There are topping formations showing up on nearly every index right now. From rounded tops to head and shoulders patterns, the market seemed destined to decline further.
QQQ has now formed a bearish double top. It hasn't been confirmed yet, we'll need a drop below the confirmation line (middle of the 'M') for that. Nonetheless, the chart is very bearish. The RSI just moved into negative territory and the PMO is falling fast after topping beneath the signal line. The Silver Cross Index is now reading right on our bullish 50% threshold, but given we have so few stocks above their 50-day EMA, it will continue to decline. Stochastics are falling in negative territory and we can see that the index has begun to underperform the SPY. A possible hedge would be the ultrashort of QQQ (SQQQ).
The rising trend is still intact, but it could be ready to test the trendline which would mean a very steep drop. The rising trend would be preserved, but the price decline would be painful. The weekly PMO is nearing a Crossover SELL Signal.
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 decline continued into today's open, but price seemed to have found support at the prior low. The 10-minute PMO is rising again so maybe we'll see a small rally to start trading on Thursday.
SPY Daily Chart: We have a bearish head and shoulders pattern on the SPY that suggests this current level of support will not hold. Even if you aren't enamored of the head and shoulders pattern, it is still a rounded top. The PMO is declining in earnest.
The VIX is holding below its moving average on the inverted scale, but we are seeing oversold levels at this point. Stochastics look very bearish as they are falling in negative territory. Notice the relative strength line to equal-weight RSP. It has begun to decline suggesting mega-caps are finally breaking down.
Here is the latest recording from 12/30. Click HERE to get to our video list.:
S&P 500 New 52-Week Highs/Lows: New Highs and New Lows were negligible today. One piece of good news would be the now rising High-Low Differential.
Climax* Analysis: There were no climax readings today. We do note that Net A-D and Net A-D Volume were both positive 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 NEUTRAL.
Both Swenlin Trading Oscillators (STOs) have hit negative territory. Interestingly we did see a slight improvement to %Stocks > 20EMA, but very little. We also saw some positive action out of %PMOs Rising.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERSOLD.
With the advent of a few new rising PMOs, %PMO Xover BUY Signals managed to turn back up today. The reading is nearly identical to the amount of rising PMOs so there isn't much upside potential here. A good rally would likely push both indicators a bit higher. The ITBM and ITVM are still in decline, confirming falling STOs.
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 of stocks above their 20-day EMA did expand slightly on today's decline, but it didn't really improve the picture. %Stocks > 50/200EMAs fell on the day. The Silver Cross Index and Golden Cross Index are still falling and because they are below their signal lines the IT and LT Biases are 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.
*****************************************************************************************************
CONCLUSION: We found it interesting that today we saw a few slight improvements to the market despite a decline. We saw positive Net A-D and Net A-D Volume, more stocks above their 20-day EMAs as well as the High-Low Differential turning up. We could still hang our hats on yesterday's upside exhaustion climax. We did see a decline today, but the climax could still be in effect. However, primary indicators including the PMO and Stochastics are all declining. There are very few PMOs rising and PMO BUY Signals. We see today's improvements as a recipe for a possible bump to the upside to finish the week, but nothing to get particularly excited about. Internals are too weak to be looking for a sustained rally. More than likely we have some churn ahead for the next two trading days as we prepare for what looks like a tough January.
Erin is 35% long, 0% 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
Yesterday's comments still apply:
"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 were mixed but long-term rates did see a bump. They still look fairly bullish, but the new declines in short-term rates could translate to a pause or pullback for all rates.
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 had a pop higher today, but the rising wedge still looks dangerous. Support is holding for now. It isn't surprising that we saw a bounce off that support level as the PMO is still on the rise. However, with Stochastics falling, there's a good chance this support won't hold.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: SELL as of 12/13/2024
TLT Daily Chart: TLT formed a bearish engulfing candlestick today that suggests we will see it drop on Thursday. It is all very dependent on the 20-year yield. Long-term yields are still in rising trends, but they are overdue for a pause. We see a little more rally for TLT as it turns back up just below this resistance zone, but we think upside potential will be limited.
Stochastics are still very weak and the PMO is headed lower with little deceleration.
DOLLAR (UUP)
IT Trend Model: BUY as of 10/9/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The PMO had finally topped on the Dollar, but today it reversed higher above the signal line. That is bullish, but we still see the rising wedge which does tell us to expect an eventual breakdown. At this point we have to wonder given strong Stochastics and the rising PMO. The RSI is getting overbought again so maybe that will be the catalyst to lower prices.
GOLD
IT Trend Model: NEUTRAL as of 12/23/2024
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Despite a good rally on the Dollar, Gold managed its own rally. Price is bunched up between a support zone and the 20/50-day EMAs. Stochastics are rolling over in negative territory so we think Gold is vulnerable right now. The PMO is flat and unresponsive. It is residing below the zero line which implies weakness.
It didn't hold true today, but there is an inverse correlation with the Dollar. The Dollar needs to weaken so Gold can get out of this tight trading range.
GOLD MINERS (GDX) Daily Chart: GDX is clinging to support right now, but given the rather weak Gold chart, we don't expect this level to hold. The RSI is very weak and the PMO is falling in deeply negative territory. Stochastics are camped out below 20. Signs point to a decline.
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 attempting a breakout right now. It is really is the best its looked in some time. The RSI is positive and not overbought yet. The PMO is rising above the zero line and Stochastics have made it above 80. The Energy sector is surging right now and we expect Crude will follow suit. Upside potential is still limited by resistance at 79 and 80.
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)