Today the Consumer Staples Sector (XLP) 20-day EMA crossed down through the 50-day EMA (Dark Cross), above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. Participation numbers are very weak with the Silver Cross Index declining and at a low 30% reading. This is a good spot to look for an upside reversal as we are sitting on a strong area of support. However, with market weakness visible across all sectors, we wouldn't count on a robust rally here.
The weekly chart shows that XLP got a little over-extended and has pulled back to the rising trend line, which is constructive; however, the weekly PMO is overbought, has topped and has crossed down through the signal 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.
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 declining trend which was established on Friday held true. Price attempted a rally after lunch, but the declining trend was ultimately preserved.
SPY Daily Chart: Price is currently holding above the 50-day EMA as support and there is another level of support just below the 50-day EMA. It is vulnerable based on the PMO's continued decline. The RSI is negative indicating price weakness.
The VIX reading remains elevated as nervousness among investors continues. We did see the lower Bollinger Band being punctured and many times that can lead to an upward move. Stochastics are now below 20 indicating extreme price weakness so we wouldn't be looking for a new leg up yet.
Here is the latest recording from 11/4. Click HERE to get to our video list.:
S&P 500 New 52-Week Highs/Lows: New Highs were visible but that have pared back considerably since the market reached all-time highs. This is in line with current market weakness. The High-Low Differential continues its decline but we do note that it has just about reached oversold territory. It can get negative so we aren't necessarily out of the woods on this decline.
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 DOWN and the condition is OVERSOLD.
The Swenlin Trading Oscillators (STOs) are both moving lower together again which highlights current market weakness. They have reached oversold territory, but they can certainly accommodate more downside as we have seen more deeply oversold readings previously. Participation slipped as we would expect with fewer stocks holding above their 20-day EMA. %PMOs Rising did turn back up on today's decline which is a bright spot. Still less than 25% hold rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The decline continues for the ITBM and ITVM. The ITVM hasn't reached negative territory yet, but we suspect it will. Less a quarter of the index hold PMO Crossover BUY Signals. More support is needed to turn the market around.
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.
Both the Silver Cross Index and Golden Cross Index are in decline and with both of them holding below their signal lines, the IT and LT Biases are BEARISH. Participation is very thin and isn't really oversold yet. Negative divergences are leading into this current decline.
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: We did just enter a six-month period of favorable seasonality for the market, but the short-term picture still implies weakness. We are looking for the market to fall further from here based on a number of indicators. The STOs are primarily a problem for the short term as they decline. It doesn't help that the PMO is in decline and Stochastics are reading below 20. Mega-caps are softening and there aren't a lot of stocks with rising momentum to help the cause. This all calls for more decline. Election Day and the upcoming Fed announcement could mean low volatility as investors wait for the outcomes.
Erin is 55% long, 55% 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 nearly reached all-time highs and then it fell back. The PMO looks particularly bearish but support is arriving soon and the rising trend out of the September low is still intact. There is probably a bit more downside to absorb, but we are looking for the rising trend to hold up longer.
BITCOIN ETFs
INTEREST RATES
Yields pulled back significantly today. They are due for a cooling off period as rising trends are awfully steep. We aren't looking for a major top here, probably just some consolidation of the steep rise.
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
Support is holding, but given we saw a decline out of the bearish rising wedge, we are looking for more decline or sideways movement. The rally has been nearly vertical so it is time to adjust the rising trend and that will include some more decline. We only see a decline as temporary as we do expect yields to challenge 2024 highs.
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 consolidating beneath support. The intermediate-term rising trend was broken bearishly and price hasn't done much since then. We are looking for a possible melt up while yields calm down. We doubt the rising bottoms trendline will be recaptured anytime soon.
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 topping. It lost support today, but did manage to close above it by day's end. The PMO has topped and is headed for a Crossover SELL Signal. Stochastics have dropped below 80. Best case would be sideways consolidation, but given the deterioration of the indicators we will look for lower prices to continue.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold managed a small rally today on the Dollar's weakness. It looks toppy like the Dollar. The PMO is on a new Crossover SELL Signal and Stochastics are tumbling lower so at this point we are looking for the rising bottoms trendline to be tested. More Dollar weakness should lead to a rally from there.
GOLD MINERS (GDX) Daily Chart: Gold Miners are testing the rising trend and today GDX did rally. While we only have 18% holding above their 20-day EMAs, we do have a very high Silver Cross Index reading so there is a foundation for an upside reversal here. It has been pretty steady about upside reversals off the 50-day EMA so we are looking for a possible rally on the horizon for GDX. It is a little early given the negative PMO, but we certainly should be on the lookout.
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 was on the rise today, but it hasn't broken above overhead resistance yet. Our best guess is that it will breakout given the newly positive RSI and rising PMO and Stochastics. We could see some turbulence after the election as each candidate holds very different views of fossil fuels. Harris would not be so friendly and that would likely press prices higher on Crude while Trump is a proponent of fossil fuels and would like expand production that would lead to Crude prices dropping. For now prices remain in a trading range and we don't see a high likelihood that they will leave this range.
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)