Today the Biotechnology ETF (IBB) 50-day EMA crossed down through the 200-day EMA (Death Cross), generating an LT Trend Model SELL Signal. The Healthcare sector is suffering and IBB is no exception. Support has been reached, but participation is incredibly thin and isn't likely to provide a strong foundation. Stochastics also topped in negative territory.
The weekly chart shows a breakdown from a rising wedge formation, as well as violation of two horizontal lines of support. The weekly PMO is tumbling lower suggesting the decline is over yet.
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Also today, the S&P 400 Mid-Cap ETF (MDY) 20-day EMA crossed down through the 50-day EMA (Dark Cross), above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. Support has been reached at October/November lows and the 200-day EMA. As with IBB, participation is very thin and unlikely to provide support for an upside reversal.
Price has reached the rising bottoms trendline, but given the new weekly PMO negative crossover, we are expecting the trend to be broken.
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Also today, the S&P 600 Small-Cap ETF (IJR) 20-day EMA crossed down through the 50-day EMA (Dark Cross), above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. Support is available but now the PMO is falling in negative territory. Participation is meager and the Silver Cross Index is below our 50% bullish threshold. We expect more decline.
The weekly chart shows IJR coming off recent all-time highs and testing tising trend line and horizontal support. There is a new weekly PMO Crossover SELL Signal that suggests this rising trend will be broken.
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Also today, the Russell 2000 ETF (IWM) 20-day EMA crossed down through the 50-day EMA (Dark Cross), above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. Remember that participation numbers are based on the SP600. With weakness pervading all of our index charts, we have to expect IWM to fall further.
On the weekly chart IWM has reached rising trend line support but we have a new weekly PMO Crossover SELL Signal.
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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: Price gapped down to begin the day and made a good attempt at clawing back losses, however after lunch, weakness appeared again. The 10-minute PMO is on a new Crossover SELL Signal.
SPY Daily Chart: We are starting to see the appearance of a possible bearish head and shoulders pattern. The PMO has topped below the signal line and continues to move lower.
The VIX is now dropping below its moving average on the inverted scale indicating internal weakness and concern by investors in this decline. Stochastics are falling.
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S&P 500 New 52-Week Highs/Lows: There were no New Highs for the first time in months. New Lows spiked on today's decline. The High-Low Differential is decelerating in oversold territory, but it isn't out of the question that it could move lower. If we start seeing a preponderance of New Lows, expect that to happen.
Climax* Analysis: There were unanimous climax readings today on the four relevant indicators, giving us a downside exhaustion climax. SPX Total Volume was short, but that is because of holiday week trading. It could be that the decline is finished, but we wouldn't bet that way.
*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 NEUTRAL.
Swenlin Trading Oscillators (STOs) took a turn for the worse today as they dropped quite a bit. They were able to reach somewhat overbought conditions before turning back down so there is plenty of room for them to continue moving lower from here. Participation which had been waking up has been cut and is nearing prior oversold readings. Only 13% of the index hold rising momentum. These are oversold readings, but those conditions can easily stick around if the market is going to continue to decline.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERSOLD.
The ITBM and ITVM continued to move lower after taking a downturn on Friday. They certainly confirm the falling short-term indicators. %PMO Xover BUY Signals topped beneath the signal line.
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 terms.
Participation for stocks above their 20/50-day EMAs is oversold, but as we mentioned earlier, those conditions can persist in a pullback or correction which we do believe we are vulnerable to going into January. The Silver Cross Index is falling vertically toward oversold territory. It is below its signal line so the IT Bias is BEARISH. The Golden Cross Index is also in decline and 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: It was a day of mostly bad news for the market. The one bullish sign was today's downside exhaustion climax. We aren't putting much emphasis on this one because the bad news is bigger. The STOs topped viciously and the ITBM/ITVM are confirming their decline. There is very little participation except to the downside. The Bias Table above is nearly all red which is short-term bearish. Today's climax could bring a pause to this decline. We would view any rally as an opportunity to do some housekeeping in your portfolio. Despite favorable seasonality the market is weakening. We think it will likely get worse.
Erin is 35% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
Bitcoin has formed a rounded top and looks ready to pullback further. Support is still holding and given the PMO has been in decline for so long, we've seen minimal damage. Stochastics are below 20 and the RSI is negative so there is still weakness here. We're watching the 85,000 level closely.
BITCOIN ETFs
INTEREST RATES
Yields fell in unison today. Shorter-term yields are looking bearish again, but long-term rates seem to be holding up. We've been looking for long-term yields to challenge 2024 highs, but it may be time for a pause.
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
We've been looking for $TNX to rally to the April top, but they have formed a bearish rising wedge that does seem to signal that the yield will be dropping to at least test the rising bottoms trendline that forms the bottom of the wedge. The PMO is also looking toppy. We felt better about yields this morning until we saw the updated yield array above.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: SELL as of 12/13/2024
TLT Daily Chart: TLT looks like it will bottom here but overhead resistance will likely keep price sluggish. The PMO is still in decline and Stochastics are flashing weakness below 20. If we get a rally, it isn't likely to have staying power. We will monitor yields.
We do see some support at 87 so we could see a small rally come off this level.
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 has formed a bearish rising wedge that implies we will see some weakness in the Dollar. The PMO has finally topped. Stochastics are above 80 so there is still some internal price strength. Today we do have a bearish filled black candlestick so we'll look for a decline tomorrow.
GOLD
IT Trend Model: NEUTRAL as of 12/23/2024
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold is in a holding pattern, moving mostly sideways as it waits for the Dollar to finally weaken. There is a strong support zone available. The PMO is still mostly neutral as are Stochastics so at this point we expect price will continue to bounce along this support zone. If the market does get very bearish, Gold could find a new lease on life as it still does have a reputation of being a hiding place or safe haven in a bear market.
Discounts are still very high indicating that investors are very bearish on the metal. This could work in its favor, but so far these elevated readings haven't done much for Gold. Everything is riding on the Dollar as the correlation between Gold and the Dollar is back to being negative.
GOLD MINERS (GDX) Daily Chart: GDX lost support today and is likely to continue to show weakness given we don't have much good news to report on Gold itself. The Silver Cross Index is reading near zero. We have no stocks above their 20-day EMA. Stochastics topped below 20. We're looking for support to be tested at 32.
CRUDE OIL (USO)
IT Trend Model: BUY as of 12/24/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: Crude Oil is in a sideways trading range, but the chart is beginning to look more bullish. The RSI is positive and not overbought. The PMO is on the rise above the zero line and Stochastics are almost above 80. We think a breakout is possible here.
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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