We want to start with our yield array chart to highlight what is happening with bonds. The Fed is dropping interest rates, and we intuitively expect that bonds will rally and yields will drop. But no. It would appear that investors don't believe that the Fed will be able to keep lowering rates because they are selling bonds and, as a result, yields are rising. It is always good to check the chart to see if it agrees with the story.
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.
Watch the latest episode of DecisionPoint on our YouTube channel here!
MARKET/INDUSTRY GROUP/SECTOR INDEXES
CLICK HERE for Carl's annotated Market Index, Sector, and Industry Group charts.
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 story was that rising yields and surging oil prices caused a decline today. Downside pressure was immediately applied on the open. We did see a small double bottom to finish the day, but its minimum upside target wouldn't even take price back to the open.
SPY Daily Chart: In today's trading room (link here) Carl made his case that we are at a market top. We'll reinforce this as we look at today's charts. The PMO has now topped again and should trigger a Crossover SELL Signal tomorrow.
The VIX did penetrate its lower Bollinger Band on the inverted scale and that can many times lead to a rally. However, we note that the Bollinger Bands have squeezed together so much that a drop beneath or an advance above is highly likely. We don't put much emphasis on this condition. Stochastics topped today.
Here is the latest recording from xxx. Click HERE to get to our video list.:
S&P 500 New 52-Week Highs/Lows: New Highs did inch higher, but overall they are in a declining trend. The High-Low Differential is still in decline. Negative divergences suggest this decline may not be over.
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.
Both the Swenlin Trading Oscillators (STOs) declined in concert today. We are listing them as "neutral" right now, but we do have to admit that the STO-B is near-term oversold. We think it has further to fall. Participation is drying up as more stocks lost support at their 20-day EMAs. Rising momentum continues to shrink with less than a third holding rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT.
Both the ITBM and ITVM are losing ground and moving out of overbought conditions. They are far from negative territory and that is where we expect them to move on a likely market decline. We're now at near-term oversold conditions for %PMO Xover BUY Signals. Most important is the continued loss of those PMO BUY Signals. It doesn't look ready to reverse higher.
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 BULLISH in the intermediate and long terms.
Both the Silver Cross Index and Golden Cross Index are in decline right now. The Silver Cross Index is getting very close to a negative crossover its signal line. That would be a Bearish Shift. For now it is above its signal line so we have to read the IT Bias as BULLISH. The Golden Cross Index is still holding above its signal line so the LT Bias remains BULLISH in the LT for now. Participation percentages are all below the Silver and Golden Cross Indexes so both should continue lower as the bias begins to break down.
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.
****************************************************************************************************
CONCLUSION: This morning we presented a case for a market top and we expect that having read this far, you're likely in agreement as the indicators are all leaning negative. There is a PMO Crossover SELL Signal on tap for the SPY and Stochastics topped. The STOs, the High-Low Differential and ITBM/ITVM are all in decline and are not oversold. A visual check of the SPY also confirms the topping action as price isn't angling toward all-time highs anymore. Our DecisionPoint Signal Table at the beginning of this blog is all green with BUY Signals, but we expect those BUY Signals will slowly go by the wayside given the mostly bearish look of the sectors (minus Energy). That is our case for a market top.
Erin is 55% long, 0% short. (This is intended as information, not a recommendation.)
****************************************************************************************************
CALENDAR
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact support@decisionpoint.com for more information!
BITCOIN
Bitcoin is rallying off the 200-day EMA, but is nearing overhead resistance again. The PMO is attempting to turn back up above the zero line so we could be seeing new strength. Stochastics are also on the rise. For now we would look for a test of the prior high, but reserve judgement on whether this is going to be a breakout move.
BITCOIN ETFs
INTEREST RATES
As noted in the opening, yields are on the rise and look as though they will move to test prior highs. One way to benefit from rising rates is to use an interest rate hedge (PFIX). Information, not a recommendation.
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
Overhead resistance is nearing at the 200-day EMA but given the rocket higher, we would expect to see it overcome. The PMO is rising strongly and should get above the zero line soon. Stochastics can't get much higher. The RSI is not yet overbought so $TNX could continue to rise.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: Bond funds are on the outs as yields continue to rocket higher. Support is about to arrive so we could see a pause in the decline, but ultimately we would look for TLT to fall further. We suspect the longer-term rising bottoms trendline will be broken and consequently that would mean a break below the 200-day EMA. The PMO is in agreement as are the very negative Stochastics readings.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 8/5/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar paused its straight up rally, only up slightly today. Overhead resistance has been hit so a pause does make sense here. The PMO has now moved above the zero line, indicating strength that should result in it moving back up. It could be time for this vertical rally to cool near-term, but longer-term indicators do suggest more upside.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold has been consolidating its move to all-time highs. It looks very toppy right now, but with a possible pause ahead for the Dollar, Gold should hold above the 20-day EMA for now. The PMO is nearing a Crossover SELL Signal so we are on the lookout for a breakdown, not a breakout.
GOLD MINERS (GDX): Gold Miners have formed a short-term bearish head and shoulders and with Gold showing more weakness, we do expect GDX to break down further. The rising trend is so far holding up, but notice that participation is leaving the building as more stocks lose support at their 20/50-day EMAs. The 50-day EMA has held up fairly well as support. It isn't quite time to reenter this group.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 8/1/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: Crude Oil continues to rally strongly as Middle East tensions build. Carl also brought up that energy is needed to power artificial intelligence and this could be adding fuel to this fire. The PMO has now moved above the zero line so we have strength powering this move higher. Interestingly despite this near vertical rally, the RSI is not yet overbought, meaning price isn't overbought yet. We expect this rally to continue.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
(c) Copyright 2024 DecisionPoint.com
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.
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.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)