Today the Semiconductor ETF (SMH) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. This is the sixth signal change in about four weeks, and at this point we have zero confidence that SMH will break out of the narrow trading range. Note that the Silver Cross Index shows that only 24 percent of the stocks in the index are on IT Trend Model BUY signals, meaning that participation in the group is dismal.
On the weekly chart SMH is potentially entering a high-level consolidation with a range between 200 and 280.
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The signal change for crude will be discussed in the Crude section below.
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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 rallied out of the rounded bottom basing pattern from yesterday. Santa Claus has indeed come to town for the market. He usually leaves town after New Year's Day so we should be prepared for problems after the first of the year.
SPY Daily Chart: Price has rallied enough to turn the PMO back up. Total Volume was incredibly low but it makes sense given the holiday.
The RSI has been pushed back into positive territory above net neutral (50). Stochastics are rising strongly and the VIX is now back above its moving average on the inverted scale. All of these are signs of near-term strength.
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S&P 500 New 52-Week Highs/Lows: New Highs and New Lows were negligible today. The High-Low Differential is still on its way lower below the zero line. Certainly this is an oversold condition, but it isn't out of the question that it could move even lower.
Climax* Analysis: Today there were three climax readings (and one "almost") on the four relevant indicators, so it gives us an upside exhaustion climax. SPX Total Volume was only 44% of the one-year average daily volume, and this low volume makes us have less confidence in the climax readings, but holiday trading is likely the culprit. Nevertheless, we'll be looking for some churn to close out the week.
*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're still going to list the Swenlin Trading Oscillators (STOs) as oversold, but they are leaving that territory quickly. Participation is rising nicely. Almost 1/3rd of the index hold rising PMOs. Readings are still very low but this is a good direction.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERSOLD.
Both the ITBM and ITVM have bottomed in oversold territory. If internals weren't so weak (Only 12% hold PMO BUY Signals), we would be very bullish. At least readings are going in the right direction for now.
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 term timeframes.
Participation is starting to see marked improvement, but readings are still anemic overall. The Silver Cross Index decelerated, but still saw a decline today. It is reading below our 50% bullish threshold and given so few are above their 20/50-day EMAs, it will continue to fall. It is below its signal line so the IT Bias is BEARISH. The Golden Cross Index is picking up speed to the downside and is below its signal line so the LT Bias is also 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: Santa Claus has arrived on time with a nice rally on very thin trading. We did see an upside exhaustion climax today, but more than likely price won't lose too much ground given positive seasonality. We also have primary indicators, the PMO and Stochastics rising. There is plenty of room for improvement on the internals. Participation is improving but is still quite weak. More than likely we are in for some churn as the market prepares for January. We could see a melt up, but today's climax suggests we will see sideways action or as we noted earlier, churn.
We wish you a very Merry Christmas and hope your holiday is filled with warmth and joy!
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 pulled back to the 50-day EMA and is now rallying. This has been a good pullback and now we await the new leg up. The PMO has decelerated, but is still in decline. Stochastics did turn up, but remain in negative territory. This looks like a good reversal point.
BITCOIN ETFs
INTEREST RATES
Yields were mixed today. The Bond market closed early today. We are expecting rates to continue to make their way higher after breaking away from bull flags.
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 is off to the races, but we do notice we have a shooting star OHLC bar and those are bearish. We could see it pullback a bit further from here. We wouldn't get too concerned given the strength of the indicators. It is likely to hold its rising trend.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: SELL as of 12/13/2024
TLT Daily Chart: The 20-year yield was lower on the day affording TLT the opportunity to rally. Price still remains below prior support and the PMO continues to move lower. Stochastics are holding below 20. We expect the declining trend to hold true.
This was the last area of strong support left for TLT and it has been broken. We expect the 2024 low to be challenged.
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's rally has been relentless since October. It has now formed a bearish rising wedge and that implies it will finally see a pullback if nothing else. The expectation is a break of the rising bottoms trendline. So far the PMO is still on the rise and Stochastics are above 80 so we aren't seeing weakness yet.
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 sideways. We don't see this ending until and if the Dollar finally makes its way lower. You can see the relative strength line is in decline so Gold really needs to see a weak Dollar to rally. Expect more sideways movement.
GOLD MINERS (GDX) Daily Chart: Gold is in a holding pattern so we expect Gold Miners won't be doing much. Price is holding support, but internals are still incredibly weak. The strongest area of support lies at 32. GDX is vulnerable to further decline. The PMO is still sinking and the Silver Cross Index is in the basement. We suspect they will make their way lower toward stronger support.
CRUDE OIL (USO)
IT Trend Model: BUY as of 12/24/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: Today the Crude Oil ETF (USO) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. This is the third signal change in as many months, and USO is in a narrow trading range. We think that USO is in a "wait-and-see" mode regarding actions of the new administration. We have little confidence that this signal change will be followed by an upside breakout.
The weekly chart shows a three-year consolidation.
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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