In today's free DecisionPoint Trading Room we remarked that all the major market indexes we track are at or above their 20-, 50-, and 200-day moving averages, and that there was plenty of distance between those moving averages. This is about as good as things can get, so we wonder how long can this last. For certain, things will eventually start to deteriorate and move toward the other side of the spectrum. Favorable conditions can persist, but we should be alert for signs of slippage.
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: Technology stocks were down with NVDA in particular running into issues over an antimonopoly law in China. Certainly when NVDA falls most of the index lose ground too.
SPY Daily Chart: The market is finally looking a little bit toppy. The PMO remains flat above its signal line and that is an expression of pure strength, so maybe we'll see a small decline to challenge the last SPY top in November. Seems highly likely with a possible drop further to the 50-day EMA.
Stochastics have now topped and do look somewhat bearish, but they do remain above 80 signaling internal strength. The VIX saw a drop on our inverted scale as investors may be starting to worry about the staying power of the current rally.
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S&P 500 New 52-Week Highs/Lows: New Highs dropped as we would expect, but we saw a paring back on New Lows. The High-Low Differential does look bearish as it declines from overbought territory.
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 UP and the condition is OVERSOLD.
We noted in today's trading room that Swenlin Trading Oscillators (STOs) were in somewhat oversold territory. They are still declining and they could certainly travel much lower than where they are now. We felt we should list them as oversold as this has been territory where we've seen upside reversals. Participation shrank further on the decline. Interestingly we saw a slight uptick in rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The Intermediate-Term Breadth Momentum and Volume Momentum (ITBM and ITVM) continue to make their way lower. They are very far away from oversold territory so they can accommodate quite a bit of downside price movement. More PMO BUY Signals are being lost.
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 continues to be leached out of the market as more stocks lose support at their 20/50-day EMAs. The Silver Cross Index is in decline and should continue to decline based on lower participation of stocks above their 50-day EMA. It is below its signal line so the IT Bias is BEARISH. The Golden Cross Index is also on its way lower as more stocks lose their Golden Crosses. With fewer stocks above their 200-day EMA than the Golden Cross Index, it should continue to fall. It is below its signal line so the LT Bias is 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: Much of today's loss was blamed on mega-cap NVIDIA which was down -2.55% today which was not much in the grand scheme. It did take most of the Technology sector down with it and consequently the market as a whole. The market is overdue for a breather and given weakening internals, this decline could see some followthrough. In any case, we have mediocre participation numbers even though we are near all-time highs. This negative divergence does tell us that if a decline does ensue, there aren't many stocks out there to swoop in and keep the market rising. Consider employing stops to protect against a more serious market decline should prices continue to fall.
Erin is 55% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
Bitcoin has softened its rising trend and is moving only slightly higher. We are expecting a bit more consolidation as the PMO is declining. Stochastics are in positive territory which is why we are looking for consolidation rather than a big decline.
BITCOIN ETFs
INTEREST RATES
Yields were up today, but it didn't compromise the current declining trends. We are still looking for them to pull back further toward support. At this point, we believe rates will remain above both levels of support that are nearing.
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 refuses to break down. It looked bad on Friday with the dip below the 200-day EMA, but ultimately support continues to hold at 4.1%. The PMO is still in decline and Stochastics are still holding below 20 so we expect this level of support to be broken.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: BUY as of 12/4/2024
TLT Daily Chart: Last week, TLT saw a Golden Cross of the 50/200-day EMAs. Now it is getting very close to a Silver Cross (20-day EMA crossing above the 50-day EMA). Yields still look very weak so we expect all Bond funds to see more rally. The PMO has gotten back above the zero line indicating new strength. Stochastics are holding above 80 so there is internal price strength. Next up is a break above resistance at 95.
DOLLAR (UUP)
IT Trend Model: BUY as of 10/9/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: We are still waiting for the bearish head and shoulders pattern on the Dollar to be confirmed with a drop beneath the down sloping neckline. It is now trying to avoid that breakdown. We are expecting lower prices on the Dollar based on the chart pattern accompanied by a falling PMO. Stochastics are also declining below 20. It isn't out of the question that UUP will continue to rally here as support does appear strong right now.
The rising bottoms trendline remains intact, but we will be watching for a breakdown this time around.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: In spite of a rally in the Dollar, Gold had a very good rally day. It brought price above the tight trading range. The Dollar still looks weak to us so we are looking for this rally to catch hold. All bets are off if the Dollar has a strong reversal here.
The correlation between Gold and the Dollar in the shorter-term has changed to positive. This is an unusual situation as Gold generally travels opposite of the Dollar. This could have interesting implications. The Dollar looks weak, but that won't necessarily mean we'll see Gold strengthen. Conversely, if the Dollar begins to rally, Gold could rally too (similar to what happened today).
GOLD MINERS (GDX) Daily Chart: Gold Miners had a great day on Gold's rally. Price managed to get above the 50-day EMA for the first time since the original decline began. We do note that there is a long "wick" on the OHLC bar as GDX closed near its lows for the day. That is a bearish aspect. On the bullish front we are seeing more stocks getting back above key moving averages. The PMO is on a Crossover BUY Signal and we feel fairly good about Gold right now so we'll look for a little followthrough.
CRUDE OIL (USO)
IT Trend Model: SELL as of 10/17/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: Everyday we come to this section and see very little action. Price is stuck in a trading zone. The PMO is flat just below the zero line suggesting a very neutral chart. We don't see anything on the chart that would imply a move out of this range. Indicators are slightly bearish so we will look for a test of the bottom of this current trading range.
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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