Today the Price Momentum Oscillator (PMO) crossed down through its signal line on the SPY. It had managed to avoid the signal for some days, but finally succumbed today.
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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: It was an auspicious opening on a gap down, but price pushed its way higher all day long. The news was that it came on Semiconductors and NVDA's advances.
SPY Daily Chart: Price found support along the October tops and formed a bullish engulfing candlestick today. While this is good news, we did get that new PMO Crossover SELL Signal today. Total Volume was slightly higher than average.
The VIX saw a higher reading today suggesting the rally didn't assuage investor nerves. It is still reading above its moving average on our inverted scale which is positive. Stochastics however continue to decline so we do see internal strength fading.
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S&P 500 New 52-Week Highs/Lows: New Highs fell on today's rally and we saw an expansion of New Lows. Neither should've occurred on a rally day. The High-Low Differential has stalled.
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) were mixed today with the STO-B moving lower again and the STO-V reversing higher. Participation of stocks above their 20-day EMA pulled back today even on the rally and we lost rising momentum within the index.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM/ITVM confirm the declining STO-V as they also make their way lower. We especially don't like the negative divergences that have formed on both of these indicators. %PMO Xover BUY Signals dropped beneath its signal line today.
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 both the intermediate and long terms.
All three participation indicators for stocks above key moving averages all declined today on a rally. That should not happen on a rally. We also note that all three of those indicators sport negative divergences. The Silver Cross Index is falling beneath its signal line so the IT Bias is BEARISH. The Golden Cross Index is also falling and is beneath its signal line so the LT Bias is also 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: The market gapped down on the open, but managed to right the ship into the close. However, it did very little to improve our indicators. The best we can say is that the STO-V turned up. Past that we have negative indications. Key indicators are moving lower and participation shrank on the rally today. We suspect that the decline will resume unless we get some help from the mega-caps as there aren't many stocks with rising momentum to keep the market elevated. We should be prepared for more downside. NVDA reports earnings after the bell tomorrow. If they aren't received well, a decline could easily ensue on Thursday.
Erin is 65% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
We have a rising flag on a flagpole. Flags are bullish continuation patterns and are generally followed by a strong breakout and rally higher. The one problem here is that the flag is 'rising' not 'falling'. These patterns have a way of breaking down so we should be alert for a possible decline. For now the PMO looks very strong and sentiment is still very bullish for crypto so this rally could easily continue higher, we would just be alert to a possible decline to push the RSI out of overbought territory.
BITCOIN ETFs
INTEREST RATES
Yields were mostly lower on the day. We could be getting ready to see a pause in the rally higher. We still are looking for 2024 highs to be challenged, but we may need a period of consolidation beforehand.
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
As expected, price dropped out of the bearish rising wedge. Wedges tell us which way to expect a break, but they don't give us any targets. For now we will look for support to be tested at 4.3%. The PMO is topping so that support line will be vulnerable.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: The bullish engulfing candlestick played out as expected with a rally today. Unfortunately today it formed a bearish filled black candlestick. Overall we expect price to begin moving sideways as yields likely see a pause in the action. The declining trend is still intact so there is a clear bearish bias to this chart. We are nearing a Death Cross of the 50/200-day EMAs. So while the PMO is nearing a positive crossover, we see it 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: Yesterday's comments still apply:
"The Dollar is beginning to pullback. It could be forming a new bull flag that would imply it will rise again soon. The PMO hasn't sustained any damage and Stochastics are still above 80. This is likely a pause before another swing higher, but for now we do expect this digestion phase to continue on a bit longer."
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold is making its way higher as the Dollar cools its rally. The declining trend will soon be tested. The PMO is still in decline and has moved below the zero line so while we are seeing a nice rally, we do think it could reverse especially if the Dollar resumes its rally.
We aren't ready to rule out a rally continuation as sentiment has reached high levels of bearishness as displayed by the high discounts. Sentiment is contrarian and things have gotten very bearish.
GOLD MINERS (GDX) Daily Chart: Gold Miners are enjoying a nice rally on Gold's rally higher. We are suspect of the Gold rally and thus are suspect of this rally. We do see that participation is improving for the group and Stochastics are rising again. But note that the Silver Cross Index is still moving lower. There are more bearishly biased gold miners than bullishly biased ones. This looks like a good rally reversal, but we aren't so sure it will get too much further. It is certainly a group that is getting healthier so entry isn't out of the question, it just carries a lot of risk until we get a handle on whether Gold's rally will continue.
CRUDE OIL (USO)
IT Trend Model: SELL as of 10/17/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: Yesterday's comments still apply:
"Crude Oil is in a sideways trading range and now it appears ready to move back up to the top of the range or at least challenge the 200-day EMA again. The PMO is trying to turn back up and Stochastics already have reversed higher. We're short-term bullish, but don't expect it to overcome resistance at 76."
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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Price Momentum Oscillator (PMO)