SPY 10-Minute Chart: The market opened slightly higher, then slipped into the negative. It continued to deteriorate throughout the day, closing slightly above the lows for the day.
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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: Couple of problems are here. First is today's bearish engulfing candlestick that implies we will see a decline tomorrow. The other problem is the high total volume we saw on the selling.
The VIX remains weak below its moving average on the inverted scale. Stochastics topped today, but remain above 80 so we don't detect weakness there yet. Based on the relative strength line to equal-weight RSP, mega-caps are beginning to take a backseat.
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S&P 500 New 52-Week Highs/Lows: New Highs hit overbought territory on today's decline. There are clearly some winning stocks out there when you see this kind of pop on a day of decline. There were no New Lows on the decline which is also positive. The High-Low Differential is rising nicely suggesting we should see more upside.
Climax* Analysis: There were no climax readings today, so it is not a climax day; nevertheless, SPX Total Volume spiked, and we think that could be a sign of downside initiation. We'll be alert for continuation tomorrow.
*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 OVERBOUGHT.
The Swenlin Trading Oscillators (STOs) were mixed with the STO-V moving lower and the STO-B continuing to rise. We didn't see much loss to participation on the decline and while we did lose some rising PMOs it wasn't devastating by any means.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
Both the ITBM and ITVM are continuing to make their way higher, although the ITVM is overbought. We didn't see any new PMO BUY Signals but conversely we didn't see any losses.
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.
Both Silver Cross Index topped today and given we have fewer stocks above their 20/50-day EMAs, it could continue to make its way lower. The Golden Cross Index stagnated. It is still technically lower than %Stocks > 200EMA so it could still reverse higher. Both Indexes are above their signal lines so the IT and LT Biases are still 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 mentioned yesterday that we should be on the lookout for a digestion phase for the market. It appears we are entering it. Participation is still pretty robust so we aren't expecting a deep decline at this time. With Total Volume spiking on today's drop and the bearish engulfing candlestick we do see a high likelihood that this decline will continue tomorrow. We don't like that the STO-V has topped again either. Consider setting stops in case this digestion turns into indigestion.
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 broke above the declining tops trendline but finished the day below it. We do like this rally and see more upside ahead for Bitcoin. The PMO looks especially bullish right now.
BITCOIN ETFs
INTEREST RATES
Yields fell today, but remain in strong rising trends. It may be time for them to ease back a bit as this advance has been nearly vertical.
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 failed at the 200-day EMA and appears ready to take some time to digest the rally. Stochastics have topped, but remain above 80 so we see some weakness. The PMO is decelerating. We do have a recent Silver Cross of the 20/50-day EMAs so we don't believe the advance is over yet, it just seems time for yields to pause a bit.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: TLT rallied today off support. With yield backing off we are likely to see TLT rally further, but given the Dark Cross of the 20/50-day EMAs we don't think it will be a lengthy rally. The PMO is also falling below the zero line so there is still quite a bit of weakness to overcome.
Price has recaptured the rising bottoms trendline so this does seem a good place to look for a bit more rally out of TLT.
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 not stopping. The rally isn't quite vertical, but it is steep. Price has now hit overhead resistance and the RSI is overbought so this would be a good area to look for a pause in the action.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold rallied even as the Dollar rallied. It also formed a bullish engulfing candlestick. The PMO is flat and of no help, but Stochastics are rising nicely. The RSI is positive and not overbought. At this point we are expecting Gold to continue bouncing around in its tight trading range in anticipation of a breakout. We don't think we'll get a breakout until the Dollar at least pauses its straight up rally.
Discounts have really pared back so we do have some bullish sentiment out there. It isn't overly bullish as we still have a discount and not a premium so we aren't looking for a downside reversal on too much bullish sentiment right now. It is a condition we will need to monitor.
GOLD MINERS (GDX): Gold Miners saw another rally today likely on the rise in Gold prices. This is looking very interesting for entry right now as the PMO has turned up above the zero line and is nearing a Crossover BUY Signal. Participation is improving and we already have a high reading on the Silver and Golden Cross Indexes. Gold still doesn't look especially bullish right now so it may be slow going.
CRUDE OIL (USO)
IT Trend Model: BUY as of 8/10/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: Crude Oil plunged today as news arrived that Israel may not target energy sites in Iran. Technically, this confirmed the short-term double top we pointed out yesterday. The pattern suggests price will return to the late September low. It is only a matter of time before news isn't so good in the Middle East so we still see upside potential here. For now, we do expect a decline toward 68.00.
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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