Price Momentum Oscillator (PMO) BUY Signals are beginning to fall by the wayside. SP400 (MDY) and SP600 (IJR) have already lost theirs and today we saw two major indexes trigger PMO SELL Signals, the Dow (DIA) and Nasdaq 100 (QQQ). The SPY is likely to lose its PMO BUY Signal tomorrow.
Price has now dropped below the 20-day EMA. Notice that participation was already slipping for stocks above their key moving averages. We still have a healthy reading on both the Silver Cross Index and Golden Cross Index, but given the decline in stocks above key moving averages, they will be headed lower soon.
The weekly chart is still favorable given the strong rising trend and weekly PMO BUY Signal. The weekly PMO is still rising for now.
QQQ also lost support at the 20-day EMA and is quickly headed to test the 50-day EMA. Price never reached all-time highs here. Participation indicators look even worse for QQQ compared with DIA. Less than 50% have price above their 20-day EMA and the Silver Cross Index is in decline, on its way to a Bearish Shift across the signal line.
The weekly chart looks good with a strong rising trend, but it could be time for price to test that trendline. The weekly PMO has topped beneath its signal line.
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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 and spent most of the day in a steady decline. It did shave some losses on the late day rally. We'll have to see if the rally continues on tomorrow's open.
SPY Daily Chart: As noted in the opening, the SPY is very close to seeing a PMO SELL Signal. Price is now sitting on horizontal support at the September top. It did manage to close above the 20-day EMA, but this looks like a market top to us.
The VIX showed weakness today as it dropped beneath its moving average on the inverted scale. Stochastics have topped and are now below 80 so weakness is definitely seeping in.
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S&P 500 New 52-Week Highs/Lows: New Highs were higher than yesterday, but remember these are intraday readings so possibly the end of day rally helped. The High-Low Differential looks very bearish as it declines out of overbought territory.
Climax* Analysis: Today there was only one climax reading (SPX Net A-D Volume) on the four relevant indicators, so it is not a climax day.
*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 are still listing the Swenlin Trading Oscillators (STOs) as "neutral", but the STO-B is technically near-term oversold. We do expect it to decline further as the market loses ground. Participation is sickly. We still have 51% above their 20-day EMAs, but we have lost many rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
We are listing the ITBM and ITVM as overbought, but the ITBM is more neutral than overbought. Both are in decline and we have a negative divergence on the ITBM. %PMO Xover BUY Signals is now near-term oversold, but given the decline is likely just getting started, we expect to see it drop below prior bottoms.
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 make its way lower after yesterday's Bearish Shift that changed the IT Bias to BEARISH. It is reading much higher than %Stocks > 20/50EMAs so it will continue to lose ground. The Golden Cross Index did turn up, but this is likely going to be brief given %Stocks > 200EMA are reading lower. It is still holding 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 finally got the decline that we've been expecting based on weak internals. Internals have not improved, they just keep getting worse. Momentum has been sucked out of the index as evidenced by %Rising PMOs and %PMO Xover BUY Signals reading well below 50%. There aren't enough stocks to come to the rescue right now. The market did make a nice end of day reversal, but given the negative divergences, declining STOs and ITBM/ITVM, we would look for lower prices. The jobs report comes out tomorrow.
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 seems to be digesting this recent rally, but we don't like that it has dropped beneath the declining tops trendline. This is a strong area of support, but the PMO is now topping suggesting the decline could continue past that level. Stochastics also dropped below 80.
BITCOIN ETFs
INTEREST RATES
Yields continue to soar higher. We expect this condition to continue as they make their way back 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
Yesterday's comments still apply:
"$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: TLT is back on the decline as the 20-year yield soars ever higher. We don't see yields stopping their rise anytime soon so we expect TLT will make its way even lower. We don't think this will be over until it gets closer to 87.00. Then we will reassess.
DOLLAR (UUP)
IT Trend Model: BUY as of 10/9/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: So much for overhead resistance! The Dollar had no problem vaulting the resistance line. It did form a shooting star candlestick which often appears at a top so maybe we'll see a small pullback. The RSI is very overbought so a decline or at least a pause is needed to move it back below 70.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold took a breather after logging new all-time highs yesterday. A rising Dollar didn't help but Gold was down much further than the Dollar was up so there was plenty of selling today. Stochastics topped, but that is the only bad news indicator we have. Today's decline took the RSI out of overbought territory. We think we could see a bit more decline to test support, but the rising trend is strong so the picture is still bullish overall.
The Dollar is due for a pause and given it is positively correlated with Gold it lends credence to a possible short-term decline for Gold here.
GOLD MINERS (GDX) Daily Chart: Gold Miners took a breather on the decline in Gold and the market as a whole. The RSI is no longer overbought but we see more decline as likely as the rally has really gotten overheated. Participation is still amazingly strong so after a pause, we will look for higher prices.
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 fell and failed to overcome resistance at the 200-day EMA and September top. The PMO has flattened and Stochastics have turned up. Given those slightly positive indicators we will look for a breakout above that level.
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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Price Momentum Oscillator (PMO)