While broad market indexes were up nicely today, Bank stocks, like JPM, had substantial declines. At present we view these declines as simply technical events, where yesterday's advance was somewhat overdone and was followed by a technical snapback. In the case of JPM we note that it found support on the top of the up gap, and that it kept over half of yesterday's gain. This is a good start to consolidate the advance.
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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 rising trend continued today with a gap up to start trading. We did see a slight pullback to finish the day, but overall the rising trend remains intact.
SPY Daily Chart: We saw nice follow through on today's rally that could imply more upside to come. The PMO is nearing a Crossover BUY Signal. The Nasdaq100, SP100 and Dow all saw new PMO Crossover BUY Signals. There is a clear momentum shift going on.
The VIX shows investors are not experiencing fear as its reading moved lower again today. It has punctured the upper Bollinger Band again on our inverted scale. These punctures can lead to short declines or at least pause/churn. Stochastics are very strong and have now moved above 80 signaling internal strength.
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S&P 500 New 52-Week Highs/Lows: New Highs pared back significantly, but were still elevated. Fewer New Lows were detected and the High-Low Differential while decelerating, is still on the rise.
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) are moving very quickly toward overbought territory. For now they look very bullish as they rise strongly. Participation ticked lower on the rally which is a negative divergence. However, we did see a slight increase in rising momentum within the index. Readings are healthy, but we'd like to see more rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
Both the ITBM and ITVM rose again today confirming the current rally and rising short-term indicators. We almost have 50% of stocks with PMO BUY Signals.
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 and long term timeframes.
The Silver Cross Index turned up today, but we don't think it will rise any further given the same amount of stocks are above their 50-day EMAs as have Silver Crosses. We need to see more stocks above their 50-day EMA to get the Silver Cross Index to expand further. The Golden Cross Index has stagnated and given it is reading higher than %Stocks > 200EMA it could begin falling again. Both are below their signal lines so the IT and LT Biases remain BEARISH in spite of the new rally.
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 rally continued to grow today, but we did see many of the stocks that gapped up like Banks pull back. The PMO is nearing a Crossover BUY Signal and participation is healthy enough to look for more upside. However, one of the consequences of the rally over the past two days is that it brought many stocks into overbought territory as measured by the RSI. These stocks will need a cooling off period so we could see the market begin to digest this rally. Tomorrow is the Fed rate decision. We should see a 0.25 rate cut which could keep the advance moving. Just be mindful of a possible hangover that would lead to some market decline. As we often say, take your cue from the open.
Erin is 75% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
Bitcoin had a mild rally today keeping it at all-time highs. The rising trend is intact, but we do note that the RSI has gotten overbought. We are still looking for more upside, but a rally digestion may be in order.
BITCOIN ETFs
INTEREST RATES
Yields backed off today which does tell us we could see a pause ahead. It seemed they were consolidating, but yesterday they popped. We'll look for a near-term pause, but ultimately we do expect a test of 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 is back within the bearish rising wedge. We are expecting some digestion of the strong advance in yields so we could see $TNX move sideways out of the wedge. The PMO is still rising and today's decline did take the RSI out of overbought territory so it isn't that bearish. Let's look for a pause with a possible breakdown from the wedge.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: Bonds reversed higher as yields were down today. It brought price back into the prior trading range. Yields are definitely due for a pause so we could see TLT rally somewhat. We aren't expecting much at this point, but we could see a test of the 200-day EMA again.
DOLLAR (UUP)
IT Trend Model: BUY as of 10/9/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: We still see a bullish flag formation on the Dollar that would imply more upside ahead. It pulled back heavily today and the PMO did top. Stochastics are also falling. It is truly a mixed bag right now. At this point we could see a bit more pullback, but the flag does suggest a decline will be short if it continues. The pattern will essentially bust if it pulls back to 29.00.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold enjoyed a rally as the Dollar pulled back today. It has now recaptured the rising bottoms trendline. Indicators are still weak so we aren't expecting much more rally here, but this would be a good place for the advance to continue off the trendline. The Dollar holds mixed messages and so does Gold. Let's look for churn.
GOLD MINERS (GDX) Daily Chart: This is a nice bounce off support. Gold doesn't look particularly bullish however. This will make it difficult to get the rally to continue. The declining trend is still intact. We are looking for an upside reversal, but indicators aren't firming up yet and the Silver Cross Index looks pretty bearish right now. With Gold looking somewhat neutral, we are looking for sideways movement. It is probably too early for entry, but Stochastics do hint this could be a good bottom if you're a risk taker.
CRUDE OIL (USO)
IT Trend Model: BUY as of 8/10/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: Price is being held captive by strong overhead resistance. The PMO is rising and Stochastics are above 80, additionally price is holding above the 20-day EMA so we could see a breakout this time around.
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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