The mid-cap and small-cap indexes soared today setting fresh all-time highs for all. You'll notice under the hood that participation of stocks above key moving averages are on the rise as well as the Silver Cross Indexes which all show rising trends.
Given the bullish characteristics on these charts we should expect to see more all-time highs ahead. Participation is at robust readings and rising trends are strong. (Note that the IWM chart has under the hood readings for IJR since we are unable to calculate them for such a large index.) We expect outperformance to continue for small- and mid-caps.
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 10-Minute Chart: The market gapped up on the open by spent most of the day taking back those gains. Trading was flat going into the close.
SPY Daily Chart: The SPY formed a filled black candlestick that does imply we will see a decline tomorrow. We have a new PMO Crossover BUY Signal that occurred above the zero line so there is internal strength as far as momentum.
The VIX is holding above its moving average on the inverted scale and Stochastics have now pushed past 80, both of which suggest internal price strength. Notice that the relative strength line to equal-weight RSP has seen a shift downward. This tells us that mega-caps are losing sway over the index. Smaller-caps are outperforming as we saw in the opening remarks today so this makes sense.
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S&P 500 New 52-Week Highs/Lows: New Highs expanded and certainly cue us in that the rally has broadened. There were no New Lows detected. The High-Low Differential has flattened out and is technically in a declining trend which we don't want to see.
Climax* Analysis: Today there was only one climax reading of the four relevant indicators, so we don't have a climax day. However, SPX Total Volume spiked at 160% of the one-year average daily volume, which looks a lot like a blowoff top. Prices may go higher, but let's be alert for them to struggle tomorrow.
*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 OVERBOUGHT.
All of the short-term indicators on the chart below are in overbought territory. They can certainly get more overbought, but it does tell us to be on alert for possible near-term weakness. For now we expect readings to expand further. Participation is heading higher and we now have 79% of the index showing rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM rose strongly today and are confirming our rising STOs. We now have 65% of the index holding PMO Crossover BUY Signal which is very healthy. That indicator is far from being overbought. We still spy negative divergences on the ITBM and ITVM.
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 term.
The market bias is BEARISH in the long term.
Participation readings are very strong right now, as they are all reading well above our bullish 50% threshold. The negative divergence on %Stocks > 20EMA is slowly dissipating and we should see the same from %Stocks > 50EMA very soon. The big news is that the Silver Cross Index crossed back above its signal line for a "Bullish Shift" that has moved the IT Bias to BULLISH. The Golden Cross Index is still reading below its signal line so the LT Bias remains BEARISH.
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: Well so much for low volume trading during a holiday week. Total volume spiked to 160% of its annual average giving us what we see as a textbook "Blow Off". Additionally we saw a bearish filled black candlestick. This certainly suggests a likely decline tomorrow. However, past that we have to acknowledge the bullish rotation into mid- and small-caps and the strongly rising indicators including a new PMO Crossover BUY Signal and Bullish Shift by the Silver Cross Index. Maybe the market will escape a decline tomorrow as the market continues to applaud the nomination of Steve Bessent for Treasury Secretary.
Erin is 60% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
Bitcoin pulled back. This could be a sign that we will get some consolidation of this almost vertical rally higher. We wouldn't be surprised if the rally continues, but it is overdue for some digestion. The PMO has topped suggesting near-term price weakness. Stochastics have dropped below 80.
BITCOIN ETFs
INTEREST RATES
Yields are finally looking ready to pause their advance higher as they have turned over, putting rising trends in jeopardy. We have been looking for a test of 2024 highs and that still could be where they end up, but for now we would look for them to decline further.
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 clearly topping. It dropped beneath support at 4.3%. The PMO is on a new Crossover SELL Signal and Stochastics have dipped into negative territory. We would look for the 200-day EMA to be tested.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: SELL as of 11/21/2024
TLT Daily Chart: Bonds are on the rise as yields finally cool off. They have reached overhead resistance at the 200-day EMA and prior price tops. We are looking for them to breakout. The RSI just moved into positive territory and the PMO is putting margin between itself and its signal line. Stochastics have just entered positive territory. The indicators have certainly lined up for more rally.
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 pulled back today and does look vulnerable finally. The PMO has topped suggesting some internal weakness. The other indicators are still favorable but we expect them to soften soon.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold really looked good on its breakout from the short-term declining trend. It showed great weakness today as it did not take advantage of a weak Dollar. Instead it saw a plethora of sellers taking it back to the declining trend. The PMO has topped beneath the signal line and the RSI just dropped into negative territory below net neutral (50).
Discounts are spiking again telling us what we can already see, investors are bearish on Gold. This could continue to put downside pressure on the metal, but at the same time we do want to see them stay elevated as extreme bearish sentiment is good for Gold. It is certainly at bearish extremes, but we happen to know they have seen higher discount readings over previous years.
GOLD MINERS (GDX) Daily Chart: Gold Miners were hit hard with the decline in Gold and with Gold showing quite a bit of weakness, we suspect this rally may already be over. Notice that improving participation readings have tanked.
CRUDE OIL (USO)
IT Trend Model: SELL as of 10/17/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: There is discussion of a cease fire in the Middle East between Israel and Lebanon. This pushed Crude prices lower. They are in a sideways trading range. We thought we'd see a possible breakout to move price up to 79.00, but instead it appears ready to test the bottom of the range instead. The PMO is beginning to top and the RSI dropped into negative territory. Stochastics are also trying to top.
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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