The market is rallying, but our indicators are deteriorating. Today the Intermediate-Term Breadth Momentum (ITBM) and Intermediate-Term Volume Momentum (ITVM) topped today. We'll discuss the implications in its section further down in the report.
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 market traded mostly sideways today finishing only slightly higher. Stochastics are falling so we could see a breakdown of the most recent rising trend.
SPY Daily Chart: New all-time highs were garnered again today as the market inches higher. The RSI is not yet overbought so we could still see price continue to make its way higher. The flat PMO above the zero line still indicates pure strength, but we sense price is about to roll over.
The VIX is still signaling complacency with its low reading, but it hasn't punctured the upper Bollinger Band on the inverted scale yet. A puncture of the upper Band could spell trouble for the index, but so far so good. Stochastics are rising above 80 so internal strength is still in force.
Here is the latest recording from 12/2. Click HERE to get to our video list.:
S&P 500 New 52-Week Highs/Lows: New Highs expanded very slightly on the rally. We still only see one New Low. The High-Low Differential is rising bullishly but is getting overbought.
Climax* Analysis: There were no climax readings today. Note that, as happened yesterday, SPX Net A-D was negative, while price was up. Also, today SPX Net A-D Volume was negative.
*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 NEUTRAL.
It isn't good news that the Swenlin Trading Oscillators (STOs) continue to decline, but it did take them out of overbought territory. Participation is continuing to thin despite higher prices. We lost even more rising PMOs today on a rally.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The topping of the ITBM and ITVM now confirms the already declining STOs. This has also sealed in negative divergences coming out of September's ITBM/ITVM tops. As we lose rising PMOs, we consequently lose PMO BUY Signals. They will likely continue lower given only 42% have rising PMOs.
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 BULLISH in the intermediate term.
The market bias is BEARISH in the long term.
Participation shrunk again on a rally day. While percentages are above our 50% bullish threshold, we don't like seeing this type of deterioration on rising prices. The Silver Cross Index topped today. It remains above its signal line so the IT Bias is still reading as BULLISH. The Golden Cross Index has stagnated. It is below its signal line so the LT Bias is read as 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: The big news today was the topping of our intermediate-term indicators. This now confirms the falling STOs and puts the market in a precarious place. Prices may be rising, but participation is shrinking. We also saw negative readings on Net Advances-Declines and Net Advance-Decline Volume on a rally day. The internals are breaking down. Now we won't say that the market can't continue higher from here, mega-caps are beginning to look bullish and we know they can push and pull the market. At this point we do expect to see some decline ahead, the indicators are clearly displaying weakness. For now, consider employing stops and let the market take you out.
Erin is 60% 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
Bitcoin has now formed a double top formation. If it is confirmed with a break below the confirmation line drawn across the last November low. The downside target of the pattern would see Bitcoin break down below support at 85,000. It is still holding above the 20-day EMA and could rebound off this level, but indicators have moved bearish so we do see a high likelihood that price will test the 85,000 level.
BITCOIN ETFs
INTEREST RATES
Yields were very mixed today. Longer-term yields did see a move higher while most shorter-term yields declined. Part of the consequence of the Fed lowering rates is that shorter-term rates will likely move lower. The next line of support is at about 3.8%.
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
Yesterday's comments still apply:
"$TNX was up slightly today helping it to hold onto support at the 200-day EMA. The PMO is still tumbling and the RSI is negative below net neutral (50). Stochastics look terrible as they fall below 20. We don't think the decline in yields is over."
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: SELL as of 11/21/2024
TLT Daily Chart: The 20-year yield was higher on the day and that caused TLT to decline. It formed a bearish engulfing candlestick which does imply a decline tomorrow, but so far the chart looks very constructive. We have a nearing Golden Cross and the PMO is still rising. Stochastics are holding above 80. We expect Bond funds to continue to make their way higher as yields soften.
The next level of overhead resistance is 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: The Dollar is in the process of setting up a bearish head and shoulders top. Price is still holding above the 20-day EMA, but the chart is very weak. The PMO is headed lower on a Crossover SELL Signal and Stochastics are falling in negative territory. The bias is getting bearish.
So far the rising bottoms trendline is holding up.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold is in a holding pattern, moving sideways as the Dollar decides what it is going to do. The indicators are very neutral so we do expect more sideways movement in this tight little trading range. If the Dollar does see a decline out of its head and shoulders pattern then we would look for a breakout. Right now the picture is still murky.
Discounts popped higher and that suggests investors are back to being very bearish on Gold. This won't help matters. Although if they get much higher sentiment will be bearish enough to look for an upside reversal. They're swinging a little wildly right now so we're not looking for an upside reversal on sentiment just yet.
GOLD MINERS (GDX) Daily Chart: Gold was up slightly and that gave Gold Miners a shove upward. We are still waiting on a PMO Crossover BUY Signal. We do note that participation improved and pushed %Stocks > 20EMA above our 50% bullish threshold. This does look like an interesting entry, but with the muddy picture on Gold we still see some risk here.
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 managed to rally today in a big way which was somewhat unexpected. The indicators are looking a bit more healthy with the RSI moving above net neutral (50) and the PMO giving us a Crossover BUY Signal. Stochastics have also turned back up. We could see some upside followthrough.
The strongest level of overhead resistance lies at 76.00. Price still has some work to do with a move above the 200-day EMA as the first order of business. The declining trend is still intact for now so we don't want to get too bullish here.
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)