SPY 10-Minute Chart: The market decided to bounce today, but we note that price hit its highs in the morning and never really recaptured them. On the bright side, it does appear that we have a bullish cup with handle pattern on the 10-minute bar chart. We aren't sure this will turn into anything great, but it does suggest we could see some followthrough on today's small rally.
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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 Daily Chart: Price has rolled over but today took a pause in the decline. It did find support along the 20-day EMA, but the strongest support level is at about 575. The PMO managed to avoid a Crossover SELL Signal on the rally, but it is still in decline.
The rally calmed some nerves as the VIX did manage to move higher on our inverted scale. It remains above its moving average which is good, but Stochastics are diving lower suggesting new internal weakness.
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S&P 500 New 52-Week Highs/Lows: New Highs did perk up with the rally as we would expect. New Lows slimmed down as well. The High-Low Differential reversed slightly higher.
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) do not suggest that this rally will turn into something special as they both continue to make their way lower. We did list them as "oversold" today, but to be sure, they could see much lower readings. At this point they are near-term oversold. We saw a slight increase in stocks above their 20-day EMA and we even saw a few more rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM/ITVM are both confirming the declining STOs and suggest that there is more downside to absorb. We have steep negative divergences on both of those indicators. We didn't lose any PMO BUY Signals, but we didn't gain any on the rally either. It remains marginally above our bullish 50% threshold.
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.
Negative divergences are still a problem for our participation indicators as %Stocks > 20/50/200EMAs are angling lower while price tops are advancing. Both the Silver Cross Index and Golden Cross Index are below their signal lines (10-day EMA and 20-day EMA respectively). This gives us a BEARISH Bias in both the intermediate and long terms. Both the Silver Cross Index and Golden Cross Index are likely to continue declining as we don't have supportive percentages of stocks above key moving averages as compared to the Silver Cross Index and Golden Cross Index. Given how close we are to all-time highs, we should have better readings on all of these indicators.
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's decline has injected new weakness into most of our indicators. Notice on the Bias Table above that we are losing many of the Silver Cross Index Bullish Biases. One day of rally was good, but we aren't looking for much followthrough as we do have those pesky STOs which continue to move lower. We are also nearing a PMO Crossover SELL Signal on the SPY. While our portfolios would like to see more upside, the market does seem to be exhaling after the election rally. Until STOs make their way higher, we see the declining trend continuing in the very short term.
Erin is 65% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
Bitcoin is digesting the vertical rally. This may be all that is needed to avoid a parabolic breakdown. This does look like a bull flag, but the flag itself is not angling lower. This means that the pattern may not execute as expected to the upside. The RSI is very overbought so we do need to see more consolidation to clear that condition. With the PMO rising so strongly, we expect the rally will resume after some more digestion.
BITCOIN ETFs
INTEREST RATES
Yields made their way lower today but overall we do expect them to stay elevated and likely reach 2024 highs before it is all said and done. The 1-month and 3-month yields are beginning to drop beneath longer-term ones, relieving the yield curve inversion somewhat.
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 rallying strongly within a rising wedge. We've toyed with making the wedge a rising trend channel, but if you use a line chart, you'll see the rising wedge. Of course these patterns suggest we'll see a breakdown. $TNX has been running hot and could use a breakdown. The PMO has topped so maybe we'll at least see a less steep move higher.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: TLT formed a bullish engulfing candlestick today. It remains in a solid declining trend and we're not so sure it will break that trend. The PMO has flattened as price has been losing ground without acceleration to the downside. It is a steady declining trend and that is what flattened out the PMO. We don't think it is gearing up for a big rally out of oversold conditions. The picture is too weak right now.
Support is nearing at 88.50.
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 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: As the Dollar digests its rally, Gold was afforded the opportunity to reverse higher. The declining trend is still intact and at this point we're not expecting it to rally out of that trend. The PMO is nearing negative territory and Stochastics, while rising, are well below 20 signaling weakness. The Dollar looks due for some more digestion so we'll look for Gold to challenge that declining trendline.
GOLD MINERS (GDX) Daily Chart: Gold Miners saw a great rally on Gold's strength today. This does look like a good place for an upside reversal as price is just above the 200-day EMA and horizontal support. Participation has sunk in the shorter term, but today managed to make up some ground. Gold should see a bit more upside so we should also see more upside on GDX. This group is still displaying weakness so entry here is very risky.
CRUDE OIL (USO)
IT Trend Model: SELL as of 10/17/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: 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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