SPY 10-Minute Chart: Yesterday's gap up on rate cut optimism was countered today by inflation fears (so they say). The result is an island reversal, which implies more downside to come. Selling picked up into the close.
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 Daily Chart: Well the bull flag hasn't been busted yet, but today's decline did not inspire confidence in the pattern which would imply a move to about 635. That's quite a bit and with today's island reversal, the flag could disintegrate. We do have the Santa Claus effect that could keep price elevated, but it does look like we'll finally see some downside. This was confirmed by a new PMO Crossover SELL Signal.
The market is dependent on outperformance by mega-caps. The relative strength line against RSP is still technically rising, but we saw some damage today. The Magnificent Seven ETF (MAGS) was down -0.82% so they let the market down today. Stochastics are now below 80 so we see some internal weakness.
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S&P 500 New 52-Week Highs/Lows: New Highs fell as expected on today's decline. We are seeing fewer and fewer New Highs as market internals continue to weaken. This has set up a negative divergence with price. We saw more New Lows. The High-Low Differential is very negative, but has reached oversold 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.
As we would expect, Swenlin Trading Oscillators (STOs) made their way lower again today. The declines weren't significant so we should be on the lookout for an upside reversal out of somewhat oversold conditions. Participation slid slightly and we continued to lose more rising momentum within the index.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM continue to make their way lower. We continue to see a loss of PMO BUY Signals and given only 23% are rising now, this indicator should continue to lose ground. %PMO Xover BUY Signals are getting oversold.
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 is being leached out of the market. Readings aren't what you'd call oversold either. They could still see much more damage. The Silver Cross Index is falling and is below its signal line so the IT Bias is BEARISH. The Golden Cross Index stagnated today, but given we have far fewer stocks holding above their 200-day EMAs, it should start to make its way down again soon. 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: We are seeing the Bias Table above flipping bearish again. This doesn't bode well in the short term. Technology is weak and that caused the bearish bias on the QQQ. Today's island reversal on the 10-minute bar chart has us concerned. Price looks very toppy and if mega-caps can't keep the ball rolling, the index will definitely turn over. The new PMO Crossover BUY Signal on the SPY also suggests we have more decline to absorb. We are still in the midst of positive seasonality so we aren't expecting a deep decline, but it isn't out of the question given very weak internals. Time to play defense.
Erin is 50% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
Stochastics are holding in positive territory and are moving higher now. The PMO continues to fall, but given the positive RSI and Stochastics, we expect to see a melt up in Bitcoin.
BITCOIN ETFs
INTEREST RATES
Yields have entered a new bullish phase as they have bottomed and are trying to form rising trends again. This will put pressure on Bond funds.
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 rallied above resistance today and appears to be in a new bull phase. The RSI is positive and the PMO has turned back up. Stochastics look particularly bullish. The rising trend held. We are looking for a move up to 4.5%.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: BUY as of 12/4/2024
TLT Daily Chart: TLT is declining sharply as the 20-year yield continues to rally higher. Yields in general look bullish right now so we aren't expecting a turnaround for TLT. The PMO topped and dropped below zero. Stochastics are falling fast. We should look for more downside.
The breakdown looks especially bearish on the one-year daily chart below.
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 obfuscated its rounded top and busted the head and shoulders pattern. It is holding onto its rising trend. The PMO is attempting to bottom. Stochastics look very bullish. Looks like the Dollar is in for another run higher.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Yesterday's advance had GLD putting in a top above the November top, thereby establishing a short-term rising trend from the November low. Very bullish. Today, however, GLD topped, setting up a bearish rising wedge. Looks like Carl could be right about a pending breakdown in Gold. The PMO and Stochastics are still rising so it may surprise and continue higher.
If the Dollar is indeed on its way to another big rally, this is likely to pose a problem for Gold. However, the correlation between the two is positive right now so Gold could conceivably move higher with the Dollar, but it won't be easy with the Dollar's headwind.
GOLD MINERS (GDX) Daily Chart: There is still a rising trend, but if Carl turns out to be correct about the decline in Gold, this won't be a group to be involved with. For now we do still see a rising trend and the PMO is still rising on a Crossover BUY Signal. Both the Silver and Golden Cross Indexes are above their signal lines, but we did lose some participation on today's decline. Erin is cautiously bullish on this group.
CRUDE OIL (USO)
IT Trend Model: SELL as of 10/17/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: We still have a boring chart for USO. The trading range is getting tighter. Price has yet to hold above the 200-day EMA. We do see a PMO BUY Signal and rising Stochastics, but overall the chart is neutral. We don't expect that to change.
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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