Today the Semiconductors ETF (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 change in as many months, and it is taking place within a narrow trading range. We can see in the thumbnail chart that the previous signal (NEUTRAL) happened only last week. The percentage of stocks in the index with Silver Cross BUY Signals (20-day EMA crosses up through the 50-day EMA) is only 24% and the percentage of stocks in the index with Golden Cross BUY Signals (50-day EMA crosses up through the 200-day EMA) is only 32%. This is pretty low for an ETF that is near its all-time highs, but it does allow for considerable improvement.
The weekly chart shows SMH in a consolidation following a breakdown from a parabolic advance. So far it appears that it has entered a high-level consolidation, which could continue for weeks or months.
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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 gapped up on the open and then consolidated the move. After lunch the rally began again in earnest. The PMO and Stochastics look favorable for the open tomorrow.
SPY Daily Chart: The RSI has now reached overbought territory suggesting it is time for some consolidation or a possible pullback. There is a nice rising trend on price so overbought conditions could persist. The PMO continues to rise and is not overbought yet.
The Bollinger Bands on the VIX are now contracting. This means we could see a puncture of the upper Band soon. Those punctures often are followed up by a decline. Stochastics are holding bullishly above 80. One important thing to note on this chart is the relative strength line to equal-weight RSP. Notice that it is rising consistently right now. This tells us that the mega-caps are in control of the market's direction.
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S&P 500 New 52-Week Highs/Lows: New Highs did expand as they should on a rally, but we do note that we had quite a few New Lows, at least more than we've seen on this current rally. The High-Low Differential is decelerating, but still rising.
Climax* Analysis: There were no climax readings today, but we saw negative Net A-D and Net A-D Volume on a rally day.
*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.
Swenlin Trading Oscillators (STOs) are still in decline with the STO-B reaching negative territory. Participation shrank again on a rally day. We also saw fewer rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM which topped yesterday, continued to decline today, basically confirming the already declining short-term STOs. We saw a negative crossover on %PMO Xover BUY Signals. Those will continue to be drained given only 40% hold 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 yet again on a rally day. The Silver Cross Index is declining sharply now and should see a Bearish Shift across its signal line very soon. That would give us a Bearish Bias in the intermediate term. For now it is above its signal line so the IT Bias is BULLISH. The Golden Cross Index is currently on the rise, but that won't last long given we have fewer stocks above their 200-day EMA than those with Golden Crosses. It is currently 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: Clearly the internals are flagging. We are losing participation and our primary indicators are in decline. The market is now overbought based on the RSI. All of this "should" be causing the market to decline so what is going on? Our thought is that mega-caps are running away with the market again. The rising relative strength line against equal-weight RSP tells that story. We are reminded of similar setups earlier this year and last where the market internals were poor but the index kept moving higher. We should be cautious as our portfolios minus mega-caps will likely struggle based on weakening participation. We'll see if the mega-caps can continue to hold things together.
Erin is 60% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
So much for the double top that was forming on Bitcoin. Today's rally nearly busted the pattern. It will bust if price gets above the November top. At this point it has been consolidating the previous vertical rally. This does look something like a bull flag. We won't get overly bullish right now because the PMO is in decline.
BITCOIN ETFs
INTEREST RATES
Yields were all lower today as the pullback continues. As noted yesterday, we are looking toward the next level of 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 was lower on the day but it is stubbornly holding onto support at the 200-day EMA. The indicators certainly suggest this level will not hold. The RSI is negative and falling. The PMO is in decline and Stochastics are below 20.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: SELL as of 11/21/2024
TLT Daily Chart: With yields falling Bond funds are rallying. Today TLT formed a bullish engulfing candlestick. The PMO is on the rise and the RSI is above net neutral (50). Stochastics are holding above 80. We would look toward 95 as the next stop for TLT.
DOLLAR (UUP)
IT Trend Model: BUY as of 10/9/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: Stochastics are turning up but they remain in negative territory. The PMO is still in decline. We see a head and shoulders top developing on UUP and that suggests price will not hold the current level of support. The pattern implies we would see a decline to at least 29.25. We are looking for lower prices.
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: Yesterday's comments still apply:
"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 but Gold Miners didn't take advantage. If the Dollar does weaken further we would look for a move out of this holding pattern. The PMO is in the process of giving us a Crossover BUY Signal but we should temper our expectations because it is sitting well below the zero line. The Silver Cross Index saw a Bullish Shift across the signal line so we now have a bullish IT Bias. We aren't expecting much here as Gold has stagnated. It all depends on the Dollar right now.
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 formed a bearish engulfing candlestick suggesting tomorrow will be another down day. Crude is stuck in a trading range and with indicators mostly flat, we don't see it leaving its confines anytime soon.
The declining tops trendline is still holding price down.
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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