Today the Semiconductor ETF (SMH) 20-day EMA crossed down through the 50-day EMA (Dark Cross), above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. If this chart seems familiar, that is because this is the third signal change in two weeks. And the fifth signal change in a little over four months. After making all-time highs in July, SMH has moved into a trading range to consolidate the gains. We don't know how the trading range will be resolved, but we have low confidence in the signals it is currently generating.
The weekly chart shows the potential for a high-level consolidation with a range between 200 and 280. That's a 30 percent range. The weekly PMO is in decline, inspiring little confidence that the top of the range will be tested.
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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: The market was briefly higher in the morning, but it began to decline shortly thereafter. We did get a little positive trading to end the day.
SPY Daily Chart: The market has clearly topped and it is currently sitting on near-term support at the November top. The 20-day EMA is also there for support. However, we don't think this support level will hold given the PMO topped today.
Not much change in the VIX. It is technically above its moving average on the inverted scale which is positive. Stochastics are now in decline and should drop below 80 soon. Internal weakness is slowly seeping in.
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S&P 500 New 52-Week Highs/Lows: New Highs were visible but are paring back. New Lows were observed, but not too many. The High-Low Differential looks very bearish on its almost vertical decline. It isn't really oversold yet either.
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.
Swenlin Trading Oscillators (STOs) are declining basically confirming the current downtrend. Participation continues to thin and we now only have 25% of the index holding rising momentum.
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) slid lower again confirming already falling short-term indicators. Only 1/3rd of the index hold PMO BUY Signals.
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 numbers are reading well below our Silver Cross Index and Golden Cross Index. The Silver Cross Index is destined to decline further given the low amount of stocks above their 20/50-day EMAs. It is below its signal line so the IT Bias is BEARISH. The Golden Cross Index is in decline and should decline further given only 69% are above their 200-day EMAs. 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: The market has been overdue for a decline for some time and we are finally starting to see it roll over. Support may've been met, but given the now declining PMO, we doubt it will hold. Speaking of PMOs, we have continued to lose rising PMOs and PMO BUY Signals and this will make a rally more difficult. Internals remain weak and we continue to see more and more participation lost. We expect this decline to linger, but we know a big day for the mega-caps could push the market higher despite these internals. Stay cautious as we figure out whether this decline will morph into something more serious.
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 is in the process of consolidating the strong gains made after the election. It is still sporting a rising trend despite a declining PMO. Stochastics don't look very good, but they are at least holding in positive territory. We suspect there may be more digestion required, but price is likely to continue to melt up in the process.
BITCOIN ETFs
INTEREST RATES
Yields inched higher again today. We are still expecting the decline will continue toward support at 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
$TNX is trying to make a comeback, but ultimately we do expect it to retrace back to the prior low. We are on the watch for a reversal in yields as they have been declining for quite some time. Stochastics did turn up so we will see. For now the PMO is in decline and the declining trend still looks intact so we'll look for more downside.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: BUY as of 12/4/2024
TLT Daily Chart: TLT pulled back toward support today at key moving averages. The PMO is flattening out as momentum is weakening on this recent decline. We are still bearish on yields so we do expect TLT will get back to rallying, but this is starting to look like an inflection point. Stochastics just dropped below 80 so weakness is visible.
DOLLAR (UUP)
IT Trend Model: BUY as of 10/9/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: We had been discussing a bearish head and shoulders top, but price is rallying again. Overall we still see a bearish rounded top formation that does imply we'll see price begin to travel lower again. However, the last three days of rally have gotten Stochastics to turn back up. The PMO is still falling so we do expect price to resume the decline.
The rising bottoms trendline remains intact, but we will be watching for a breakdown.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold rallied again today despite a rising Dollar so we do see a bullish injection coming in. The PMO triggered a new Crossover BUY Signal. The RSI is back in positive territory and Stochastics are rising.
Discounts remain elevated so investors are still very bearish on the metal. That could work in Gold's favor given how high discounts currently are. Sentiment is contrarian so excessive bearishness can be looked at bullishly. We think Gold will continue to make its way higher.
GOLD MINERS (GDX) Daily Chart: Considering Gold was up +1.32%, we should've seen a big rally out of Gold Miners and we didn't. That doesn't bode well. Participation was stagnant today and while it is at acceptable levels, we need to see more. Given they didn't rally as they should've, we think some decline is ahead.
CRUDE OIL (USO)
IT Trend Model: SELL as of 10/17/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: Yesterday's comments still apply:
"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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