We normally cover this subject on Fridays, but mortgage rates ticked up for the second week in a row, having found support on the line drawn across the 2023 low. Concern about what the Fed may or may note be able to do next is likely a contributing factor. Great suspense is building regarding tomorrow's PPI reading.
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/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 spent most of the day below yesterday's close. Likely we are seeing indecision as the PPI report and Consumer Sentiment will be released tomorrow. The messaging from the Fed does imply we will see another interest rate cut ahead.
SPY Daily Chart: Today's decline didn't change the direction of the PMO. It continues to rise higher. Total volume was light again.
The VIX didn't make much headway on today's consolidation as traders are still showing some nervousness. Stochastics look very good as they rise above 80 suggesting there is some internal price strength. Mega-caps continue to outperform based on the rising relative strength line to equal-weight RSP.
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S&P 500 New 52-Week Highs/Lows: New Highs dropped as we would expect. If we mark yesterday as a top, we have a negative divergence with price in the short term. The High-Low Differential turned back down today.
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.
The Swenlin Trading Oscillators (STOs) continued higher but the STO-B remains in negative territory which throws a little shade on the advance. We have negative divergences developing on participation indicators given yesterday's all-time high.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Both the ITBM and ITVM moved lower. The ITVM had inched higher yesterday, but is back in decline. Neither of these indicators confirm rising STOs. We saw no new PMO Crossover BUY Signals. It is likely to decline soon given there are fewer stocks with rising PMOs.
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 had a Bearish Shift across the signal line today. This gives us a new BEARISH bias in the intermediate term. It is likely to continue lower given we have fewer stocks above their 50-day EMAs. The Golden Cross Index stagnated today. It may stay here given there are the same amount of stocks above their 200-day EMAs as those with Golden Crosses. The Golden Cross Index is still above its signal line so the LT Bias is 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 still have a problem with broad market participation. Mega-caps are beginning to outperform again and that could conceivably keep the large-cap indexes elevated. However, we note new negative divergences in the short term that need to be resolved. While STOs are still on the rise, both the ITBM and ITVM are moving lower. This smells like a bull trap on yesterday's all-time highs. While the index could continue moving higher based on the rising PMO and Stochastics, we would apply caution given today's Bearish Shift by the Silver Cross Index.
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 is headed down to the next support level. Given very weak Stochastics and falling PMO, we don't think this next level will hold. More than likely price will test support at 54,000.
BITCOIN ETFs
INTEREST RATES
Yields Yields were mixed on the day. The rising trends have been established and we would look for interest rates to continue moving higher.
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 now have a break above the 200-day EMA. The yield did close beneath it, but this is a very bullish move. The RSI is now overbought so a cooling period may be warranted. The PMO is rising strongly above the zero line now and Stochastics are holding above 80. Look for a pause in the action before $TNX advances further.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: TLT formed a bullish hollow red candlestick on support. This is a strong area of support as it coincides with the 200-day EMA, horizontal support and the rising bottoms trendline. As strong as this appears to be, we suspect it will be broken. If we are going to get higher prices, the time is now while the 20-year yield shows a little bit of weakness. However, indicators tell us this level of support will eventually be broken.
On the one-year chart, the rising bottoms trendline has been broken.
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 went mostly unchanged today. We have a clear bearish shooting star candlestick that tells us to expect a pause in this incredible rally. The RSI moved out of overbought territory today, but it could use more decline or a pause to bring it lower. The PMO and Stochastics look very strong right now so we aren't expecting a big decline, just a move toward support at 28.70.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold managed a nice rally today off the rising bottoms trendline. Price is back above the 20-day EMA. We don't like what is happening to the PMO and Stochastics, but the Dollar does look ready for a pullback so we could see Gold proceed slightly higher. At this point we aren't looking for new all-time highs.
Gold is not tied so closely with the Dollar given the correlation is near zero. We still think a rising Dollar would apply downward pressure, but so far Gold is holding up.
GOLD MINERS (GDX): Gold Miners saw a big rally today as Gold was up quite a bit. The short-term declining trend was slightly broken. Participation of stocks above their 20/50-day EMAs did see a recovery. We could see a bit more rally here if Gold can hold up to the Dollar.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 7/31/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: Crude Oil rallied strongly after pulling back yesterday. The hurricanes are not helping and the Middle East remains in turmoil so more upside is likely. Given Stochastics are in decline, we do see the possibility that price will stay underneath resistance a bit longer. We should get a Silver Cross of the 20/50-day EMAs tomorrow which would give us an IT Trend Model BUY Signal.
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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