Today the Semiconductor (SMH) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. This is the fourth signal in less than three weeks, generated by the movement of SMH within a very narrow range. Note that the SMH Silver Cross Index is at 24 percent, which means that 76 percent of its component stocks are not on BUY Signals. At this point, the new BUY Signal does not identify an upward change of trend.
The weekly chart shows that a parabolic advance has broken down, and SMH appears to be in a high-level consolidation, which may take some time to complete. The weekly PMO is descending so problems remain.
_______
Also today, the Real Estate Sector ETF (XLRE) 20-day EMA crossed down through the 50-day EMA (Dark Cross), below the 200-day EMA, generating an IT Trend Model SELL Signal. XLRE is toying with support, but given the declining PMO and paltry participation numbers, there is a high likelihood that this support level will be broken.
The weekly chart shows that XLRE has reached a zone of long-term resistance. Since it is in a solid rising trend, it is reasonable to expect the advance to resume once the correction is complete. The weekly PMO is in decline suggesting we could see price test the bottom of the rising trend channel before it starts heading higher again.
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: Price gapped up in the morning and proceeded to rally from there. The end of the trading day had price retracing lower in a severe decline during the final hour of trading.
SPY Daily Chart: Price looks toppy, but we wouldn't be surprised to see it continue to hold above support as we make our way further into favorable seasonality. The PMO is on a Crossover SELL Signal, but it is also flat above the zero line which implies strength not weakness.
Stochastics do show signs of weakness as they have dropped below 80. The VIX has now made its way beneath its moving average highlighting more internal weakness.
Here is the latest recording from 12/16. Click HERE to get to our video list.:
S&P 500 New 52-Week Highs/Lows: New Highs did expand but overall we have a declining trend on New Highs which is a negative divergence with rising price tops. New Lows really expanded and are now in near-term oversold territory. The High-Low Differential is near-term oversold. It can actually get below zero, it doesn't happen that often in a bull market.
Climax* Analysis: Not a climax day. Total Volume was very high on the rally.
*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.
Readings on all of our short-term indicators are oversold. We were surprised at how far the Swenlin Trading Oscillators (STOs) fell given the rally today. It highlights weakness under the surface. We now have only 17% of stocks showing rising momentum. It will be difficult to keep the market elevated without any new rising momentum.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
Both the ITBM and ITVM are now reading negative. This is technically a sign of oversold conditions in the near term, but they can get far far more oversold than they are right now. Just under a quarter of the index have PMO Crossover BUY Signals. With fewer PMOs rising however, we will see that indicators continue lower.
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 continued to shrink despite a nice rally. The internals just keep getting weaker. The declining trends on both the Silver/Golden Cross Indexes set up a negative divergence with price. Both the Silver Cross Index and Golden Cross Index are below their signal lines so the IT and LT Biases are still 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: Investors are waiting patiently for the Fed announcement this week. Today the market had a good rally, but participation of stocks above key moving averages shrank when they should've expanded. STOs pushed lower and the ITBM/ITVM continue to confirm already declining short-term indicators. Yet, the market keeps finding a way to move higher. There is clearly a small group of stocks keeping the market elevated given only 17% have rising momentum within the index. Cap-weighting is the culprit. Stay cautious. Our sense is that January will be very rough, but until then the market could stay near all-time highs based on favorable seasonality.
Erin is 40% 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 had a good day. It is breaking from the consolidation zone and is headed on another leg up. The RSI isn't overbought just yet and the PMO did turn back up. Stochastics are holding above 80 so we are looking for Bitcoin to continue to move higher.
BITCOIN ETFs
INTEREST RATES
The 20-year and 30-year yields ticked lower, but most other yields moved slightly higher. We are starting to see what could be flag formations on yields which would definitely imply that they will continue to move higher.
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
We can see what looks like a large bull flag on $TNX and the rising yield on this rally confirmed the pattern. The PMO is nearing a Crossover BUY Signal and Stochastics are above 80 suggesting internal strength. We would look for the yield to move higher.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: BUY as of 12/4/2024
TLT Daily Chart: Bonds managed a small rally today, but it formed a filled black candlestick that does imply a possible decline tomorrow. The PMO just triggered a Crossover SELL Signal and Stochastics are below 20 so we do expect to see support tested at the July low.
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 finally took a pause today, but the chart is still bullish. We have a solid rising trend and Stochastics are now above 80. The PMO is very flat, but it is occurring above the zero line suggesting pure strength not weakness despite it being on a Crossover SELL Signal. The RSI is positive. We could see a move to test the rising trend once again, but given the bullish indicators, it is likely to stay above it.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold is still holding within a bearish rising wedge formation. The pattern calls for a breakdown. Stochastics also favor a breakdown. The PMO is in decline and headed toward a Crossover SELL Signal. We would look for an upcoming decline in Gold with a drop to at least 235, but 230 is not out of the question. If the Dollar would finally weaken, we could look for something good for Gold, but the Dollar just won't break down.
Support at 230 coincides with the 200-day EMA so that level is strong and should hold price should Gold make its way down there. Again, a lot rides on the Dollar.
GOLD MINERS (GDX) Daily Chart: The PMO has topped well below the zero line which is especially bearish for GDX. Gold looks precarious as well and GDX will struggle if Gold breaks down. Participation has dropped off the map and both the Silver Cross Index and Golden Cross Index are below their signal lines. We had been looking for an upside reversal here but the Dollar spoiled all the fun.
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 continues to travel sideways within a trading range. Price had gotten above the 200-day EMA, but today dropped back below it. If history repeats itself, the piercing of the 200-day EMA is a signal that price will head back down to test the bottom of the range or at least the previous lows around 69 and 70.
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)