SPY 10-Minute Chart: The market started down and kept getting worse. One "cover story" was that investors are concerned that all the AI spending will hurt earnings. We think more likely is that the overdue market decline chickens are coming home to roost.
As you might guess, the Mag 7 were in the lead.
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 Daily Chart: So much for low volatility going into the election and Fed announcement next week. Support was obliterated today but it did just manage to close above the 50-day EMA. The RSI has moved into negative territory below net neutral (50) and the PMO continues to make its way lower on a Crossover SELL Signal.
The VIX punctured its lower Bollinger Band and that can often times lead to a snapback, but given the Bands are so close together, it didn't take much to puncture it so we wouldn't count on a rally. Stochastics dove lower and are now below net neutral (50).
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S&P 500 New 52-Week Highs/Lows: New Highs interestingly expanded on the day, but what is most notable is the expansion in New Lows. The High-Low Differential continues its decline but it is near-term oversold.
Climax* Analysis: There was only one climax reading today, but there were three "almosts". SPX Total Volume was 132% of the one-year daily average volume. While we technically don't have a climax day, it does have the impression of downside initiation. We'll be looking for continued downside, either immediately, or following some churn.
*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) not surprisingly turned down today in negative territory. This is a sign of true weakness. It is compounded by the loss of participation and even more losses to rising PMOs.
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) continue to decline and should hit negative territory soon. %PMO Xover BUY Signals topped beneath the signal line.
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 is in free fall right now with no opportunity to move higher given we have far fewer stocks with Silver Crosses versus the Silver Cross Index. The Golden Cross Index held steady today, but given the lack of participation of stocks above their 50/200-day EMAs, it should start declining again soon. The Silver Cross Index is below its signal line so the IT Bias is BEARISH. The Golden Cross Index is above its signal line so the LT Bias remains BULLISH for now.
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: The Bearish Biases are multiplying on the Bias table above as more and more Silver Cross Indexes move below their signal lines. The reversal of STOs in negative territory bothers us the most about today's indicators. It also doesn't help that we saw an "almost" downside initiation climax. Participation has really taken a hit, particularly the PMO internals which continue to slide. This looks like the beginning of a new leg down given bleeding participation and bearish biases. The mega-caps were holding the index above support, but with them failing, it is likely there is more downside to absorb.
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 pulling back after coming so close to new all-time highs. We still expect to see all-time highs but it appears we'll see a bit more pullback first. The PMO is still rising so we think this is temporary.
Bitcoin Weekly Chart: Yesterday's comments still apply:
"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 were lower on the day, but remain in strong rising trends. We do expect them to creep higher from here, but we'll be on the lookout for a pause.
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
The bearish rising wedge was technically executed yesterday but the yield is back inside the pattern. We are still looking for a breakdown out of the wedge as the pattern implies, but the PMO still looks very healthy and likely means any decline will be temporary in nature.
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 working hard to rally, but yields are against Bond funds right now so downward pressure continues to be applied. Yields may be ready to pause their strong rising trends and that would afford TLT an opportunity to stay above support and possibly push past resistance. The PMO wants to turn up but it is still in very negative territory so we read this as diminishing weakness not new strength.
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 finally seeing some weakness, but not so fast, we have a bullish hollow red candlestick that could imply a rebound off this support level. However, the PMO is topping and Stochastics are dropping so we would expect to see some decline or at least some consolidation at this level.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold pulled back sharply and it put price below support. The PMO has topped, but Stochastics remain above 80 so we would look for some consolidation with a melt toward the support zone.
If the Dollar weakens further, it may not affect Gold bullishly as usual based on the current positive correlation. That certainly held true today.
GOLD MINERS (GDX) Daily Chart: The deep drop in Gold prices hit Gold Miners particularly hard. They continue to work their way back toward support. The PMO is on a new Crossover SELL Signal and boy did we lose some participation of stocks above their 20/50-day EMAs. The rising trend is currently intact, but we suspect with the Silver Cross Index Bearish Shift across the signal line and tumbling Stochastics that it will break. Look for more decline which should eventually offer us a good entry. It appears too soon to look for a rebound.
CRUDE OIL (USO)
IT Trend Model: BUY as of 8/10/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: Welll we were apparently wrong that the rally wouldn't amount to much. Crude is making a strong rebound. Ultimately it is in a sideways trading range so if we are going to see more rally on the rising PMO, we suspect it will run into trouble at overhead resistance. This first level of overhead resistance at the 200-day EMA should be broken if the PMO and Stochastics are right, but we do note the declining trend out of the October high hasn't been broken 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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