Both Meta Platforms (META) and Microsoft (MSFT) both report after the bell tomorrow so we thought we would preview the charts.
MSFT is in a nice short-term rising trend. We have a new Silver Cross of the 20/50-day EMAs. The RSI is not overbought so it can definitely accommodate more upside. The PMO is rising on a Crossover BUY Signal and just vaulted the zero line. Stochastics are holding above 80. You'll note in relative strength studies that the Software group is beginning to outperform the market. MSFT is showing leadership against the SPY. It isn't technically outperforming its industry group near-term, but over time it does seem to show some leadership. The picture is technically sound going into earnings.
The weekly chart is very favorable with a nice rising trend channel. Price is now bouncing off the bottom of the channel. The weekly PMO is trying to turn back up.
META is on a nice rally near-term. It appears to be a breakout from a bull flag. The RSI is positive and not overbought and the PMO has turned back up. Stochastics are rising and have reached positive territory. Relative strength is picking up for the Software group and META is outperforming the SPY currently. It isn't the best Software stock given it is losing strength against the group. Overall this is a positive picture.
META is holding onto a strong rising trend. The concern is that price may need to go test the rising bottoms trendline. The weekly PMO looked very negative with a top beneath the zero line, but it has since turned back up.
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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 down on the open but spent the rest of the day erasing losses. The last ten minutes of trading saw a strong decline that took out some of the day's profit.
SPY Daily Chart: The bearish filled black candlestick did not resolve with lower prices today which is bullish. Price is still churning around sideways. The PMO is still in decline. Total volume was right on average.
Stochastics had just turned up yesterday but today even with the rally, they turned back down. They are still in positive territory so there is only slight weakness here. Volatility remains low, squeezing the VIX tightly between its Bollinger Bands.
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S&P 500 New 52-Week Highs/Lows: What strikes us about the New Highs/New Lows chart is the very negative High-Low Differential. We didn't see any New Lows and we saw New Highs expand slightly.
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.
Swenlin Trading Oscillators (STOs) are in negative territory but they are rising which is bullish. On the rally we did lose some participation of stocks above their 20-day EMA and we lost some rising PMOs which is bearish.
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 moving lower, not confirming the rising STOs. They've not yet reached negative territory but are headed that way. We lost more PMO BUY Signals on the rally which is bearish.
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.
The Silver Cross Index continues to dive lower despite price being near all-time highs. This highlights the negative divergences on %Stocks > 20/50/200EMAs. Participation percentages are all very low. We lost more stocks above their 20/50/200-day EMAs. The Silver Cross Index is below its signal line so the IT Bias is BEARISH. The Golden Cross Index halted its decline and remains above its signal line so the LT Bias is BULLISH still.
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: Bearish biases continue to be added to our Bias table above so there is deterioration going on under the surface. While STOs are rising, we saw shrinking participation and loss of PMOs rising and PMO BUY Signals. We still have to contend with negative divergences on %Stocks > 20/50/200-day EMAs. Given the problems with nearly all of the other indicators (including the PMO and Stochastics), we suspect we will see more churn. It's due for a decline, but the mega-caps are reporting and this could spur prices onto a breakout to new all-time highs despite the weakness under the hood. For now we expect more sideways movement with low volatility going into next week's election and Fed interest rate announcement. The expectation is a 0.25% cut.
Erin is __% long, __% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
Bitcoin is off to the races and is headed to new all-time highs. The PMO is accelerating higher, but we do notice the RSI has gotten overbought. It hasn't liked that condition historically on the chart so we wouldn't be surprised if we saw a pause in the action.
Bitcoin Weekly Chart: This breakout is especially bullish as it is executing a large bull flag on the weekly chart. The flag implies much much higher prices for Bitcoin. The weekly PMO is about to give us a Crossover BUY Signal above the zero line.
BITCOIN ETFs
INTEREST RATES
Yields took a breather today, pulling back slightly. We believe this is temporary. Yields should continue to rise toward 2024 highs.
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 are monitoring a short-term bearish rising wedge on $TNX that would imply an upcoming break of the rising bottoms trendline. $TNX is overbought based on the RSI so we could see a pause in this rally soon.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: The 20-year yield was lower today offering TLT the opportunity to rally. We see a possible pause coming on yields so we could see an upside reversal here soon. We wouldn't necessarily buy into it as we do think this condition is temporary. Yields are likely to move higher again.
The rising bottoms trendline was broken on this decline, but as we noted above, this could be a good place to see an upside reversal. The PMO hasn't turned up and overall TLT looks very bearish in its declining trend so don't expect much on the upside.
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, but today it did form a bearish filled black candlestick that would imply a decline tomorrow. The biggest problem is the overbought RSI, but at the same time, it has held overbought conditions for some time. It is definitely overdue for a decline, but Stochastics have turned up again indicating we could see even higher prices for UUP.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold broke to new all-time highs again. It has a tendency to breakout and then consolidate or pullback, then breakout again. Here's the breakout so now we should expect a little sideways movement soon.
The indicators are very bullish and suggest we will continue to see new all-time highs on Gold. It is a strong rising trend and with positive indicators, it should hold up longer.
GOLD MINERS (GDX) Daily Chart: Gold Miners reversed today before having to test the bottom of its rising trend channel. This is good news as this could be the beginning of the next leg up. The PMO is about to bottom above the signal line and Stochastics are turning up. Participation remains robust suggesting we could see higher prices from here.
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 is still headed down. The PMO just entered negative territory and Stochastics are nearly below 20 indicating severe weakness. We aren't looking for a rebound yet.
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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