We'll talk about today's Bearish Shift on the Silver Cross Index in the Bias section below.
Materials (XLB) were looking very good at the end of Friday, but the chart has gone completely south since then. Two declines were enough to drag the PMO below its signal line generating a Crossover SELL Signal. One of the big problems with the chart besides the PMO is the double top that has formed. The pattern implies we could see a drop close to the 200-day EMA. Participation has also been hit as more stocks lose support at key moving averages. With Gold doing so well, we had expected this sector would benefit, but instead it has reversed.
The weekly chart is still bullish so any decline would likely be short-lived. We have a strong rising trend with a breakout from a congestion zone. The weekly PMO is on the rise with a Crossover BUY Signal well above the zero line.
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: Speaking of double tops, we had one to finish out trading today. After an initial drop, the market climbed and nearly closed higher instead of lower. The double top implies we'll see a decline tomorrow AM.
SPY Daily Chart: Price is consolidating sideways and hasn't lost much ground. We do note that the PMO has topped and is getting close to a Crossover SELL Signal.
The RSI is still positive and is not overbought. The VIX and Stochastics are still displaying internal price strength as the VIX is above its moving average on the inverted scale and Stochastics are holding above 80. We are seeing an upswing in mega-cap participation as the relative strength line to equal-weight RSP is rising again.
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S&P 500 New 52-Week Highs/Lows: New Highs are paring back and New Lows have made a stronger appearance. This is likely why the High-Low Differential has topped in overbought territory.
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) both fell considerably today. The STO-B is getting very close to negative territory. Participation has really thinned out and continues to decline. Less than one third of the index hold positive momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Negative divergences continue to be a problem on the IT indicator chart. While the ITVM is not showing a divergence, both the ITBM and %PMO Xover BUY Signals show lower readings than at previous all-time highs. Only 45% of stocks hold PMO BUY Signals which is below our bullish 50% threshold.
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.
We've been waiting for it based on lower percentages of stocks above their 20/50-day EMAs and today we got it, the Silver Cross Index crossed below its signal line for a "Bearish Shift". This has moved the IT Bias to BEARISH. The Golden Cross Index topped today and given it has a higher percentage than the amount of stocks above their 50/200-day EMAs, it should continue lower. It has some margin to cover before the LT Bias changes from BULLISH to bearish given the margin between it and its signal line.
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 had a number of Bearish Shifts that changed the bias table above, adding more "Bear" biases including today's Bearish Shift on the SPY. Price has leveled off but given the deterioration of all of our indicators we are getting defensive. The PMO is nearing a Crossover SELL Signal and STOs are falling fast. Negative divergences are still a problem on many of our indicators, most notably, participation of stocks above key moving averages which show declining trends. We would exercise caution. Expanding portfolios will be especially difficult when less than a third of the index hold positive momentum. Be careful out there.
Erin is 65% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
Bitcoin finished the day slightly higher as it figures out what to do with the declining tops trendline. The PMO looks very bullish but Stochastics have topped. We would expect the rally to continue, but it may be muted based on Stochastics.
BITCOIN ETFs
INTEREST RATES
Yields were mostly higher on the day. We expect them to continue upward and will likely challenge the 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
$TNX continued its march higher. The RSI is now overbought so it may get hung up around 4.3% but ultimately with the strongly rising PMO above the zero line and Stochastics holding above 80, we would expect it to continue to climb toward 4.5%.
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 fell slightly today offering TLT the opportunity to rally a little bit. The declining trend is intact and the PMO is falling fast and Stochastics are below 20 so we don't expect an upside reversal in Bonds at this time. Yields look far too bullish as well.
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 has now reached overhead resistance. This is where we expect it to stumble as the RSI is very overbought. However, this straight up rally isn't showing signs of weakness. The PMO and Stochastics are about as bullish as you can get. We wouldn't be surprised if we do get the breakout here.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: The positive correlation of the Dollar and Gold continues. All things being equal, we should see Gold move lower on a rally day for the Dollar, but that isn't happening these days. Gold set another all-time high even as the Dollar rallied. Gold looks very good right now and we suspect this rally will continue. The one problem Gold has right now is an overbought RSI. That condition isn't good for Gold based on history so maybe we'll see a little consolidation.
Considering we are at all-time highs, it is interesting that we still have bearish discount levels. This means there are more traders that could get on board with Gold moving forward. We won't worry about sentiment getting too bullish yet. It seems discounts are the norm now. Note the positive correlation with the Dollar that we mentioned earlier.
GOLD MINERS (GDX) Daily Chart: Gold Miners are very overbought, but with Gold still looking bullish, we think they could make their way even higher. Participation is at 100% for stocks above their 20/50-day EMAs and the Silver Cross Index is at 96%. There is clear strength here. Should Gold finally cool off, be prepared for a healthy decline as they are very overbought.
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 rallied today and it has turned the PMO back up. We are cautiously bullish based on that PMO reversal. Stochastics are still very negative, but they did turn up today. The 200-day EMA and horizontal resistance are likely to be a problem, but given the slight improvement on the indicators, we will look for more upside for now.
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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