as well as horizontal support at the June/July tops. We could see a reversal here, but given the very bullish yields chart, we would look for a pause not a full blown rally off that level.
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 pressed the pause button as it digests the recent vertical rally. The PMO is now above the zero line and we see a Silver Cross arriving soon as the 20-day EMA prepares to cross above the 50-day EMA. That would be an IT Trend Model BUY Signal. Stochastics are holding above 80. The expectation is a rally resumption.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold lost some near-term support today. We now have a PMO Crossover SELL Signal and the Dollar still looks very bullish. Gold is likely to continue its decline and lose the next level of support. Look for a test of the 50-day EMA.
One thing that could work in Gold's favor is that it is no longer correlated to the Dollar. It could conceivably move higher with the Dollar. However, given the bearish indicators, we think it unlikely.
GOLD MINERS (GDX): Gold Miners confirmed the short-term head and shoulders pattern with a drop below the confirmation line today. They also dipped below the 50-day EMA. Participation has been leached out by this decline. With weak Gold charts, we expect GDX to struggle. The rising trend is now being tested and will likely fail. The head and shoulders downside target would put price at about 36.00.
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 finally pulled back today, right at overhead resistance. It did hold above the 200-day EMA and while it damaged the PMO it didn't push it backward. Stochastics topped but remain above 80. We would expect this rally to continue, but we could see some bouncing around below resistance first.
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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